<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PNV.NET, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 4899 65-0612435
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
11711 N.W. 39TH STREET
CORAL SPRINGS, FLORIDA 33065
(954) 745-7800
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
ROBERT P. MAY
CHIEF EXECUTIVE OFFICER
PNV.NET, INC.
11711 N.W. 39TH STREET
CORAL SPRINGS, FLORIDA 33065
TELEPHONE (954) 745-7800
FACSIMILE (954) 745-7886
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES TO:
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<S> <C>
ELIZABETH G. WREN, ESQ. RICHARD A. GOLDBERG, ESQ.
JAMES M. O'CONNELL, ESQ. SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
KILPATRICK STOCKTON LLP 919 THIRD AVENUE
3500 ONE FIRST UNION CENTER NEW YORK, NEW YORK 10022
CHARLOTTE, NORTH CAROLINA 28202 TELEPHONE (212) 758-9500
TELEPHONE (704) 338-5000 FACSIMILE (212) 758-9526
FACSIMILE (704) 338-5125
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AMOUNT OF REGISTRATION
TO BE REGISTERED REGISTERED(1) FEE
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<S> <C> <C>
Common Stock, par value $.001 per share..................... $60,000,000 $16,680
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</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee. Includes shares of common stock that the underwriters have an option to
purchase solely to cover over-allotments, if any.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SHARES
(PNV.NET LOGO)
COMMON STOCK
$ PER SHARE
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This is an initial public offering of common stock of PNV.net, Inc. PNV.net is
offering shares of common stock.
PNV.net expects that the price to the public in the offering will be between
$ and $ per share. The market price of the shares after the
offering may be higher or lower than the offering price.
We have applied to include the common stock on the Nasdaq National Market under
the symbol "PNVN."
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 9.
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PER SHARE TOTAL
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<S> <C> <C>
Price to the public............................. $ $
Underwriting discount...........................
Proceeds to PNV.net, Inc........................
</TABLE>
PNV.net has granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of additional
shares from PNV.net within 30 days following the date of this prospectus to
cover over-allotments.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC WORLD MARKETS
ALLEN & COMPANY INCORPORATED
VOLPE BROWN WHELAN & COMPANY
WILLIAM BLAIR & COMPANY
The date of this prospectus is , 1999.
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[INSIDE FRONT COVER PAGE]
2
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 9
Forward Looking Statements.................................. 25
Use of Proceeds............................................. 26
Dividend Policy............................................. 26
Capitalization.............................................. 27
Dilution.................................................... 29
Selected Financial Data..................................... 30
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 32
Business.................................................... 45
Management.................................................. 69
Certain Transactions........................................ 79
Principal Stockholders...................................... 81
Description of our Capital Stock............................ 83
Description of our 13% Notes................................ 88
Shares Eligible for Future Sale............................. 90
Underwriting................................................ 92
Legal Matters............................................... 94
Experts..................................................... 94
Where You Can Find More Information......................... 95
Index to Financial Statements............................... F-1
</TABLE>
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PNV.net's principal executive offices are located at 11711 N.W. 39th Street,
Coral Springs, Florida 33065. Its telephone number is (954) 745-7800.
Unless otherwise stated, all information contained in this prospectus assumes no
exercise of the over-allotment option granted to the underwriters.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order. The shares should be ready for delivery on or
about , 1999 against payment in immediately available funds.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus.
It is not complete and may not contain all of the information that you should
consider before investing in our common stock. You should read this entire
prospectus carefully, including the section entitled "Risk Factors" and our
financial statements and the related notes to those statements included in this
prospectus.
PNV.NET, INC.
We are the leading provider of bundled telecommunications, cable television and
Internet access services to the trucking community. Our current customers
include drivers, long-haul trucking fleets, truckstop operators and trucking
industry suppliers and manufacturers. As of July 31, 1999, we had deployed our
private, integrated network at 230 truckstops in 41 states through which we
offer telecommunications, cable television and Internet access services to
fleets and truck drivers in the privacy of the truck cab, as well as
comprehensive telecommunications services to truckstop operators for the public
areas inside the truckstop. During July 1999, we had approximately 35,000
subscribers. To date, we have raised more than $140.0 million in debt and equity
capital, which has allowed us to deploy our network and establish our brand name
in the trucking industry. We believe that our competitive advantages position us
to become the preferred provider of communications and Internet information
solutions to the trucking community. These competitive advantages include:
- our integrated nationwide network which allows us to deliver our bundled
telecommunications, cable television and Internet access services to truck
drivers in the privacy and convenience of their truck cabs;
- our strategic relationships with major truckstop operators and major industry
suppliers, such as TravelCenters of America (or TA), Pilot Corporation and
Volvo Trucks, as well as our brand name recognition in the trucking industry.
We have entered into long-term contracts with the operators of approximately
450 of the approximately 1,100 full service truckstops across the country. We
also have contracts with trucking associations representing more than 300
additional independent truckstops that permit us to offer our services to
their members; and
- the flexible and cost-efficient design of our network, which enables us to
offer a private full-service telecommunications network to the trucking
community.
We believe our competitive advantages position us to offer our services and
products to additional drivers, long-haul trucking fleets, truckstop operators
and trucking industry suppliers and manufacturers, as well as other trucking
industry participants. We currently offer:
- in-cab telecommunications and cable television services to truck drivers and
fleets, including incoming and outgoing local and long distance calling,
basic and premium cable television, as well as value-added communications
services, including a locator service, voice mail and wake-up calls;
- Internet access as an Internet service provider, or ISP, as well as content
and applications on our Internet website, to truck drivers and their
families, fleets and industry suppliers. These offerings are available in the
truck cab or any other Internet access point. They will also be available
through public Internet kiosks which we are deploying inside certain
truckstops;
- a total telecommunications solution inside the truckstops for truckstop
operators, including prepaid phone cards, public phone operations and public
Internet kiosks; and
- advertising for industry suppliers and other industry participants through
our cable channel known as the "Drivers' Entertainment Network," our monthly
television programming guide and lifestyle magazine, Connect!, our Internet
website and our voice response system.
We believe the Internet will become a significant communications and commerce
medium for the trucking community. We intend to capitalize on our position as
the leading provider of bundled telecommunica-
4
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tions, cable television and Internet access services to the trucking community
by providing a leading trucking industry website and expanding our network to
improve the lifestyles of drivers and their families and the trucking industry's
work efficiencies. We are designing this portal website to have the following
components:
- business-to-business electronic commerce applications that provide a platform
for fleets, drivers and industry suppliers to exchange information and
conduct transactions such as load posting, freight matching and classified
ads;
- business-to-consumer electronic commerce applications that allow drivers and
constituent groups to purchase goods and services for their personal and
occupational use, including books, music, parts and electronics;
- advertising opportunities that allow advertisers to market their products,
provide links to their websites and target the driver market which has unique
demographic characteristics;
- specialized content on a wide variety of subjects of interest to the trucking
community and those who interact with the industry; and
- a "life style" segment that provides truck drivers with interactive tools and
services that permit them to personalize their on-line experience, including
e-mail, chat rooms, news, weather and games.
The foundation for our bundled telecommunications, cable television and Internet
access services is our private, integrated nationwide network. Our network
utilizes Cisco routers, PC-based private branch exchange (or PBX) switches with
proprietary software, modem banks and a cable headend system, as well as a
dedicated backbone that connects all sites to a central server at our
headquarters in Coral Springs, Florida. Our network provides flexible voice and
data channels and dedicated long distance and Internet access. We have no direct
competitors for our bundled in-cab services.
OUR STRATEGY
Our objective is to capitalize on our position as the leading provider of
bundled telecommunications, cable television and Internet access services to the
trucking community and to become the preferred provider of communications and
Internet information solutions to the trucking community. We plan to achieve our
objective by:
- Continuing to deploy our network at additional truckstops and increasing
subscription sales. We intend to continue to deploy our network at
additional full-service truckstop locations and believe that the availability
of our network at a larger number of truckstops, together with our proposed
marketing efforts and initiatives, will allow us to increase our subscription
sales to drivers and fleets.
- Becoming the leading trucking industry portal website. We are developing our
trucking industry portal website to allow participants in this vertical
market to communicate with each other, obtain industry-related information
and entertainment, and conduct commerce.
- Extending our brand name recognition. We intend to promote our strong brand
name in the trucking community and believe we will benefit from being an
early provider of content and services dedicated to the trucking community.
We believe that increasing the recognition of our strong brand name will
generate traffic growth on our portal and allow us to increase our
advertising revenues.
- Leveraging our position as an Internet service provider. We intend to use
our Internet access service to attract and retain subscribers by providing
connectivity between drivers, their families, fleets, truck stops, industry
suppliers and other industry participants.
- Providing a total communications solution to truckstop operators. We
recently contracted with TA, the largest truckstop chain in the United
States, to provide a total telecommunications solution inside its truckstops
and intend to offer this service to other major truckstop chains.
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- Providing comprehensive data and voice solutions to fleets and industry
suppliers. We intend to offer services to fleets and industry suppliers that
will allow them to install gateways into our network which will permit data
and voice communications among drivers, fleets and industry suppliers. We
also plan to offer fleets and industry suppliers the ability to integrate
their intranet sites with our network to access additional tools and
services.
- Expanding our entertainment services. We intend to expand our cable
television services to include additional programming, pay-per-view and other
channels specifically targeted to the trucking community. We are also
designing our website to provide content of interest to truck drivers and
other trucking community participants, as well as general information.
- Maximizing and expanding our strategic relationships. We intend to expand our
relationships with trucking industry participants, including truckstop
operators, fleets and suppliers.
---------------------
We recently changed our name from Park 'N View, Inc. to PNV.net, Inc. We were
incorporated in Delaware on September 18, 1995. Our website address is
www.pnv.net. Information contained on our website does not constitute part of
this prospectus.
6
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THE OFFERING
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<S> <C>
Common stock offered........................ shares
Common stock outstanding after this
offering.................................. shares(1)
Use of proceeds............................. We intend to use the net proceeds of this
offering to redeem our Series A preferred
stock, fund operating losses and capital
expenditures and for working capital and
other general corporate purposes
Proposed Nasdaq National Market symbol...... PNVN
</TABLE>
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(1) Based on 4,331,014 shares of common stock outstanding as of September 16,
1999, plus the sale of shares in this offering, 7,226,543 shares
issuable upon the conversion of our outstanding convertible preferred stock,
shares issuable in payment of accrued dividends on our convertible
preferred stock and 4,000 shares issuable upon the exercise of outstanding
warrants. Excludes 1,951,493 shares issuable upon the exercise of options
outstanding under our stock option plan, 219,841 shares available for future
grants of options under our stock option plan and 945,774 shares issuable
upon the exercise of warrants that will remain outstanding after this
offering.
---------------------
Unless otherwise indicated, all information in this prospectus assumes the
following:
- the redemption of all outstanding shares of our Series A preferred stock for
a total redemption price of $3.9 million, plus accrued dividends, which would
have been $.8 million as of June 30, 1999, upon the completion of this
offering;
- the automatic conversion of all outstanding shares of our Series B, Series C
and Series D preferred stock into a total of 7,226,543 shares of common stock
upon the completion of this offering;
- the issuance of shares of our common stock, valued at the initial
public offering price of $ per share, in payment of all accrued
dividends on our outstanding convertible preferred stock upon the completion
of this offering; and
- the issuance of 4,000 shares of our common stock upon the exercise of
outstanding warrants having an exercise price of $10.50 per share immediately
prior to the completion of this offering.
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SUMMARY FINANCIAL DATA
(in thousands, except share and per share data and other data)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------
1997 1998 1999
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<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ 888 $ 3,504 $ 8,453
Cost of revenues........................................ 2,077 6,599 15,717
Selling, general and administrative expenses............ 5,027 10,414 19,546
Stock-based compensation................................ -- -- 5,035
---------- ---------- ----------
Loss from operations.................................... (6,216) (13,509) (31,845)
Interest (expense) income and other, net................ 171 (225) (7,927)
---------- ---------- ----------
Net loss................................................ $ (6,045) $ (13,734) $ (39,772)
========== ========== ==========
Basic and diluted net loss attributable to common
stockholders.......................................... $ (6,962) $ (16,526) $ (42,703)
Net loss per share (basic and diluted).................. $ (1.61) $ (3.83) $ (9.89)
Shares used to compute basic and diluted net loss per
share................................................. 4,318,182 4,318,182 4,318,456
Pro forma basic and diluted net loss per share(1)....... -- --
Shares used to compute pro forma basic and diluted net
loss per share(1)..................................... -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED(2)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 4,101
Working capital......................................... 18,828
Total assets............................................ 61,386
Total current liabilities............................... 5,169
Total long-term debt and long-term portion of capital
leases............................................... 71,110
Total redeemable preferred stock........................ 42,093
Common stockholders' deficiency......................... (56,986)
</TABLE>
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<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------
1997 1998 1999
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<S> <C> <C> <C>
OTHER DATA:
Number of truckstops at which network is deployed....... 29 118 220
Number of monthly subscribers in the month ended........ 5,967 17,100 21,317
Number of daily subscribers in the month ended.......... 3,943 8,161 13,829
</TABLE>
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(1) The "pro forma" information reflects:
- the amendment of our certificate of incorporation to provide for
authorized capital of 50,000,000 shares of common stock and 8,750,000
shares of preferred stock and the designation of 3,000,000 shares of
Series D preferred stock in September 1999;
- the sale of 3,000,000 shares of our Series D preferred stock for $10.50
per share in September 1999;
- the redemption of all outstanding shares of our Series A preferred stock
for a total redemption price of $3.9 million, plus accrued dividends,
which would have been $.8 million as of June 30, 1999, upon the completion
of this offering;
- the automatic conversion of all outstanding shares of our Series B, Series
C and Series D preferred stock into a total of 7,226,543 shares of common
stock on the completion of this offering;
- the issuance of shares of our common stock, valued at the initial
public offering price of $ , in payment of all accrued dividends on
our outstanding convertible preferred stock upon the completion of this
offering; and
- the issuance of 4,000 shares of common stock upon the exercise of
outstanding warrants having an exercise price of $10.50 per share
immediately prior to the completion of this offering.
(2) The "pro forma as adjusted" information reflects the sale of
shares of common stock in this offering at an assumed initial public
offering price of $ , after deducting underwriting discounts and
estimated offering expenses, and the application of the net proceeds from
the sale.
8
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RISK FACTORS
You should carefully consider the following risk factors and other information
contained in this prospectus before deciding to invest in the shares. The risks
described in this section or elsewhere in this prospectus are not the only ones
that we may face. Additional risks that are not yet identified or that we
currently think are immaterial may materially adversely affect our business and
financial condition in the future.
WE HAVE A LIMITED OPERATING HISTORY AND HAVE NOT BEEN PROFITABLE AND EXPECT
FUTURE LOSSES AND NEGATIVE CASH FLOW.
From November 1993 to November 1995, our predecessor, Park 'N View, Ltd.,
developed our network and installed and operated it at one truckstop as a field
test. We began offering services on our network in December 1995 with the
completion of our first site. We deployed our network at 14 truckstops in 1996,
59 truckstops in 1997, 113 truckstops in 1998 and 43 truckstops from January 1,
1999 to July 31, 1999. Consequently, we have a limited operating history upon
which you may evaluate us and we face all of the risks and uncertainties of
early-stage companies. To date, we have not been profitable. We may never be
profitable or, if we become profitable, we may be unable to sustain
profitability. We have recognized limited revenues since our inception and have
incurred substantial costs to build and deploy our network, offer our services
and operate our business. We have incurred net losses of approximately $61.5
million from our inception through June 30, 1999. To date, our cash flow from
operations has been substantially insufficient to meet our cash requirements. We
expect to incur substantial net losses and experience substantial negative cash
flows for the foreseeable future. As of June 30, 1999, our total liabilities
plus our preferred stock outstanding exceeded our total assets by $57.0 million.
MANY OF OUR COSTS ARE FIXED AND WE EXPECT OUR COSTS TO INCREASE WHICH MAY
REQUIRE US TO SEEK ADDITIONAL FINANCING IN THE FUTURE, WHICH MAY NOT BE
AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL.
A high percentage of the costs of operating our network are fixed, including our
commitments under our contract with AT&T for T-1 lines and our equipment leases
with Cisco for routers. In addition, many of our costs are based on our
expectations of the future demand for our services and are relatively fixed in
the short-term. If our revenues do not increase, we may not be able to reduce
our costs in a timely manner to account for any shortfall in revenues. Recently,
we significantly increased our costs for:
- additional personnel to expand our sales and marketing programs and to
develop the portal website;
- the deployment of prepaid phone card machines at truckstops operated by a
major chain; and
- the publication of Connect!.
During the remainder of fiscal 2000, we plan to further increase our costs for:
- additional personnel to expand our sales and marketing programs and to
develop the portal website;
- the deployment of public Internet kiosks at certain truckstops;
- the installation of additional switching capacity necessary for our provision
of public phone operations at truckstops operated by two major truckstop
chains; and
- the addition of personnel in other areas to support the expansion of our
operations that our business plan contemplates.
We also plan, following the completion of this offering, to deploy prepaid phone
card machines at additional truckstops and to continue our publication of
Connect!. In addition, beginning in November 2000, we will be required to make
the scheduled semiannual interest payments on our 13% notes from our available
cash. Prior to that time, we have made, or will make, the first four scheduled
interest payments from funds and securities in an escrow account.
Our capital requirements will depend on numerous factors, including the growth
of our revenues, if any, and the rate of such growth and our expenditures. We
expect that the net proceeds of this offering,
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together with existing cash and anticipated cash generated from operations, will
be sufficient to fund our anticipated cash requirements for at least the next 18
months. Thereafter, if our cash flow from operations is not sufficient to
provide funds for working capital and capital expenditures and if equity or debt
or other financing is not available, we may experience insufficient liquidity
which could have a material adverse effect on our financial condition and
results of operations. Any needed financing may not be available on terms
favorable to us, or at all. If adequate funds are not available on acceptable
terms, we may curtail or cease our operations. Moreover, even if we are able to
continue our operations, the failure to obtain any needed financing could have a
material adverse effect on our business and financial results. Any inability to
fund our future capital requirements would have a material adverse effect on our
business, financial condition and operating results. See the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the heading "Liquidity and Capital Resources" for more
information on our capital requirements.
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN.
Currently, our revenues are generated primarily from sales of subscriptions to
the telecommunications and cable television services offered on our network and
to a lesser extent from prepaid phone card operations and resales of long
distance telephone minutes and advertising sales. Our future success depends
upon, among other things, our ability to increase revenues from our current
sources and generate revenues from additional sources, including, specifically,
our ability to:
- increase sales of subscriptions to the telecommunications and cable
television services offered on our network;
- convert daily subscribers to monthly subscribers and otherwise increase our
revenue on a per subscriber basis;
- generate sales of subscriptions to our Internet access service;
- increase resales of long distance telephone minutes;
- generate advertising revenue;
- generate revenues from e-commerce activities through the portal we are
developing; and
- expand our prepaid phone card operations.
If we are unable to increase our revenues from our current sources and generate
revenue from other sources, our business, financial condition and operating
results will be materially adversely affected. We may not be able to sustain our
current revenues or successfully generate additional revenue.
WE MAY NOT BE ABLE TO RETAIN OUR CURRENT SUBSCRIBERS OR INCREASE SALES OF
SUBSCRIPTIONS TO SERVICES OFFERED ON OUR NETWORK AND THE LONG DISTANCE TELEPHONE
MINUTES WE OFFER OVER OUR NETWORK.
Our future success depends upon our ability to significantly increase the number
of subscribers to services currently offered on our network and to generate fees
for Internet access service. The number of our active subscribers did not
increase significantly from September 1998 to June 1999 and decreased by 622
subscribers from March 1999 to June 1999.
Even if truck drivers initially subscribe to our network, they may not renew
their subscriptions. Of our new monthly subscribers in April 1999, our data
indicates that 82% were still active monthly subscribers in July 1999. There are
many factors that could cause a subscriber to cancel an ongoing monthly
subscription or fail to purchase a subscription, including dissatisfaction with
our network and the services offered, or with the number and location of the
truckstops at which our network is available, or truck driver turnover. Some
drivers have experienced problems in connecting to our network due to an
accumulation of moisture in the parking lot access points, or bollards. This
operational problem may cause drivers to cancel or decide not to purchase a
subscription. In July 1999, we began offering Internet access service free of
charge on a promotional basis. Beginning in October 1999, we intend to charge
separate subscription fees
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<PAGE> 12
for this service. Once we begin to charge a separate fee, truck drivers may be
unwilling to purchase a subscription to this service. Many truck drivers may not
own a computer for accessing the Internet.
Our power plan programs and payroll deductions, designed to increase ongoing
monthly subscriptions, may not be successful. We began marketing our power plan
program in October 1997 and had approximately 11,890 subscribers under this
program as of July 31, 1999. We began marketing our payroll deduction program in
March 1999 and had approximately 2,430 subscribers under this program as of July
31, 1999.
Our future success also depends on our ability to increase our resales of long
distance telephone minutes. We began marketing resales of long distance
telephone minutes in February 1999. Since that time we have increased our long
distance resales from $36,000 in February to $54,000 in July 1999. We believe
that increasing competition in the telecommunications industry will result in
significantly lower prices for long distance services. We may not be able to
reduce our prices sufficiently to compete effectively. Our failure to increase
our resales of long distance minutes on a profitable basis could have a material
adverse effect on our financial condition and results of operation.
OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF ELECTRONIC COMMERCE
TRANSACTIONS ON THE PORTAL, WHICH IS UNCERTAIN.
Our success depends on our ability to develop and generate revenue from
electronic commerce activities on the portal. If we are unable to develop
electronic commerce activities on the portal or if business-to-business
electronic commerce within the trucking industry does not grow or grows more
slowly than expected, either of these developments will have a material adverse
effect on our business. Many truck drivers may not have a computer for accessing
the Internet from their trucks which may adversely affect the growth of
electronic commerce in the trucking industry and on our portal. According to a
survey of approximately 800 truck drivers conducted for us by a third party
research firm in December 1998, approximately 21% of truck drivers have
computers in their truck cabs.
OUR LONG-TERM SUCCESS DEPENDS ON OUR ABILITY TO GENERATE ADVERTISING REVENUES
AND ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN.
Our business model contemplates that we will generate significant advertising
revenue from sales of advertising in Connect! and on the portal. We began
publishing Connect! in July 1999 and have not yet launched the portal. If we are
not successful in developing content for Connect! and the portal that attract a
significant number of truck drivers and other trucking industry participants, it
is unlikely that we will be able to attract advertisers.
The growth of Internet advertising requires validation of the Internet as an
effective advertising medium. This validation has yet to fully occur. Acceptance
of the Internet among advertisers will also depend on growth in the commercial
use of the Internet. If we do not generate advertising revenue or if widespread
commercial use of the Internet does not develop, or if the Internet does not
develop as an effective and measurable medium for advertising, our business,
financial condition and operating results could be materially adversely
affected.
WE ARE HIGHLY LEVERAGED WHICH COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE AND
EXPAND OUR BUSINESS.
We have a significant amount of debt outstanding. On June 30, 1999, we had $71.1
million of outstanding indebtedness and $57.0 million of stockholders'
deficiency. On a pro forma basis, giving effect to the sale of our Series D
preferred stock, the redemption of our Series A preferred stock, the automatic
conversion of our Series B, Series C and Series D preferred stock into common
stock, the issuance of shares of common stock in payment of accrued dividends on
our convertible preferred stock, the exercise of certain outstanding warrants to
purchase common stock, the sale of shares of common stock in this
offering at an assumed initial public offering price of $ and the
application of the net proceeds of this offering, on June 30, 1999, we had
$ million of stockholders' equity.
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We may not be able to meet our debt service requirements. We will be in default
under the terms of the indenture governing our 13% notes if we are unable to
make required interest payments or we otherwise fail to comply with the various
covenants in the indenture. We are required to make semiannual interest payment
on our 13% notes in May and November each year. The 13% notes mature in May
2008. We have made the first two interest payments and intend to make the next
two interest payments from funds and securities in an escrow account. Beginning
with the November 2000 scheduled interest payment, we will be required to make
these interest payments from our available cash. A default would permit the
holders of our 13% notes to accelerate the maturity of these notes, which would
have a material effect on our business, financial condition and results of
operations. Even if we are able to meet our debt service obligations, the amount
of debt we have could adversely affect us in a number of ways. For example, we
could be required to dedicate a substantial portion of our cash flow from
operations to the payment of principal and interest on our debt, thereby
reducing the funds available for the growth of our business.
WE DERIVE MOST OF OUR REVENUE FROM OUR OPERATIONS AT TRUCKSTOPS AND TRUCKSTOPS
MAY ENTER INTO CONTRACTS WITH OTHER PROVIDERS IF WE DO NOT MEET OUR OBLIGATIONS.
Most of our current revenues are generated from our operations at truckstops. We
expect that the provision of telecommunications, cable television and Internet
access services through our network will continue to be a primary source of
revenue for the foreseeable future. See the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the heading "Overview" and the section entitled "Business" under the heading
"Network Buildout; Truckstop Relationships and Contracts" for discussions about
our contractual relationships with truckstop owners and associations. TA owns or
operates over 150 of the truckstops that we have under contract.
We have contracted with truckstop operators located throughout the United
States. While most independent truckstop owners who own a single truckstop
execute a standard contract, the contracts executed by truckstop chains that
operate multiple truckstops vary significantly. These contracts generally
provide that the truckstop chains and independent truckstop owners may terminate
the contracts, and our exclusive rights under the contracts, if we fail in any
material respect to perform any of our obligations under the contracts and fail
to remedy the breach within 30 days after we receive notice of the breach. Any
failure by us to meet our contractual obligations that results in the
termination of our contracts, could have a material adverse effect on our
financial condition and results of operations.
OUR CONTRACTS WITH TRUCKING ASSOCIATIONS TO INSTALL OUR NETWORK AT APPROXIMATELY
300 MEMBER TRUCKSTOPS ARE NOT LEGALLY BINDING ON THEIR MEMBERS.
As of June 30, 1999, we had entered into contracts with the three largest
trucking associations representing more than 300 additional independent
truckstops pursuant to which these associations have agreed to permit us to
offer our services to their members. These associations do not have authority to
legally bind their members. Therefore, while each association has granted us the
right to offer cable television and telephone services to their members, this
contractual provision is not binding on any member. Prior to installation of our
network at an association member's truckstop, we must enter into a contract with
the association member granting us the right to install our network at the
member's truckstops. Accordingly, our contracts with truckstop associations may
not result in our network being installed at additional truckstop locations. See
the section entitled "Business" under the heading "Network Buildout; Truckstop
Relationships and Contracts."
OUR TELECOMMUNICATIONS AND CABLE TELEVISION PRODUCTS AND SERVICES COMPETE WITH
THOSE OFFERED BY MANY WELL-ESTABLISHED COMPETITIVE PROVIDERS.
In the market for the telecommunications and cable television services that we
offer, we compete with various elements of other providers' offerings based on
ease of access, functionality and cost. These industries are highly competitive,
and we expect to face strong competition from existing and potential
competitors. Our competitors comprise a broad range of companies engaged in
telecommunications and cable television services, including, but not limited to,
public phone operators, prepaid phone card
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providers, cellular and other wireless telecommunications companies, long
distance telecommunications carriers, cable operators and direct broadcast
satellite companies, as well as companies developing new technologies. The
Telecommunications Act of 1996 also permitted the Regional Bell Operating
Companies, or RBOCs, to enter the out-of-region long distance market and, if
certain requirements are met, to enter the long distance market in its in-region
states. Some of these competitors and potential competitors, including those
arising from the consolidation of telecommunications and cable television
companies and the formation of strategic alliances, are well established
companies and have significantly greater financial, marketing and programming
resources than us.
Our telecommunications services compete with public pay phones, cellular and
other wireless telephones, long distance providers, calling cards, prepaid phone
cards, collect calls and toll-free numbers. We believe that drivers currently
use public pay phones located at truckstops for a significant number of the
calls they make and we may not successfully attract drivers who predominantly
use these public pay phones. Although cellular and other wireless service may be
presently unavailable in some remote truckstop locations, we expect competition
from cellular and other wireless telecommunications providers to be increasingly
more intense as a result of the entrance of new competitors and the development
of new technologies, products and services, which may reduce the cost of
cellular and other wireless services. Our telecommunications services may not be
able to compete successfully against cellular and other wireless offerings. Our
resales of long distance telephone minutes also compete with those provided by
calling cards, prepaid phone cards, collect calls and toll-free numbers. Our
telecommunications services may not be able to effectively compete against these
or future telecommunications competitors, many of which have large customer
bases and significantly more resources than us. We believe that increasing
competition in the telecommunications industry will result in significantly
lower prices for long distance services. We may not be able to reduce our prices
sufficiently to compete effectively. Our failure to increase our resales of long
distance minutes on a profitable basis could have a material adverse effect on
our financial condition and results of operations.
The prepaid phone card sector of the long distance telecommunications market is
highly competitive and is affected by the constant introduction of new cards and
services by industry participants. Competition is based upon pricing, customer
service and perceived reliability of the prepaid phone cards. Our competitors
include some of the largest telecommunications providers, as well as emerging
carriers in the prepaid phone card market which have greater financial,
technical, personnel and marketing resources than us and greater name
recognition and larger customer bases than us. Our ability to compete
effectively in the prepaid phone card sector of the long distance
telecommunications market will depend upon our ability to provide reliable cards
at prices competitive with, or lower than, those charged by our competitors. Our
contractual arrangements with third parties relating to the prepaid phone cards
that we offer may make it difficult or impossible for us to reduce our prices
for prepaid long distance minutes to compete effectively on a profitable basis.
Our failure to increase our sales of prepaid phone cards on a profitable basis
could have a material adverse effect on our financial condition and results of
operations.
The competition for our cable television offerings currently consists of
alternatives located outside the truck cab and primarily in the truckstop.
Community television and game rooms inside the truckstop are the most readily
available entertainment alternatives for truck drivers. We believe that a small
number of professional truck drivers have purchased direct broadcast satellite,
or DBS, dishes to receive television programming in their cabs. Cable, DBS, and
other video service providers to such users as residential apartment buildings
could seek to compete by offering cable television programming to truckstops. We
may not be able to compete successfully against these providers, most of which
will have access to greater resources and provide more programming than our
network. See the section entitled "Business" under the heading "Competition."
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WE HAVE MANY STRONG COMPETITORS FOR OUR CURRENT AND PLANNED INTERNET ACCESS
SERVICES.
The market for providing Internet access is extremely competitive and highly
fragmented. There are no substantial barriers to entry, and we expect that
competition will continue to intensify. We may not be able to compete
successfully against current or future ISPs, many of whom may have financial
resources greater than ours. Increased competition could cause us to increase
the sales and marketing expenses related to our Internet access services as well
as cause our users to obtain Internet access from other sources. We may not be
able to offset the effects of these increased costs through an increase in the
number of subscribers to our Internet access service and we may not have the
resources to continue to compete successfully as an ISP.
We believe that new competitors, including large computer hardware and software,
media, and telecommunications companies, will continue to enter the Internet
access market. As consumer awareness of the Internet grows, existing competitors
are likely to further increase their emphasis on their Internet access services,
resulting in even greater competition. In addition, telecommunications companies
may be able to offer customers reduced communications costs in connection with
these services, reducing the overall cost of their Internet access solutions and
significantly increasing pricing pressures on our Internet access services. The
ability of our competitors to acquire other ISPs, to enter into strategic
alliances or joint ventures or to bundle other services and products with
Internet access could also put us at a significant competitive disadvantage.
We intend to deploy public Internet kiosks in the truckstops of two major chains
following the completion of this offering. There is at least one company that
has installed Internet/e-mail kiosks in a number truckstops.
OUR CURRENT AND PLANNED INTERNET PRODUCTS AND SERVICES FACE INTENSE COMPETITION.
Competition for Internet products and services and electronic commerce is
intense. We expect that competition will continue to intensify. Barriers to
entry are minimal, and competitors can launch new websites at a relatively low
cost. Various websites currently exist that provide content and commerce
solutions to the trucking community. Several of these websites have market
acceptance, established customer and advertising bases and offer a greater
variety of content and applications than our portal may initially offer. Our
competitors may develop new Internet products or services that are superior to,
or have greater market acceptance than, our products and services. If we are
unable to compete successfully against our competitors, our business, financial
condition and operating results could be adversely affected.
WE ARE DEPENDENT ON THIRD PARTIES FOR THE PUBLIC PHONE AND PREPAID PHONE CARD
OPERATIONS WE OFFER.
We are currently dependent on third parties for the public phone and a portion
of the prepaid phone card operations that we offer truckstops. We are obligated
to provide public phone operations in the truckstops of one major chain. We have
contracted with a third party to provide these operations and do not intend to
provide this service directly. This third party's failure to provide public
phone operations would result in our breach of our contract with the truckstop
chain. Our system is currently unable to provide all of the components necessary
for prepaid phone card operations. Although we believe that other third parties
could provide these services for us or, over time, we could develop the systems
so that we could provide these services, any inability to rely on third party
systems without disruption prior to such development would eliminate our ability
to offer prepaid phone card operations to truckstops and could have a material
adverse effect on our business, financial condition and results of operations.
WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS.
We rely on local and long distance telecommunications carriers to provide
telecommunications services via local lines and T-1 lines. We may experience
disruptions or capacity constraints in our local and long distance
telecommunications services. If disruptions or capacity constraints occur, we
may have no means of replacing these services on a timely basis, at a cost
acceptable to us, or at all. In addition, local phone service is sometimes
available only from the local monopoly telephone company in the markets we
serve.
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We believe that the federal Telecommunications Act of 1996 generally will lead
to increased competition in the provision of local telephone service, but we
cannot predict when or to what extent this will occur or the effect of increased
competition on pricing or supply.
The long distance telecommunications carrier from which we purchase long
distance minutes for resale also sells or leases products and services to our
competitors and may be, or in the future may become, a direct competitor itself.
Our suppliers and our telecommunications carrier may enter into exclusive
arrangements with our competitors or stop selling or leasing their products or
services to us at commercially reasonable prices, or at all.
OUR SUCCESS WILL DEPEND ON THE TIMELY AND COST-EFFECTIVE INSTALLATION OF OUR
NETWORK FOR WHICH WE RELY ON THIRD PARTIES.
Our future success will depend in large part on the timely and cost-effective
installation of our network at additional truckstops for which we rely on third
parties. To date, the installation of our network at truckstops by these
contractors has been completed substantially on our schedule and within our
budget, and, generally, the installation services performed by these contractors
have been satisfactory to us. Although we believe that there are sufficient
alternative sources for the installation of our network, we may not be able to
obtain these services on a timely basis or at a cost acceptable to us. If we
were unable to continue our buildout as planned, it could have a material
adverse effect on our business, financial condition and results of operations.
WE DEPEND ON THIRD PARTIES TO SUPPLY US WITH PROGRAMMING AND EQUIPMENT.
We purchase our satellite equipment, headend equipment, telephone switching
equipment, computer hardware and cable programming from outside suppliers and do
not have purchase agreements with any supplier other than our cable programming
supplier, Echostar Communications Corporation. We presently purchase our
satellite equipment and computer hardware from a sole supplier and we believe
that limited alternative sources for these items exist. If we were required to
purchase alternative telephone switching equipment from another source, it would
require reprogramming of some of our software or if we were required to purchase
any alternative equipment from another source, it could require that we modify
and redesign our network in certain respects which, in each case, could result
in service delays and expense to us. In addition, we purchase the cable
programming offered on our network from Echostar. Although we believe that
limited alternative sources for cable programming exist, utilizing an
alternative source could require retrofitting certain equipment at each
truckstop site and could result in an interruption in our ability to offer cable
television services through our network for a limited period of time. If we are
unable to obtain any of the foregoing equipment, particularly telephone
switching equipment, or cable programming, this could have a material adverse
effect on our ability to expand our business in a timely fashion and, as a
result, on our results of operations and financial condition.
We depend on a few third-party suppliers of hardware components. Currently, we
acquire routers used to provide our networking services from only one source.
From time to time, we have experienced delayed delivery from some suppliers. If
we are unable to develop alternative sources of supply, if required, we could
experience delays and increased costs in expanding our network infrastructure.
WE HAVE CONTRACTS WHICH REQUIRE US TO PAY A SPECIFIED MINIMUM DOLLAR AMOUNT
REGARDLESS OF OUR NEEDS.
We have contracts with AT&T under which we obtain T-1 lines and related
communications services for our network and purchase long distance telephone
minutes that we resell. These contracts require us to pay specified minimum
dollar amounts regardless of the number of T-1 lines or long distance telephone
time we need. In return for our commitment to minimum payments, we have obtained
certain discounts applied to our payments for these services. See the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under the heading "Liquidity and Capital Resources." If
we do not obtain the available discounts with regard to our required payments,
this could have a material adverse effect on our business, financial condition
and results of operations.
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OUR BUSINESS DEPENDS UPON THE HEALTH OF THE TRUCKING INDUSTRY.
Our business depends on the trucking industry which is dependent on economic
factors, including the level of domestic economic activity and interest rates,
as well as operating factors such as fuel prices and fuel taxes over which we
have no control and which could contribute to a decline in truck travel. The
long-haul trucking business is also a mature industry that has grown slowly in
recent years and has, in the past, been susceptible to recessionary downturns.
OUR NETWORK MAY BE VULNERABLE TO SECURITY BREACHES AND INAPPROPRIATE USE BY
INTERNET USERS WHICH COULD DISRUPT OUR SERVICE.
The future success of our business will depend on the security of our network
and, in part, on the security of the network infrastructures of our third-party
providers, over which we have no control. Despite the implementation of security
measures, our infrastructure is vulnerable to computer viruses or similar
disruptive problems. Computer viruses or problems caused by third parties,
including the sending of excessive volumes of unsolicited bulk e-mail or "spam,"
could lead to interruptions, delays, or cessation in service to our subscribers.
Third parties could also potentially jeopardize the security of confidential
information stored in our computer systems or our subscribers' computer systems
by their inappropriate use of the Internet, which could cause losses to us or
our subscribers or deter persons from subscribing to our services. Inappropriate
use of the Internet includes attempting to gain unauthorized access to
information or systems, commonly known as "cracking" or "hacking." Although we
intend to continue to implement security measures to prevent this, "hackers"
have circumvented security measures adopted by others in the past, and may be
able to circumvent our security measures in the future.
To alleviate problems caused by computer viruses or other appropriate uses or
security breaches, we may have to interrupt, delay, or cease service to our
subscribers, which could have a material adverse effect on our business,
financial condition, and results of operations. In addition, we expect that our
subscribers will increasingly use the Internet for commercial transactions in
the future. Any network malfunction or security breach could cause these
transactions to be delayed, not completed at all, or completed with compromised
security. Subscribers or others may assert claims of liability against us as a
result of any failure by us to prevent these network malfunctions and security
breaches. Until more comprehensive security technologies are developed, the
security and privacy concerns of existing and potential subscribers may inhibit
the growth of the Internet service industry in general and our subscriber base
and revenue in particular.
WE MAY FACE POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED THROUGH OUR
NETWORK.
Since the law relating to liability of ISPs for information carried on or
disseminated through their networks is not settled, even with the defenses
available in Section 223 of the Communications Decency Act of 1996 and the
recent enactment of the Digital Millennium Copyright Acts, we may be subject to
such liability. A number of lawsuits have sought to impose liability for
defamatory speech, indecent materials and infringement of copyrighted materials.
The United States Supreme Court has let stand a lower court ruling that an ISP
was protected from liability for material posted on its system by a provision of
the Communications Decency Act. However, the findings in that case may not apply
in other circumstances. Other courts have held that online service providers and
ISPs may be subject to damages for copying or distributing copyrighted
materials. Provisions of the Communications Decency Act that imposed criminal
penalties for using an interactive computer service for transmitting obscene or
indecent communications have been found unconstitutional by the United States
Supreme Court. However, the Child Online Protection Act requires limits on
access to pornography and other material deemed "harmful to minors." This
legislation imposes criminal penalties and civil liability. Numerous states have
adopted or are adopting similar types of legislation. We may be subject to
claims relating to content that is published on or downloaded from our sites. We
also could be subject to liability for content that is accessible from our
website through links to other websites or that is posted by users in chat rooms
or bulletin boards. Potential liability imposed on ISPs like us for material
carried on or disseminated through our network could require us to implement
measures to reduce our exposure to that liability. These measures may
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require us to spend substantial resources or discontinue certain service
offerings. We do not have errors and omissions insurance that would cover claims
relating to these risks. The imposition of liability could have a material
adverse effect on our business or financial results.
OUR BUSINESS IS CHARACTERIZED BY EVOLVING TECHNOLOGY WHICH WE MAY NOT BE ABLE TO
KEEP UP WITH IN A COST-EFFECTIVE WAY.
The services that we offer through our network are characterized by evolving
technology, changes in customer needs, rapidly growing competition and frequent
new product and service introductions. Our future success will depend, in part,
on our ability to:
- effectively use and offer leading technologies;
- continue to develop our technical expertise;
- enhance our current networking services;
- develop new products and services that meet changing customer needs;
- advertise and market our services; and
- influence and respond to emerging industry standards and other technological
changes.
We must accomplish these tasks in a timely and cost effective manner. New
technologies, such as wireless data transmissions, or industry standards may
replace or provide lower cost alternatives to our existing products and services
or could render our existing products and services noncompetitive and adversely
affect their marketability. We also believe that our ability to compete
successfully depends on the continued compatibility and interoperability of our
services with products and architectures offered by other vendors. Although we
intend to support emerging standards in the market for the Internet and other
network connectivity, new industry standards could emerge, and we may not be
able to conform to these new standards in a timely fashion and maintain a
competitive position in the market. Our pursuit of necessary technological
advances and maintenance of technological compatibility may require substantial
time and expense.
RISK OF FAILURE OF OUR COMPUTER AND COMMUNICATIONS HARDWARE SYSTEMS INCREASES
WITHOUT BACK-UP FACILITIES.
We depend on the efficient and uninterrupted operation of our computer and
communications hardware systems in Coral Springs, Florida. However, we do not
have remote back-up facilities for our computer systems. Interruptions could
result from natural disasters, technical failures, including power loss, the
failure of telecommunications equipment and systems and similar events. Any
interruptions in the delivery of our services could result in customer
dissatisfaction and which in turn could adversely affect usage of our network
and results of operations.
WE ARE NOT READY FOR THE YEAR 2000 AND FACE RISKS ASSOCIATED WITH BECOMING YEAR
2000 COMPLIANT.
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the Year 1900 rather
than the Year 2000. In addition, the Year 2000 is a leap year, and some computer
programs may not properly provide for February 29, 2000. System failures and
miscalculations causing disruptions of normal business activities may occur.
IBM recently completed a readiness review of our services, software, switches
and routers and other systems, as well as our analysis and planning,
remediation, readiness testing, staffing, and contingency planning for Year 2000
issues. IBM concluded that we are not ready for the Year 2000. However, IBM did
conclude that our proprietary software and databases likely would not require
any Year 2000 remediation.
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Following the completion of IBM's readiness review, in August 1999, we hired
additional product development employees to address, among other things, Year
2000 issues. We also retained IBM to provide project management assistance for
our Year 2000 compliance efforts, to assist us with the implementation of the
recommendations included in IBM's readiness review, to develop action plans for
mission critical systems and to provide other Year 2000 preparation services.
IBM also is conducting project management training for our personnel who will
lead our Year 2000 efforts. With the assistance of IBM, we will conduct an
inventory assessment of our mission critical systems during the third quarter of
1999. We believe that our Year 2000 preparation, planning and remediation
efforts will be substantially complete when IBM completes its services for us in
the third quarter of 1999.
On a preliminary basis, we have estimated $400,000 as the maximum cost of
evaluating, testing, reprogramming, and modifying our services, systems and
equipment. This estimate includes the approximately $86,000 paid to IBM for its
readiness review and approximately $186,000 payable to IBM for their project
management, implementation assistance and other services. This estimate also is
based on the belief that no major problems will be encountered in becoming Year
2000 compliant.
We also utilize software and hardware developed by third parties both for our
network and internal information systems. We have made inquiries to our
significant suppliers regarding their Year 2000 compliance or the status of
their review and implementation of their own Year 2000 compliance programs.
While some of these suppliers have provided oral or written assurances, we do
not have any information regarding, or any oral or written assurances from, many
of our significant suppliers and providers of equipment, telecommunications and
data communications regarding their Year 2000 compliance or the status of their
review and implementation of their own Year 2000 compliance programs.
We may have to replace the non-information technology systems that cannot be
repaired. IBM has reviewed our non-information technology systems and concluded
that we did not have compliance information from the suppliers of our
non-information technology systems. As a result, while we do not believe that we
have many non-information technology assets with microprocessors, we presently
have no basis on which to estimate the costs of assessing and repairing or
replacing our non-information technology systems or to determine whether such
costs will have a material adverse effect on our operations or our financial
condition.
Our services and systems operate in complex network environments and directly
and indirectly interact with a number of other hardware and software systems. We
face risks to the extent that suppliers of products, services and systems
purchased by us and others with whom we transact business, including those which
form significant portions of our network and may be sole or limited source
suppliers, do not have business systems or products that comply with Year 2000
requirements, despite the implementation of a Year 2000 compliance program or
assurances of Year 2000 compliance by such suppliers. If these networks fail,
our business will be significantly impacted.
We have not fully determined the risks associated with the reasonably worst-case
scenario. With the assistance of IBM, we are developing contingency procedures
that would go into effect if any of our systems or suppliers experience Year
2000 problems. While we have customary plans for back-up and recovery of our
system, we have not enhanced these plans to address Year 2000 issues.
In the event any material errors or defects are not detected and fixed or third
parties cannot timely provide us with services, systems or equipment that meet
the Year 2000 requirements, our business, results of operations and financial
condition could be materially adversely affected. Known or unknown errors or
defects that affect the operation of our services, systems or equipment could
result in delay or loss of revenues, interruption of telecommunications, cable
television and Internet services, cancellation of subscriptions, diversion of
development resources, damage to our reputation, damages paid to customers and
litigation costs. For a more detailed discussion of our Year 2000 readiness
review, see the section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" under the heading "Year 2000."
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WE ARE SUBJECT TO BURDENSOME GOVERNMENT REGULATION TO VARYING DEGREES.
Regulation of the telecommunications industry is changing rapidly. As a provider
of telecommunications services nationwide, we are subject to varying degrees of
regulation in each of the jurisdictions in which we provide our services. Laws
and regulations, and the interpretation of such laws and regulations, differ
significantly among the jurisdictions in which we operate. These laws and
regulations are, moreover, subject to changes as a result of ongoing regulatory
implementation proceedings, subject to review by courts and otherwise. This is
particularly true in regard to Internet services, which, while not heavily
regulated at this time, are the subject of intense debate over the degree that
they should be regulated in the future, if at all. There can be no assurance
that future regulatory, judicial and legislative changes will not have a
material adverse effect on the company, that regulators and/or third parties
will not raise material issues with regard to our compliance or non-compliance
with applicable regulations, and/or that we will be in compliance with all such
laws and regulations at any one point in time.
We are subject, in our provision of telecommunications services, to the
provisions of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, the FCC regulations thereunder as well as the
applicable laws and regulations of the various states administered by state
public utilities commissions, state public service commission or like state
regulatory bodies ("PUCs"). We are required by most states to obtain
authorization before commencing intrastate services. On the federal level, we
are considered a non-dominant domestic interstate carrier subject to minimal
regulation by the FCC. We are not required to obtain FCC authority to expand our
interstate operations, but we are required to maintain, and do maintain, a
domestic interstate tariff on file with the FCC. The FCC presumes the tariffs of
non-dominant carriers to be lawful. Therefore, the FCC does not carefully review
such tariffs. The FCC could, however, investigate our tariffs upon its own
motion or upon complaint by a member of the public. As a result of any such
investigation, the FCC could order us to revise our tariffs, or the FCC could
prescribe revised tariffs. In late 1996, the FCC ruled that interexchange
carriers are no longer required to file their tariffs for domestic interstate
interexchange services. In August 1997, the FCC affirmed its decision to end
tariff filing requirements for domestic interstate long distance services
provided by non-dominant carriers. The FCC also eliminated the requirement that
non-dominant carriers disclose information on rates and terms of their products.
These detariffing orders have been stayed by the US Court of Appeals for the
District of Columbia. Most recently, on March 18, 1999, the FCC adopted an order
that would permit the alternative of posting rates on a carrier's website. This
order will not become effective until the Court affirms the FCC's mandatory
detariffing plan.
In addition to the general requirement that before providing U.S. international
services we obtain authority under Section 214 of the Communications Act and
file a tariff containing the rates, terms and conditions applicable to such
international services, we are also subject in our provision of U.S.
international services to FCC rules requiring, among other things, the filing of
certain carrier-to-carrier contracts, notifications or approvals of certain
foreign carrier investments, approval for assignments of FCC licenses and
transfers of control of certified carriers, and other international service
regulations. We are also subject to a number of reporting requirements,
including requirements to report on our international revenue, traffic flows,
and use of international facilities. We have recently filed a Section 214
application seeking international authority, which we expect to be granted as a
matter of course. Upon such grant we intend to file an international tariff with
the FCC. Because we have provided U.S. international service prior to obtaining
Section 214 authorization, we are subject to sanctions including fines, other
penalties and/or denial or revocation of our 214 authority. We do not believe
that an enforcement action is likely, and if such action is taken, we do not
believe that any such penalties or fines would be onerous, or that our
authorization would be revoked. There can be no assurance, however, that this
will be the case.
The state PUCs also regulate telecommunications service providers. Most states
require carriers to obtain authorization, either pursuant to certification, the
fulfillment of tariff requirements or notification requirements to provide
intrastate telecommunications services, or to be found exempt from regulation
before commencing such services. Many states also require carriers to file and
maintain detailed tariffs or price lists listing the rates, terms and conditions
under which they provide service. We are currently
19
<PAGE> 21
authorized, pursuant to registration, certification, tariffs, notifications or
on an unregulated basis to provide intrastate long distance telephone service in
the 48 contiguous states and Hawaii.
The relevant regulatory authorities could find that we provided intrastate long
distance service prior to obtaining necessary authorization. In the event of any
such finding, we may be subject to sanctions, including fines, other penalties
and/or revocation of our authority. We do not believe that any enforcement
action is likely, or that if such action is taken, that any such fines or
penalties would be onerous, or that our authorizations would be revoked. There
can be no assurance, however, that this will be the case.
While we believe that our service offerings do not subject us to rules and
regulations governing pay phone providers, competitive local exchange carriers,
operator service providers and facilities-based providers, there can be no
assurance that all relevant regulatory authorities would agree, since such rules
and regulations are subject to different interpretations, and are subject to
change. Were any regulatory authorities to determine that we are subject to
regulations governing pay phone, CLEC, operator service or facilities-based
providers, including additional authorization requirements, we could be subject
to sanctions for providing service without appropriate authorizations or for
otherwise failing to comply with applicable regulatory requirements. While we do
not believe that such determinations would result in a material adverse effect
upon us or our operations, there can be no assurance that this would be the
case.
Federal and state regulatory authorities also impose various reporting
requirements and obligations to contribute to "universal service" and other
subsidy funds, and to take certain steps to protect consumers. Some state PUCs
also require prior approval for transfers of control of certified carriers,
transfer of carrier assets, including customer bases, carrier stock offerings,
the incurrence by carriers of significant debt obligations and name changes. The
FCC also requires prior approval or notification under certain circumstances. We
recently changed our name from Park 'N View, Inc. to PNV.net, Inc. We are in the
process of notifying the various PUCs, and, where necessary, seeking approval in
connection with the name change, this offering, a prior debt offering and our
Series D preferred stock offering. We are also in the process of making required
filings with the FCC. We cannot be certain that we will obtain all necessary
regulatory approvals in connection with the name change and such offerings.
Additionally, we may be subject to fines or other sanctions for failure to seek
prior approval, where necessary, for certain of these corporate actions and/or
for failure to notify the FCC and/or state PUCs in a timely enough fashion.
Delay or failure in complying with applicable regulations could result in
sanctions, including fines or other penalties, and our authorizations being
conditioned, modified, canceled, terminated or revoked, which would limit or
eliminate our ability to provide telecommunications services. Conditions,
modifications, cancellations, termination or revocation could have a material
adverse effect on our business, financial condition and results of operations.
WE MAY BECOME SUBJECT TO GOVERNMENTAL REGULATION OF CABLE TELEVISION COMPANIES.
Cable television companies are subject to extensive governmental regulation.
Because our cable system equipment is installed exclusively on private property,
we do not believe that we are subject to such regulations. However, in the event
we are required to comply with such regulations, the expense, potential delay
and management distraction potentially resulting from the compliance process
could have a material adverse effect on our results of operations and financial
condition.
OUR ISP SERVICE MAY BECOME REGULATED BY THE FEDERAL COMMUNICATIONS COMMISSION OR
OTHER GOVERNMENT AGENCIES.
ISPs are not currently regulated like telecommunications service providers by
the Federal Communications Commission or any other agency. In a report to
Congress adopted on April 10, 1998, the FCC reaffirmed that Internet service
providers should be classified as unregulated "information service providers"
rather than regulated "telecommunications providers" under the terms of the
Telecommunications Act of 1996.
This finding is important because it means that regulations governing regular
telephone service do not directly apply to ISP services. ISPs are not required
to contribute a percentage of their gross revenues
20
<PAGE> 22
from ISP services to support "universal service" subsidies for local telephone
services and other public policy objectives, such as enhanced communications
systems for schools, libraries, and some health care providers. The FCC action
seems likely to discourage states from regulating Internet service providers as
telecommunications carriers or imposing similar subsidy obligations.
Nevertheless, Internet-related regulatory policies are continuing to develop,
primarily as determined by the industry itself, and it is possible that we could
be exposed to direct governmental regulation in the future. For example, in the
same report to Congress, the FCC stated its intention to consider whether to
regulate voice and fax telephony services provided over the Internet as
"telecommunications" even though Internet access itself would not be regulated.
We cannot predict whether in the future the FCC will modify its current policies
against regulation of ISPs.
Due to the increasing popularity and use of the Internet, it is possible that
additional laws and regulations may be adopted with respect to the Internet,
covering issues such as content, privacy, access to some types of content by
minors, pricing, bulk e-mail or "spam," encryption standards, consumer
protection, electronic commerce, taxation, copyright infringement, and other
intellectual property issues. ISPs are, of course, subject to certain
regulations applicable to businesses generally. We cannot predict the impact, if
any, that any future regulatory changes or developments may have on our
business, financial condition, and results of operations. Changes in the
regulatory environment relating to the Internet access industry, including
regulatory changes that directly or indirectly affect telecommunication costs or
increase the likelihood or scope of competition from regional telephone
companies or others, could have a material adverse effect on our business,
financial condition and results of operations.
WE HAVE NOT PAID AND DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS ON OUR COMMON
STOCK IN THE FORESEEABLE FUTURE.
We have never paid, and for the foreseeable future do not anticipate paying, any
cash dividends on our common stock. We intend to retain our earnings, if any,
for use in our growth and ongoing operations. In addition, the terms of the
indenture governing our 13% notes restrict our ability to pay dividends on the
common stock.
LIMITATIONS IMPOSED BY RESTRICTIVE COVENANTS COULD LIMIT HOW WE CONDUCT
BUSINESS.
The indenture governing our 13% notes contains covenants that restrict our
ability to, among other things:
- incur additional debt;
- pay dividends and make other distributions;
- prepay subordinated indebtedness;
- repurchase capital stock;
- make investments and other restricted payments;
- engage in transactions with affiliates;
- engage in business other than the provision of telecommunications,
television, Internet and other related services to the trucking industry;
- enter into sale and leaseback transactions;
- create liens;
- sell assets; and
- engage in mergers and consolidations and certain other events which could
cause an event of default.
As a result of these restrictions, we are limited in how we conduct our business
and we may be unable to raise additional debt or equity financing to operate
during general economic or business downturns, to
21
<PAGE> 23
compete effectively or to take advantage of new business opportunities. This may
affect our ability to generate revenues and make profits.
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW MAY MAKE MORE
DIFFICULT OR PREVENT A CHANGE IN CONTROL.
Provisions of the certificate of incorporation and bylaws that we intend to
adopt before the completion of this offering may have the effect of
discouraging, delaying or making more difficult changes in control that are not
approved by our board of directors or preventing the removal of incumbent
directors. The existence of these provisions may have a negative impact on the
price of the common stock and may discourage third-party bidders from making a
bid for our company or may reduce any premiums paid to stockholders for their
common stock. In addition, our 13% notes are redeemable on changes in our
control and the removal of directors under certain circumstances, which may have
a similar effect. In particular, the provisions that we intend to adopt will
prohibit stockholder action by written consent, require advance notice for
nomination of directors and for stockholders proposals and allow only the
chairman of the board or a majority of the directors to call a special
stockholders' meeting. In addition, upon the completion of this offering, our
outstanding preferred stock will be redeemed or will automatically convert into
common stock. Following this redemption or conversion, we intend to eliminate
our current preferred stock designations and thereafter our board of directors
may designate and issue preferred stock without stockholder approval.
Furthermore, as a Delaware corporation, we are subject to Section 203 of the
Delaware General Corporation Law. In general, this law prevents a person who
becomes the owner of 15% or more of the corporation's outstanding voting stock
from engaging in specified business combinations for three years unless
specified conditions are satisfied.
THE INTERESTS OF OUR MANAGEMENT AND OUR PRINCIPAL STOCKHOLDERS MAY CONFLICT WITH
OUR INTERESTS AND THE INTERESTS OF OUR OTHER STOCKHOLDERS.
Upon the completion of this offering, our present directors, executive officers
and principal stockholders as a group will beneficially own approximately %
of the outstanding common stock. Accordingly, if all these particular
stockholders were to act together they could exercise significant influence over
or control the election of our board of directors, our management and policies
and the outcome of particular corporate transactions or other matters submitted
to our stockholders for approval, including mergers and the sale of our assets.
In addition, each of our current directors serves as a designee of the holders
of our common stock or one of our series of preferred stock. Following the
completion of this offering, these designees will remain on the board of
directors at least until their respective successors, if any, are elected.
OUR COMMON STOCK HAS NEVER BEEN PUBLICLY TRADED SO WE CANNOT PREDICT THE EXTENT
TO WHICH A TRADING MARKET WILL DEVELOP FOR OUR COMMON STOCK.
There has not been a public market for our common stock. We cannot predict the
extent to which a trading market will develop or how liquid that market might
become. The initial public offering price will be determined by negotiations
between representatives of the underwriters and us and may not be indicative of
prices that will prevail in the trading market.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The market price of our common stock is likely to be highly volatile as the
stock market in general, and the market for Internet-related and technology
companies in particular, has been highly volatile. Investors may experience
decreased liquidity of our common stock following periods of volatility because
of the market's adverse reaction to such volatility. The trading prices of many
technology and Internet-related companies' stocks have reached historical highs
within the last 52 weeks and have reflected relative valuations substantially
above historical levels. During the same period, these companies' market prices
have also been highly volatile and have recorded lows well below their
historical highs.
22
<PAGE> 24
In the past, companies that have experienced volatility in the market price of
their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
which could have an adverse effect on our business, results of operations and
financial condition.
WE MAY EXPERIENCE SUBSTANTIAL SALES OF OUR COMMON STOCK AFTER THE OFFERING.
Sales of our common stock, or the availability of our common stock for sale,
could cause the market price of our common stock to decline and could impair our
ability to raise capital through the sale of additional equity securities. Upon
completion of this offering, assuming an initial public offering price of
$ , we will have approximately shares of common stock
outstanding and 2,897,267 shares of common stock subject to outstanding options
and warrants. The shares sold in this offering will be freely
tradable without restriction or future registration under the federal securities
laws unless purchased by our "affiliates" as that term is defined in Rule 144
under the Securities Act. The remaining shares of common stock
outstanding on completion of the offering will be "restricted securities" as
that term is defined in Rule 144.
Our stockholders, option holders and holders of warrants to purchase 440,399
shares of common stock are generally limited by lock-up agreements restricting
their ability to sell their common stock for a period of at least 180 days after
the date of this prospectus without the prior written consent of CIBC World
Markets. In addition, the holders of warrants to purchase 505,375 shares of
common stock have agreed not to sell the common stock issuable on the exercise
of these warrants for at least 90 days after the date of this prospectus. When
these lock-up periods expire, the shares owned by these persons may be sold into
the public market without registration under the Securities Act in compliance
with the applicable restrictions of Rule 144 under the Securities Act. After the
date of this prospectus, we intend to file a registration statement under the
Securities Act to register all shares of common stock issuable upon the exercise
of outstanding stock options or reserved for issuance under our stock option
plan, of which 738,969 shares are currently exercisable or become exercisable
before December 31, 1999. This registration statement is expected to become
effective immediately upon filing. Subject to the vesting requirements and
exercise of the related options and the grant of stock options as well as the
terms of the lock-up agreements, shares covered by this registration statement
will be eligible for sale in the public markets, except for any shares held by
our "affiliates."
We have granted demand registration rights to the beneficial owners of 9,326,110
shares of our common stock, including the holders of 7,226,543 shares issuable
on the conversion of our Series B, Series C and Series D preferred stock and
100,399 shares issuable on the exercise of outstanding warrants. These demand
registration rights also will apply to the shares of our common stock,
valued at the initial public offering price of $ per share, to be issued in
payment of accrued dividends on our Series B, Series C and Series D preferred
stock upon completion of this offering. These stockholders and warrantholders
also may require us to file additional registration statements on Form S-3,
subject to conditions and limitations. In addition, if we propose to register
any of our common stock under the Securities Act, these stockholders and
warrantholders, as well as the holders of warrants to purchase an additional
340,000 shares of common stock, are entitled to notice of this registration and
include the shares of common stock in the registration. If a piggyback
registration involves an underwriting, the underwriters may limit or eliminate
the number of shares in the registration.
We have also agreed with the holders of outstanding warrants to purchase 505,375
shares of common stock to maintain an effective registration statement under
which the warrants and the underlying common stock can be resold or issued until
such time as these securities can be distributed under Rule 144 under the
Securities Act. We have previously filed a registration statement on Form S-1
registering the resale or issuance of these securities. In July 1999, we
notified the holders of these warrants that they must discontinue using the
prospectus in this registration statement in connection with their disposition
of the registered securities until further notice from us. As of August 31, 1999
we had accrued liquidated damages of $2,527 to these holders under the terms of
the registration rights agreements relating to these warrants and these
liquidated damages will continue to accrue at a per week per warrant rate of
$.0025
23
<PAGE> 25
until the end of September 1999 and at increasing rates thereafter until we have
satisfied our obligations under this registration rights agreement.
THE PURCHASERS IN THIS OFFERING WILL EXPERIENCE DILUTION DUE TO THE ISSUANCE OF
SHARES TO CERTAIN OF OUR PREFERRED STOCKHOLDERS IN CONNECTION WITH THIS
OFFERING.
In November 1996, we sold 1,372,370 shares of Series B preferred stock. In
August 1997 and March 1999, we sold an aggregate of 2,351,543 shares of Series C
preferred stock. In September 1999, we sold 3,000,000 shares of Series D
preferred stock.
Our Series B, Series C and Series D preferred stock will convert into common
stock upon the completion of this offering. The shares of Series B preferred
stock will convert into common stock on a 1.37 to 1.00 basis. The shares of
Series C preferred stock and Series D preferred stock will convert into common
stock on a 1.00 to 1.00 basis. The holders of our Series B, Series C and Series
D preferred stock are entitled to per annum dividends equal to seven percent of
the liquidation value of their stock, set at $10.93, $8.00 and $10.50 per share
respectively. We intend to pay all accrued dividends on our convertible
preferred stock upon the completion of this offering by issuing a number of
shares of common stock equal to the aggregate dividend amount, divided by the
initial public offering offering price.
By way of example, if the initial public offering price is $ per share and
the offering closes on , the holders of our Series B, Series
C and Series D preferred stock would be entitled to receive approximately
shares, shares and shares of common stock,
respectively.
THE PURCHASERS IN THE OFFERING WILL IMMEDIATELY EXPERIENCE SUBSTANTIAL DILUTION
IN NET TANGIBLE BOOK VALUE.
If you buy shares in this offering, you will suffer immediate and substantial
dilution in pro forma net tangible book value. The exercise of outstanding
options and warrants, or our issuance of additional shares of stock at a price
below the price of a share in this offering, may result in further dilution. See
the section entitled "Dilution" for further information.
WE MAY NOT HAVE IDENTIFIED ALL THE RISKS AND UNCERTAINTIES THAT WE MAY FACE.
The risks described in this section or elsewhere in this prospectus are not the
only ones that we may face. Additional risks that are not yet identified or that
we currently think are immaterial may materially adversely affect our business
and financial condition in the future.
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<PAGE> 26
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking statements
within the meaning of the federal securities laws. These statements include,
among others, statements found under "Prospectus Summary," "Risk Factors," "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."
Forward-looking statements typically are identified by use of terms such as
"may," "will," "expect," "anticipate," estimate and similar words, although some
forward-looking statements are expressed differently. You should be aware that
PNV.net's actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including:
- our limited operating history and whether we will be able to achieve or
maintain profitability;
- whether we can significantly increase subscriptions to the telecommunications
and cable television services that we offer through our network;
- whether we can convert daily subscribers to monthly subscribers and otherwise
increase our revenue on a per subscriber basis;
- whether a significant number of truck drivers subscribe to our Internet
access service;
- whether we can generate advertising revenue;
- whether we can increase resales of long distance telephone minutes;
- whether we can successfully implement our business plan with respect to our
development of the portal;
- whether we can develop electronic commerce activities on the portal we are
developing;
- whether we can increase distribution channels for and sales of prepaid phone
cards;
- whether we can attract and retain sufficient sales and marketing and
technical personnel;
- Year 2000 problems;
- increased competition;
- the unknown effects of possible system failures and rapid changes in
technology;
- adverse changes in economic conditions and in the markets we serve;
- regulatory, economic and other changes; and
- changes in the law.
You should also consider carefully the statements under "Risk Factors" and other
sections of this prospectus, which address additional factors that could cause
PNV.net's actual results to differ from those set forth in the forward-looking
statements.
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<PAGE> 27
USE OF PROCEEDS
PNV.net estimates that the net proceeds from the sale of the shares of common
stock it is offering will be approximately $ . "Net proceeds" is what
PNV.net expects to receive after paying the underwriting discount and other
expenses of the offering. For the purpose of estimating net proceeds, PNV.net is
assuming that the public offering price will be $______ per share.
We will use the net proceeds to redeem our Series A preferred stock for $3.9
million, plus accrued dividends, which would have been $.8 million as of June
30, 1999. Funds managed by Patricof & Co. Ventures, Inc., which will
beneficially own a total of approximately % of our common stock upon the
completion of this offering, own more than 99% of our Series A preferred stock.
We intend to use the remaining net proceeds to fund operating losses in
connection with the expansion of our operations that our business model
contemplates and capital expenditures, and for working capital and other general
corporate purposes. We may also use a portion of the proceeds for acquisitions
or other investments. However, we have no present understanding or agreement
relating to any acquisition or investment.
The timing and amount of PNV.net's actual expenditures will be based on many
factors, including, but not limited to, cash flow generated by operations,
actual rate of expansion of our operation and economic conditions which will
affect the long-haul trucking market. Accordingly, we will have significant
flexibility in applying the net proceeds of the offering.
Pending use of the net proceeds of this offering, PNV.net will invest these
funds in short-term, investment grade, interest-bearing instruments.
DIVIDEND POLICY
PNV.net has never paid any cash dividends on its capital stock. PNV.net
anticipates that it will retain earnings, if any, to finance the growth and
development of its business. Therefore, PNV.net does not expect to pay cash
dividends on our common stock for the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of the board of
directors and will be dependent upon our financial condition, operating results,
capital requirements and such other factors as the board of directors deems
relevant. We cannot declare or pay any cash dividends on our common stock unless
permitted by the indenture governing our 13% notes, which includes various
financial restrictions on our ability to declare and pay cash dividends. Upon
the completion of this offering, we intend to redeem our Series A preferred
stock, which redemption price will include accrued dividends, which would have
been $.8 million as of June 30, 1999, and issue shares of common
stock, valued at the initial public offering price of $ , in payment of
all accrued dividends on our outstanding Series B, Series C and Series D
preferred stock.
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<PAGE> 28
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999 on an
actual basis, a pro forma basis and a pro forma as adjusted basis. You should
read this information in conjunction with our financial statements appearing
elsewhere in this prospectus, and with the sections entitled "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- -------------- -----------
(IN THOUSANDS EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short term investments.......... $ 12,468 $ $
======== ======= =======
Long-term debt:
Long-term debt, less current portion...................... $ 70,846
Obligations under capital leases, less current portion.... 264
--------
Total long-term debt, excluding current portion......... 71,110
Series A Redeemable Preferred Stock (including accrued
dividends of $839,493), par value $.01 per share; 627,630
shares authorized, actual; 388,065 shares issued and
outstanding, actual; no shares authorized or issued and
outstanding, pro forma and pro forma as adjusted......... 4,610
Series B 7% Cumulative Convertible Preferred Stock
(including accrued dividends of $2,762,083), par value
$.01 per share; 1,372,370 shares authorized, actual;
1,372,370 issued and outstanding, actual; no shares
authorized or issued and outstanding, pro forma and pro
forma as adjusted........................................ 17,404
Series C 7% Cumulative Convertible Preferred Stock
(including accrued dividends of $2,423,904), par value
$.01 per share; 3,750,000 shares authorized; 2,351,543
shares issued and outstanding, actual; no shares
authorized or issued and outstanding, pro forma and pro
forma as adjusted........................................ 20,080
Series D 7% Cumulative Convertible Preferred Stock, par
value $.01 per share, no shares authorized or issued and
outstanding, actual, pro forma and pro forma as
adjusted................................................. -- -- --
Common Stockholders' Deficiency:
Common stock, par value $.001 per share; 12,000,000 shares
authorized; 4,328,614 shares issued and outstanding,
actual; 50,000,000 shares authorized, pro forma and pro
forma as adjusted; shares issued and
outstanding, pro forma; shares issued and
outstanding, pro forma as adjusted........................ 4
Additional paid-in capital................................ 13,012
Receivable from stockholder............................... (145)
Deferred stock-based compensation......................... (8,345)
Accumulated deficit....................................... (61,512)
--------
Total common stockholders' deficiency...................... (56,986)
--------
Total capitalization.................................... $ 56,218
========
</TABLE>
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<PAGE> 29
The "pro forma" column gives effect to:
- the amendment of our certificate of incorporation to provide for
authorized capital of 50,000,000 shares of common stock and 8,750,000
shares of preferred stock and the designation of 3,000,000 shares of
Series D preferred stock in September 1999;
- the sale of 3,000,000 shares of our Series D preferred stock for $10.50
per share in September 1999;
- the redemption of our Series A preferred stock for a total redemption
price of $3.9 million, plus accrued dividends, which would have been $.8
million as of June 30, 1999, upon the completion of this offering and the
elimination of the designation of this preferred stock;
- the automatic conversion of our Series B, Series C and Series D preferred
stock into a total of 7,226,543 shares of common stock upon the
completion of this offering and the elimination of the designation of
this preferred stock;
- the issuance of shares of our common stock, valued at the
initial public offering price of $ , in payment of all accrued
dividends on our outstanding convertible preferred stock upon the
completion of this offering; and
- the issuance of 4,000 shares of common stock upon the exercise of
outstanding warrants having exercise price of $10.50 per share
immediately prior to the completion of this offering.
The "pro forma as adjusted" column gives effect to the sale of
shares of common stock in this offering at an assumed initial public offering
price of $ after deducting underwriting discounts and estimated
offering expenses.
The shares of common stock outstanding in the "actual," "pro forma" and "pro
forma as adjusted" columns do not include:
- 1,951,493 shares reserved for issuance upon the exercise of options
outstanding under our stock option plan having a weighted average exercise
price of $4.09 per share;
- 219,841 shares available for future grants of options under our stock option
plan; and
- 945,774 shares reserved for issuance upon the exercise of outstanding
warrants to purchase 505,375 shares having an exercise price of $.01 per
share and outstanding warrants to purchase 440,399 shares having a weighted
average exercise price of $8.61 per share that will remain outstanding after
this offering.
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<PAGE> 30
DILUTION
Our pro forma net tangible common stockholders' deficiency as of June 30, 1999
was approximately $( ) million or approximately $( ) per share of
common stock. Pro forma net tangible book value per share represents the amount
of our total tangible assets less total tangible liabilities, divided by
shares of common stock outstanding, after giving effect to the
conversion of our Series B, Series C and Series D preferred stock into 7,226,543
shares of common stock, the issuance of shares of common stock in
payment of accrued dividends on our convertible preferred stock valued at the
initial offering price, and the issuance of 4,000 shares of common stock upon
the exercise of warrants having an exercise price of $10.50 per share. Dilution
per share represents the difference between the amount per share paid by
investors in this offering and the pro forma as adjusted net tangible book value
per share after this offering. After giving effect to the sale of the common
stock offered in this offering at an assumed initial public offering price of $
per share and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us, our pro forma as adjusted net
tangible book value as of June 30, 1999 would have been approximately $
million, or $ per share of common stock. This represents an
immediate increase in pro forma net tangible book value of $ per share
to existing stockholders and an immediate dilution of $ per share to
new investors purchasing shares at the initial public offering price.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering................................................
Increase in pro forma net tangible book value per share
attributable to new investors............................
--------
Pro forma as adjusted net tangible book value per share
after this offering.......................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table summarizes on a pro forma as adjusted basis as of June 30,
1999, the difference between the number of shares of common stock purchased from
us, the total consideration paid and the average price per share paid by
existing stockholders and by new investors at an assumed initial public offering
price of $ per share, before deducting the estimated underwriting
discounts and commissions and offering expenses payable by us. Each of these
figures is based upon the number of shares of common stock outstanding as of
June 30, 1999. These figures give effect to the conversion of our Series B,
Series C and Series D preferred stock into 7,226,543 shares of common stock, the
issuance of shares of common stock in payment of accrued
dividends on our convertible preferred stock valued at the initial public
offering price and the issuance of 4,000 shares of common stock upon the
exercise of warrants having an exercise price of $10.50 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................
New investors............................
Total.................................
</TABLE>
The foregoing table does not reflect our issuance of up to a total of 2,897,267
shares of common stock subject to outstanding options and warrants that will
remain outstanding after this offering. As of September 16, 1999, there were
options outstanding to purchase 1,951,493 shares of common stock at a weighted
average exercise price of $4.06 per share, warrants to purchase 505,375 shares
of common stock having an exercise price of $.01 per share and warrants to
purchase 440,399 shares of common stock having a weighted average exercise price
of $8.61 per share. To the extent that these options or warrants are exercised,
or we issue additional shares of stock at a price below the price of a share in
this offering, there will be further dilution to the new investors.
29
<PAGE> 31
SELECTED FINANCIAL DATA
(in thousands, except share and per share data and other data)
This section presents selected historical financial data of PNV.net. You should
read carefully the financial statements included in this prospectus. The
selected data in this section is not intended to replace the financial
statements and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PNV.net derived the statement of operations data for the Successor for the years
ended June 30, 1997, 1998 and 1999 and the balance sheet data as of June 30,
1998 and 1999 from audited financial statements in this prospectus. PNV.net
derived the statement of operations data for the Predecessor for the year ended
December 31, 1994 and for the period from January 1, 1995 to November 2, 1995,
and for the Successor for the period from September 18, 1995 (Successor's date
of incorporation) to June 30, 1996 and the balance sheet data for the
Predecessor as of December 31, 1994 and for the Successor as of June 30, 1996
and 1997 from the audited financial information of the Predecessor and the
Successor that is not included in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) SUCCESSOR(1)
-------------------------- -----------------------------------------------------
PERIOD PERIOD FROM
FROM SEPTEMBER 18,
YEAR JANUARY 1, 1995 (DATE OF
ENDED 1995 TO INCORPORATION) YEAR ENDED JUNE 30,
DECEMBER 31, NOVEMBER 2, TO JUNE 30, ------------------------------------
1994 1995 1996 1997 1998 1999
------------ ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............. -- -- $ 150 $ 888 $ 3,504 $ 8,453
Cost of revenues......... -- -- 437 2,077 6,599 15,717
------- ---------- ---------- ----------
Gross margin............. -- -- (287) (1,189) (3,095) (7,264)
Selling, general and
administrative
expenses............... $ 288 $ 476 1,576 4,432 10,379 19,546
Stock-based
compensation........... -- -- -- -- -- 5,035
Write down of
equipment.............. -- -- -- 595 35 --
----- ----- ------- ---------- ---------- ----------
Loss from operations..... (288) (476) (1,863) (6,216) (13,509) (31,845)
Interest expense......... -- -- 103 157 1,031 10,515
Interest income and
other.................. -- -- (5) (328) (806) (2,588)
----- ----- ------- ---------- ---------- ----------
Net loss................. $(288) $(476) $(1,961) $ (6,045) $ (13,734) $ (39,772)
===== ===== ======= ========== ========== ==========
Net loss attributable to
common stockholders.... -- -- $(1,983) $ (6,962) $ (16,526) $ (42,703)
Net loss per share (basic
and diluted)........... -- -- -- $ (1.61) $ (3.83) $ (9.89)
Shares used to compute
basic and diluted net
loss per share......... -- -- -- 4,318,182 4,318,182 4,318,456
Pro forma basic and
diluted net loss per
share(2)............... -- -- -- -- --
Shares used to compute
pro forma basic and
diluted net loss per
share(2)............... -- -- -- -- --
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
PREDECESSOR(1) SUCCESSOR(1)
------------------ ----------------------------------------
AS OF JUNE 30,
AS OF DECEMBER 31, ----------------------------------------
1994 1996 1997 1998 1999
------------------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 20 $ 366 $ 4,717 $19,811 $ 4,101
Working capital........................... 7 (82) 2,814 57,139 18,828
Total assets.............................. 175 2,898 12,939 94,578 61,386
Total long-term debt and long-term portion
of capital leases....................... 217 3,388 425 70,605 71,110
Total redeemable preferred stock.......... -- 721 19,131 39,134 42,093
Partnership deficiency/common
stockholders' deficiency................ (55) (1,970) (8,932) (20,270) (56,986)
OTHER DATA:
Number of truckstops at which network is
deployed................................ -- 10 29 118 220
Number of monthly subscribers in the month
ended................................... -- 1,548 5,967 17,100 21,317
Number of daily subscribers in the month
ended................................... -- -- 3,943 8,161 13,829
</TABLE>
- ---------------------------
(1) In November 1995, our Predecessor, Park 'N View, Ltd., transferred certain
of its assets, contractual rights and liabilities to PNV.net in exchange for
2,318,182 shares of common stock issued to the former partners of Park 'N
View, Ltd. The net liabilities transferred were recorded by PNV.net at Park
'N View, Ltd.'s historical carrying amount of $84,446. The financial
information identified herein as for the "Predecessor" is for Park 'N View,
Ltd. as of December 31, 1994 and the year ended December 31, 1994 and the
period from January 1, 1995 to November 2, 1995, the date the net
liabilities were transferred to PNV.net. The financial information
identified herein as for the "Successor" is for PNV.net as of and for the
period ended June 30, 1996 and for the years ended June 30, 1997, 1998 and
1999.
(2) The "pro forma" information reflects:
- the amendment of our certificate of incorporation to provide for
authorized capital of 50,000,000 shares of common stock and 8,750,000
shares of preferred stock and the designation of 3,000,000 shares of
Series D preferred stock in September 1999;
- the sale of 3,000,000 shares of our Series D preferred stock for $10.50
per share in September 1999;
- the redemption of all outstanding shares of our Series A preferred stock
for $3.9 million, plus accrued dividends which would have been $.8 million
as of June 30, 1999, both upon the completion of this offering;
- the automatic conversion of all outstanding shares of our Series B, Series
C and Series D preferred stock into a total of 7,226,543 shares of common
stock on the completion of this offering;
- the issuance of shares of our common stock, valued at the initial
public offering price of $ , in payment of all accrued dividends on
our outstanding convertible preferred stock upon the completion of this
offering; and
- the issuance of 4,000 shares of common stock upon the exercise of
outstanding warrants having an exercise price of $10.50 per share
immediately prior to the completion of this offering.
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial statements
and other financial information included in this prospectus. This prospectus
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those indicated in the forward-
looking statements. Please see the section entitled "Forward-Looking Statements"
elsewhere in this prospectus. Our fiscal year ends on June 30 and is named for
the year in which it ends.
OVERVIEW
Background
From November 1993 to November 1995, our predecessor, Park 'N View, Ltd.
developed our network and installed and operated it at one truckstop as a field
test. There were no revenues or significant selling expenses generated by Park
'N View, Ltd. during this period. Following the formation of PNV.net in
September 1995, and the transfer to PNV.net of the business and net liabilities
of Park 'N View, Ltd., we began the buildout of our network utilizing
principally proceeds from sales of our securities and began offering services on
our network in December 1995 with the completion of our first site. As of July
31, 1999, our network was available at 230 full-service truckstops. We have
incurred net losses of approximately $61.5 million from our inception through
June 30, 1999. As of June 30, 1999, our total liabilities plus our preferred
stock outstanding exceeded our total assets by $57.0 million.
During the third and fourth quarters of fiscal 1999 and the first quarter of
fiscal 2000, we granted options to purchase our common stock to employees and
consultants at exercise prices which we have determined were below the deemed
fair market value of our common stock on the grant dates for financial reporting
purposes. As a result of these option grants, for stock options granted to
employees in fiscal 1999, we recorded total deferred stock compensation expense
of $13.4 million which is being expensed over the vesting period of the options
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and recognized stock-based compensation
expense of approximately $5.0 million. For stock options granted to consultants
in fiscal 1999, we recognized consulting service expense of approximately $.1
million. For stock options granted to employees in the first quarter of fiscal
2000, we intend to record deferred compensation expense of $2.1 million, which
will be amortized over the vesting period of the options. Of the remaining total
deferred stock compensation for stock options granted to employees in fiscal
1999 and the first quarter of fiscal 2000, we expect that $7.4 million, $2.1
million, $.6 million and $.2 million will be expensed in fiscal 2000, 2001, 2002
and 2003, respectively. In March 1999, we issued a warrant to purchase 100,000
shares of our common stock to a customer at an exercise price determined to be
below the deemed fair market value of our common stock on the issuance date for
financial reporting purposes. We are amortizing this warrant over the life of
the contract. As of June 30, 1999, the amount of deferred expense was $.7
million.
In September 1999, we sold 3,000,000 shares of our Series D preferred stock for
$10.50 per share. We have determined that the purchase price was below the
deemed fair market value of the Series D preferred stock for financial reporting
purposes. As a result, we have recorded the deemed fair market value of the
Series D preferred stock as paid-in capital and the difference between the
purchase price and deemed fair market value as a dividend.
We had approximately $52.7 million in net operating loss carryforwards at June
30, 1999 for income tax purposes. Utilization of the net operating loss
carryforwards may be subject to a substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue Code of 1986. The
annual limitation may result in the expiration of net operating losses before
utilization of the losses.
Certain fiscal 1997 and 1998 revenue amounts have been reclassified to conform
to the fiscal 1999 presentation.
32
<PAGE> 34
Our prospects must be considered in light of our limited operating history. We
face all the risks and uncertainties of early-stage companies. Our future
success depends upon, among other things, our ability to increase revenues from
our current sources and generate revenues from additional sources, including
specifically, our ability to:
- increase sales of subscriptions to the telecommunications and cable
television services offered on our network;
- convert daily subscribers to monthly subscribers and otherwise increase our
revenue on a per subscriber basis;
- generate sales of subscriptions to our Internet access service;
- increase resales of long distance telephone minutes;
- generate advertising revenue;
- generate revenues from e-commerce through the portal we are developing; and
- expand our prepaid phone card operations.
There can be no assurance that we will achieve or sustain profitability, as more
fully discussed in the section entitled "Risk Factors."
Net Revenues
To date, our revenues have been generated principally from sales to long-haul
truck drivers of monthly and daily subscriptions to the telecommunications and
cable television services offered on our network and, to a lesser extent, from
prepaid phone card operations, resales of long distance telephone minutes,
advertising and membership kits.
The following table sets forth the number of monthly and daily subscribers to
our network during the last month in each of our four most recent fiscal
quarters.
<TABLE>
<CAPTION>
PERIOD MONTHLY SUBSCRIBERS DAILY SUBSCRIBERS TOTAL SUBSCRIBERS
------ ------------------- ----------------- -----------------
<S> <C> <C> <C>
September 1998............................. 19,207 8,925 28,132
December 1998.............................. 21,997 11,203 33,200
March 1999................................. 21,632 14,136 35,768
June 1999.................................. 21,317 13,829 35,146
</TABLE>
Because a substantial number of our subscriptions have historically been sold
through vending machines and due to the deployment of our network over a three
year period, our subscriptions have not followed the typical pattern exhibited
by a mature subscriber-based business with recurring and automatically renewing
subscriptions. In addition to monthly subscriptions purchased at vending
machines located at truckstops where our network is deployed, our monthly
subscribers consist of the following categories:
- Drivers whose subscription fees are automatically charged to their credit
cards or deducted from their checking accounts, until cancelled, under a
program we refer to as the "power plan program;"
- Fleet drivers whose subscription fees are automatically deducted from their
compensation, until cancelled, under our payroll deduction program in which
their fleets participate. As of June 30, 1999, 23 fleets were participating;
and
- Fleet drivers whose subscription fees are paid by their fleets. We have
contracts with nine fleets under which they have agreed to pay ongoing
monthly subscription fees over varying periods of time.
33
<PAGE> 35
The following table sets forth our monthly subscribers by category during the
last month in each of our four most recent quarters:
<TABLE>
<CAPTION>
PERIOD POWER PLAN PAYROLL DEDUCTION FLEET FUNDED VENDING MACHINE
- ------ ----------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
September 1998........................... 11,723 307 2,566 4,611
December 1998............................ 13,606 506 2,974 4,911
March 1999............................... 13,594 330 2,818 4,890
June 1999................................ 11,988 2,000 3,200 4,129
</TABLE>
Prior to the commencement of our power plan program in October 1997, all of our
monthly subscriptions were purchased at vending machines at truckstops at which
our network was deployed. Currently, all purchases of daily subscriptions are
limited to vending machines at these truckstops.
We market our telecommunications, cable television and Internet access services
directly, and indirectly through fleets, to long-haul truck drivers. During
February 1999, we temporarily significantly reduced our sales and marketing
force to conserve cash and believe that this had an adverse impact on our
subscription sales for the remainder of fiscal 1999. We also jointly market our
services directly to drivers with some truckstop chains. Subscribers first
purchase a membership card and starter kit for $10. This fee is waived for
subscribers under our ongoing monthly subscription programs. Drivers then
sign-up under an ongoing monthly subscription program or, alternatively,
purchase a monthly or daily card from vending machines at the truckstop. Monthly
subscribers receive a number of free long distance telephone minutes depending
on the package of services purchased. Our sales to truck drivers at our vending
machines are cash transactions completed at the point of sale. Under the power
plan program, a subscriber's monthly subscription is automatically renewed and
the monthly fee is automatically deducted from or charged to the subscriber's
checking account or credit card. Under the payroll deduction program, a
subscriber's monthly subscription is automatically renewed and the monthly fee
is automatically deducted from the subscriber's fleet compensation. Subscribers
under the power plan or payroll deduction programs may cancel their
subscriptions at any time.
We offer a $10 cash card located at truckstops where our network is deployed.
This card serves as an additional method of payment for the purchase of long
distance telephone minutes over our network and pay-per-view programming. A
truck driver generally pays for long distance telephone minutes with our cash
card or the driver's credit card. Truck drivers may also pay for these minutes
through payroll deductions.
We generally recognize revenue in the period earned. Pre-paid revenues are
recorded as deferred revenue until earned. Monthly subscription fees are
recorded as revenue ratably over the subscription period.
During the fourth quarter of fiscal 1999, we also began to generate revenue from
our prepaid phone card operations in one major truckstop chain and sales of
advertising principally in our Connect! magazine. In July 1999, we began to
offer Internet access service on our network free of charge on a promotional
basis. Beginning in October 1999, we intend to charge separate fees for monthly
and daily subscriptions to this service. We also have recently begun to offer a
total communications solution to truckstop owners and operators consisting of
public phone and prepaid phone card operations as well as public Internet
kiosks. We contracted with two truckstop chains to provide one or more of these
services. We intend to offer these services to other truckstop owners and
operators. We have recently entered into an advertising agreement with Volvo
Trucks for its advertising on our advertising media and following the completion
of this offering, we intend to expand our sales and marketing efforts with
regard to sales of advertising. Our agreement with Volvo Trucks restricts until
July 2000 our ability to place advertising on our Drivers' Entertainment Network
for products or services of Volvo Trucks' competitors or on specified portions
of our portal for trucks that compete with Volvo's Trucks. Volvo Trucks may
elect to extend this restriction until July 2001 for an additional $300,000
payment to us. Volvo Trucks can terminate this agreement if our subscribers do
not log-on to our network at least 160,000 times each month in any three
consecutive months.
34
<PAGE> 36
Cost of Revenues
Our fixed operating expenses currently consist principally of:
- amortization and depreciation of the capitalized costs of our network,
prepaid phone card machines and increased switching capacity to accommodate
our public phone operations;
- cable programming, which we purchase on a per parking stall basis;
- T-1 lines, local telephone lines and routers for our frame relay, which are
installed at each truckstop at which our network is deployed;
- commissions paid to one truckstop chain under a contract we entered into in
the first quarter of fiscal 2000; and
- long distance telephone time under a contract with AT&T.
Our variable operating expenses consist principally of purchases of long
distance and other telephone services, commissions paid to truckstop operators
under our contracts with them for services through our network, payments to the
provider of certain components of our prepaid phone card operations, incentive
payments to one truckstop chain relating to subscription sales quotas and the
starter kit equipment.
Under our contracts with most truckstop operators, commission expenses are
generally:
- 35% of revenues, after deducting promotions and sales tax of approximately
$5.12 per subscription, from sales from on-site vending machines for the
first five years and 40% for the second five years; and
- with regard to subscriptions under our power plan program and payroll
deduction programs, 35% of revenues, after deducting promotions and sales tax
of approximately $8.60 per subscription, for the first month and 10% of
revenues thereafter.
The contracts further provide that we will pay an additional commission to
truckstop operators equal to 10% of their revenues from subscription sales to
fleets pro rata based on the number of their stalls. In addition, under our
contract with one truckstop chain, our commissions payable is a fixed amount
plus an incentive payment that is determined based on its satisfaction of
monthly subscription sales quotas for each truckstop.
During late fiscal 1999, we significantly increased our operating expenses in
connection with the publication of our Connect! magazine and the commencement of
development of the portal and we expect costs incurred in these activities will
increase significantly at least during fiscal 2000. We expect our other
operating expenses to also significantly increase as we continue to buildout our
network and implement our business plan.
Selling Expenses
We market our network to drivers through a direct sales force and intend to
continue to maximize and expand this sales force following the completion of
this offering. We currently maintain additional sales personnel at 50 to 60 of
our largest truckstop locations. Our sales force also sells to fleet drivers
whose fleets have agreed to establish payroll deduction accounts. We also have a
sales force that sells our advertising media. Selling expenses have therefore
consisted principally of salaries, benefits, travel and marketing expenses. In
addition, we have marketed subscriptions through point-of-sale merchandising
materials and, at larger sites, through field sales representatives. We added
approximately 18 persons to our sales and marketing staff during the first
quarter of fiscal 2000 and intend to add at least 25 persons to this staff
during the second quarter of fiscal 2000.
General and Administrative Expenses
We significantly increased the size of our management team during fiscal 1999
and the number of our full-time employees increased to 215 as of June 30, 1999
from 174 as of June 30, 1998, which resulted in an increase in general and
administrative expenses. We expect that general and administrative expenses will
35
<PAGE> 37
increase substantially as we expand our sales and marketing programs, operations
and administrative staff to support the expansion of our operations that our
business plan contemplates. Such expenses will be incurred in advance of any
anticipated related revenues. We also will incur public relations expense in
fiscal 2000.
RESULTS OF OPERATIONS
Year Ended June 30, 1999 Compared to Year Ended June 30, 1998
Revenues. Our net revenues increased 143% to $8.5 million for fiscal 1999, from
$3.5 million for fiscal 1998. Service revenues increased 148% to $8.2 million
for fiscal 1999 from $3.3 million for fiscal 1998. The increase in revenues for
fiscal 1999 was primarily due to increases in sales of subscriptions to our
network and to a lesser extent, sales of long distance time.
Cost of Revenues. Cost of revenues, excluding service depreciation, increased
138% to $11.2 million for fiscal 1999 from $4.7 million for fiscal 1998. This
increase was principally due to costs associated with the increase in the number
of sites of our network, the costs associated with the increase in sales volume
and routing equipment leases incurred in connection with upgrading our network.
Service costs (which includes commission payable to truckstops, cable
programming, leased telephone lines and purchased long distance minutes, starter
kits, freight, site repairs and routing equipment leases incurred in connection
with the upgrading the cost of phone lines and purchased long distance minutes)
increased 188% to $9.5 million for fiscal 1999 from $3.3 million for fiscal
1998. This increase was due to the increase in the number of sites, long
distance telephone minutes included with memberships and the addition of T-1
lines, which began to be installed at our sites in the three month period ended
December 31, 1998. Service depreciation increased $2.6 million to $4.5 million
for fiscal 1999 from $1.9 million for fiscal 1998. This increase in service
depreciation reflects the additional buildout of our network. As we increase the
number of truckstops at which our network is deployed, we believe that cost of
revenues will increase significantly. Fixed costs are a significant portion of
the cost of revenues and as the number of new sites increase, fixed costs will
continue to increase.
Selling Expense. Selling expense increased 67% to $8.7 million for fiscal 1999
from $5.2 million for fiscal 1998. This increase was primarily attributable to
an increase in salaries, travel and marketing expenses. Salaries increased 43%
to $4.0 million for fiscal 1999 from $2.8 million for fiscal 1998. Travel and
per diem expenses increased 18% to $1.3 million for fiscal 1999 from $1.1
million for fiscal 1998. Marketing expenses increased 173% to $3.0 million for
fiscal 1999 from $1.1 million for fiscal 1998. This increase in salaries and
travel reflects the additional sales personnel needed for new sites. This
increase in marketing expenses reflects additional marketing efforts to increase
our subscriptions to services offered on our network.
General and Administrative Expenses. General and administrative expenses
increased 108% to $10.8 million for fiscal 1999 from $5.2 million for fiscal
1998. The increase was primarily attributable to an increase in salaries, travel
and professional fees. Salaries increased 122% to $5.1 million for fiscal 1999
from $2.3 million for fiscal 1998. Travel and per diem expenses increased 175%
to $1.1 million for fiscal 1999 from $.4 million for fiscal 1998. Professional
fees increased 25% to $.5 million for fiscal 1999 from $.4 million for fiscal
1998.
Stock-Based Compensation Expense. During the third and fourth quarters of
fiscal 1999, we granted options to purchase our common stock to employees and
consultants at exercise prices which we have determined were below the deemed
fair market value of our common stock on the grant dates for financial reporting
purposes. As a result of these options, we recorded total deferred stock
compensation expense of $13.4 million which is being amortized over the vesting
period of the options, generally three to four years, in accordance with APB 25
and recognized stock-based compensation expense of approximately $5.0 million in
fiscal 1999.
Interest Expense (Income) and Other-Net. Interest expense (income) and
other-net increased to $7.9 million for fiscal 1999 from $.2 million of interest
expense and other-net for fiscal 1998. The additional net
36
<PAGE> 38
interest expense for fiscal 1999 compared to fiscal 1998 is primarily
attributable to the interest expense on our 13% notes in the aggregate principal
amount of $75.0 million issued in May 1998.
Net Loss. Our net loss increased 191% to $39.8 million for fiscal 1999 from
$13.7 million for fiscal 1998. We expect to incur significant net losses and
negative cash flow from operations for the foreseeable future.
Year Ended June 30, 1998 Compared to Year Ended June 30, 1997
Revenues. Our net revenues increased 289% to $3.5 million for fiscal 1998 from
$.9 million for fiscal 1997. This increase in net revenues was primarily due to
additional subscription sales.
Cost of Revenues. Cost of revenues, excluding service depreciation, increased
236% to $4.7 million for fiscal 1998 from $1.4 million for fiscal 1997
principally due to increased sales volume. Cost of revenues includes commissions
payable to truckstops, cable programming, leased telephone lines, equipment and
freight. Service depreciation increased 217% to $1.9 million for fiscal 1998
from $.6 million for fiscal 1997 resulting primarily from increased buildout of
our network.
Selling Expenses. Selling expenses increased 271% to $5.2 million for fiscal
1998 from $1.4 million for fiscal 1997. This increase was primarily attributable
to an increase in salaries, travel, and marketing expenses. Salaries increased
300% to $2.8 million for fiscal 1998 from $.7 million for fiscal 1997. Travel
expenses increased 450% to $1.1 million for fiscal 1998 from $.2 million for
fiscal 1997. Marketing expenses increased 175% to $1.1 million for fiscal 1998
from $.4 million for fiscal 1997. This increase in salaries, travel and
marketing expenses reflects additional sales personnel and marketing efforts for
new sites.
General and Administrative Expenses. General and administrative expenses
increased 68% to $5.2 million for fiscal 1998 from $3.1 million for fiscal 1997.
This increase was primarily attributable to an increase in salaries,
professional fees and rent. Salaries increased 77% to $2.3 million for fiscal
1998 from $1.3 million for fiscal 1997. This increase was due to additional
administrative personnel to support additional sites. Professional fees
increased 300% to $.4 million for fiscal 1998 from $.1 million for fiscal 1997
primarily due to our need for accounting and legal assistance. Building rent
increased 300% to $.4 million for fiscal 1998 from $.1 million for fiscal 1997
due to the increase in office and warehouse space.
Interest Income (Expense) and Other-Net. Interest income (expense) and
other-net decreased $.4 million to $(.2 million) for fiscal 1998 from $.2
million for fiscal 1997, reflecting an increase in interest income of $.5
million from investment of cash in short-term investments and an increase in
interest expense and other-net of $.9 million. This increase in interest expense
is primarily related to interest on our 13% notes. See note 5 of notes to
financial statements.
Net Loss. Our net loss increased 128% to $13.7 million for fiscal 1998 from
$6.0 million for fiscal 1997 primarily as a result of the foregoing factors.
Year Ended June 30, 1997 Compared to Period from September 18, 1995 (Date of
Incorporation) to June 30, 1996
Revenues. Our net revenues increased 350% to $.9 million for fiscal 1997 from
$.2 million for the period from September 18, 1995 to June 30, 1996 (the "fiscal
1996 period"). Service revenues increased 700% to $.8 million for fiscal 1997
from $.1 million for the fiscal 1996 period. Equipment sales decreased 32% for
fiscal 1997 to $52,000 from $77,000 for the fiscal 1996 period. Advertising
revenue increased 475% for fiscal 1997 to $23,000 from $4,000 for the fiscal
1996 period. Other revenues increased $58,700 for fiscal 1997 to $59,000 from
$300 for the fiscal 1996 period. This increase in service revenue reflects
additional subscription membership to our network and the decrease in equipment
sales is the result of our discontinuing the selling of telephone kits to the
truckstop. This increase in advertising revenue was principally due to a
contract for advertising on our network. This increase in other revenues was due
to the sale of surplus cable equipment.
37
<PAGE> 39
Cost of Revenues. Cost of revenues, excluding service depreciation, increased
250% to $1.4 million for fiscal 1997 from $.4 million for the fiscal 1996 period
principally due to increased subscription sales volume. Service depreciation
increased 600% to $.6 million for fiscal 1997 from $.1 million for the fiscal
1996 period.
Selling Expenses. Total selling expenses increased 180% to $1.4 million for
fiscal 1997 from $.5 million for the fiscal 1996 period. Salaries increased 600%
for fiscal 1997 to $.7 million from $.1 million for the fiscal 1996 period.
Marketing expenses increased 100% for fiscal 1997 to $.4 million from $.2
million for the fiscal 1996 period. This increase in salaries, travel and
marketing expenses was primarily due to additional sales personnel and marketing
efforts to support the new sites built during the year.
General and Administrative Expenses. Total general and administrative expenses
increased 182% to $3.1 million for fiscal 1997 from $1.1 million for the fiscal
1996 period. Salaries increased 225% for fiscal 1997 to $1.3 million from $.4
million for the fiscal 1996 period. Travel expenses increased 300% for fiscal
1997 to $.4 million from $.1 million for the fiscal 1996 period. This increase
reflects the addition of administrative personnel to support sites built
throughout the year.
Interest Income (Expense) and Other-Net. Interest income (expense) and
other-net increased 300% to $.2 million for fiscal 1997 from ($.1 million) for
the fiscal 1996 period reflecting an increase in interest income of $.3 million
from investment of cash in short-term investments and a gain on a sale of fixed
assets of $26,000, which was partially offset by an increase in interest expense
of $54,000. The principal amount of the related debt securities, together with
interest accrued thereon, was converted by the holders thereof into shares of
Series A preferred stock. See the section entitled "Certain Transactions" and
note 5 of notes to financial statements.
Net Loss. Our net loss increased 200% to $6.0 million for fiscal 1997 from $2.0
million for the fiscal 1996 period primarily as a result of the foregoing
factors.
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<PAGE> 40
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly results of operations
data for the eight quarters ended June 30, 1999. Our management believes that
this information has been prepared substantially on the same basis as the
audited financial statements appearing elsewhere in this prospectus, and all
necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the unaudited
quarterly results of operations. The quarterly data should be read in
conjunction with our audited financial statements and notes to financial
statements appearing elsewhere in this prospectus. The operating results for any
quarter are not necessarily indicative of the operating results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1998 1998 1998 1998
------------- ------------ ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 568,942 $ 669,478 $ 868,037 $ 1,397,319 $ 1,723,787 $ 1,985,412
Cost of revenues:
Service cost.................... 496,142 683,954 933,687 1,222,393 1,513,006 2,300,751
Service depreciation............ 303,096 396,442 512,311 694,883 822,652 1,047,954
Equipment cost.................. 221,410 253,945 296,251 584,479 367,241 579,471
Advertising..................... -- 4,399 10,325
----------- ----------- ----------- ----------- ----------- -----------
Total cost of revenues......... 1,020,648 1,334,341 1,742,249 2,501,755 2,707,298 3,938,501
----------- ----------- ----------- ----------- ----------- -----------
Gross margin................... (451,706) (664,863) (874,212) (1,104,436) (983,511) (1,953,089)
Selling, general and
administrative expenses......... 1,719,951 2,212,037 2,571,078 3,875,405 3,602,680 5,338,719
Stock-based compensation......... -- -- -- -- -- --
Write-down of equipment.......... -- -- -- 35,151 -- --
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations............. (2,171,657) (2,876,900) (3,445,290) (5,014,992) (4,586,191) (7,291,808)
Interest expense................. 9,709 11,226 3,014 1,006,645 2,644,737 2,596,997
Interest income and other........ (126,272) (160,171) (110,999) (408,244) (749,246) (797,106)
----------- ----------- ----------- ----------- ----------- -----------
Net loss....................... (2,055,094) (2,727,955) (3,337,305) (5,613,393) (6,481,682) (9,091,699)
Preferred stock dividends and
amortization of preferred stock
issuance costs.................. (531,418) (730,343) (728,082) (802,694) (691,704) (714,281)
Accretion of Series C Preferred
shares to fair value............ -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net loss attributable to common
stockholders................. $(2,586,512) $(3,458,298) $(4,065,387) $(6,416,087) $(7,173,386) $(9,805,980)
=========== =========== =========== =========== =========== ===========
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, JUNE 30,
1999 1999
----------- ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 2,287,604 $ 2,455,917
Cost of revenues:
Service cost.................... 2,713,624 2,936,811
Service depreciation............ 1,259,697 1,387,547
Equipment cost.................. 434,064 292,414
Advertising..................... 27,510 19,313
----------- ------------
Total cost of revenues......... 4,434,895 4,636,085
----------- ------------
Gross margin................... (2,147,291) (2,180,168)
Selling, general and
administrative expenses......... 4,587,833 6,017,092
Stock-based compensation......... 250,000 4,785,315
Write-down of equipment.......... --
----------- ------------
Loss from operations............. (6,985,124) (12,982,575)
Interest expense................. 2,678,414 2,594,462
Interest income and other........ (461,296) (580,683)
----------- ------------
Net loss....................... (9,202,242) (14,996,354)
Preferred stock dividends and
amortization of preferred stock
issuance costs.................. (728,513) (708,105)
Accretion of Series C Preferred
shares to fair value............ -- (88,420)
----------- ------------
Net loss attributable to common
stockholders................. $(9,930,755) $(15,792,879)
=========== ============
</TABLE>
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<PAGE> 41
LIQUIDITY AND CAPITAL RESOURCES
Since our incorporation in September 1995, we have satisfied our cash
requirements through the proceeds of sales of common stock, sales of preferred
stock, certain debt securities and 13% notes which we sold together with
warrants to purchase 505,375 shares of our common stock. To date, we have raised
$112.4 million in debt and equity capital.
From November 1995 to November 1996, in connection with our capitalization,
certain investment limited partnerships managed by Patricof & Co. Ventures, Inc.
invested $3.8 million, purchasing shares of our Series A preferred stock and our
common stock as well as debt securities. In November 1996, a group of investors
comprised of the funds managed by Patricof and certain partners in such funds
made an additional $15.0 million investment in PNV.net, purchasing shares of our
Series B preferred stock. In August 1997, a group of investors, led by a
subsidiary of The Hillman Company, invested $18.6 million, purchasing shares of
our Series C preferred stock.
In May 1998, we sold an aggregate $75.0 million of units consisting of our 13%
notes due 2008 and 75,000 warrants to purchase 505,375 shares of common stock
for $.01 per share. We received net proceeds after commissions, but before
offering expenses, of $72.4 million. The indenture governing our 13% notes does
not contain any financial ratios or tests that we are required to satisfy.
In September 1999, ABRY Broadcast Partners III, L.P., Halpern Denny Fund IV,
L.P. and Cummins Engine Company, Inc. purchased a total of 3,000,000 shares of
our Series D preferred stock for $10.50 per share. We received net proceeds
after commissions, but before offering expenses, of $29.6 million.
Net cash used in operating activities was $29.3 million for fiscal 1999, $9.4
million for fiscal 1998 and $3.4 million for fiscal 1997. The $19.9 million
increase in net cash used in operating activities for fiscal 1999 as compared to
fiscal 1998 resulted primarily from an increase in cost of revenues and selling,
general and administrative activities. The $6.0 million increase in net cash
used in operating activities for fiscal 1998 as compared to fiscal 1997 resulted
primarily from increased marketing and additional staff to support the larger
number of sites and subscribers.
Net cash (used in) provided by investing activities was $14.4 million for fiscal
1999, ($63.9) million for fiscal 1998 and $(6.4) million was used in fiscal
1997. The $78.3 million change in net cash provided by investing activities for
fiscal 1999 as compared to fiscal 1998 resulted primarily from the purchase of
short term investments in 1998 after the receipt of the proceeds from the $75.0
million unit offering and the subsequent sale of the short term investments in
1999 to support our operations and to increase the buildout of our network. The
$57.5 million increase in net cash used in investing activities for fiscal 1998
as compared to fiscal 1997 resulted primarily from the additional buildout of
our network and the purchase of short-term investment securities.
Net cash (used in) provided by financing activities was ($.8) million for fiscal
1999, $88.4 million for fiscal 1998 and $14.2 million for fiscal 1997. The $89.2
million decrease in net cash provided by financing activities for fiscal 1999 as
compared to fiscal 1998 was because no additional financing was obtained in
fiscal 1999. The $74.2 million increase in net cash provided by financing
activities for fiscal 1998 as compared to fiscal 1997 resulted primarily from
the issuance of Series C preferred stock and an offering of units consisting of
our 13% notes and warrants to purchase 505,375 shares of common stock.
During fiscal 1999, our working capital decreased $38.3 million. The decrease
was primarily attributable to a decrease in cash and cash equivalents of $15.7
million and a decrease in short term investments of $23.7 million, as a result
of operating losses, and an increase in accrued interest of $.3 million.
We had capital expenditures of $17.9 million in fiscal 1999 related principally
to the deployment of our network at approximately 102 truckstops. Our capital
expenditures for fiscal 1999 also related to our purchase of prepaid phone card
machines and the installation of increased switching capacity related to our
public phone operations. In addition, component equipment has decreased to $2.7
million as of June 30, 1999. It is anticipated that such amount may increase in
the near term to support the installations of our network. Component equipment
is temporarily staged at our warehouse until all equipment for a site is
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<PAGE> 42
received, certain assembly operations are complete and the site is ready to
accept the equipment for installation. The period of time that the component
equipment is staged at our warehouse is approximately 45 days and the
construction period at the site is approximately 30 days. Accordingly the time
period between the date of acquisition of the component equipment and the
completion date for the installation at the site is approximately 75 days. The
level of equipment inventory at any point of time will be dependent upon the
anticipated number of truckstops at which our network will be installed during
the next 75 days. An increase in component equipment will adversely affect
liquidity by the amount of such increase.
We currently estimate that our capital expenditures for fiscal 2000 will consist
of the following, among others:
- $12.0 million for the deployment of our network at approximately 80
additional truckstops;
- $2.2 million for the installation of additional switching capacity related to
our public phone operations, leasehold improvements and equipment for our
headquarters and the purchase of additional prepaid phone card machines; and
- up to $4.5 million for the purchase of public Internet kiosks.
Our capital commitments consist primarily of capital leases, commissions payable
to one truckstop chain, noncancelable leases of routers for our frame relay and
contracts for T-1 lines and for long distance and other telephone services.
Pursuant to our principal contract with AT&T for obtaining T-1 lines, we are
required to purchase T-1 lines having a value at our discounted rates, of at
least $2.0 million during the first year of operation, which corresponds to
approximately 200 of the T-1 lines currently provided to us by AT&T, and $3.0
million in each of the second and third years, which corresponds to
approximately 300 T-1 lines. The first year of operation under this contract
commenced March 1999. In addition, our contract with AT&T for long distance and
other telephone services requires us to purchase each month services having a
discounted price of $40,000 for a two-year period that began August 1998.
At June 30, 1999, our minimum commitments under capital leases and noncancelable
operating leases with terms in excess of one year, including commitments under
the contracts relating to our purchase of T-1 lines and long distance services
and the routers for our frame relay, totaled $4,659,433, $4,731,697, $3,090,678
and $49,482, for the four years ending June 30, 2000 through 2003, respectively.
See note 4 of notes to financial statements.
We are required to make semiannual interest payments on our 13% notes in May and
November of each year. The 13% notes mature in May 2008. We have made the first
two interest payments and intend to make the next two interest payments from
funds and securities in an escrow account established in connection with and
from the proceeds of our sale of these notes. Beginning with the November 2000
scheduled interest payment, we will be required to make these interest payments
from our available cash.
Our cash and short-term investments as of June 30, 1999 was approximately $12.5
million available for working capital.
Our capital requirements will depend on numerous factors, including the growth
of our revenues, if any, and the rate of such growth and our expenditures. We
expect that we will have significant capital requirements in the future to fund
our anticipated capital expenditures and for working capital purposes. We expect
that the net proceeds of this offering, together with existing cash and
anticipated cash generated by operations, will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 18 months.
Thereafter, if our cash flow from operations is not sufficient to provide funds
for working capital and capital expenditures and if equity, debt or other
financing is not available, we expect that we may experience insufficient
liquidity which could have a material adverse effect on our financial condition
and results of operations. There can be no assurance that additional financing
will be available when needed, if at all, or, if available, on terms acceptable
to us. If adequate funds are not available on acceptable terms, we will be
required to delay or limit any further expansion of our business. Any inability
to fund our future capital requirements could have a material adverse effect on
our business, financial condition and operating results.
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<PAGE> 43
YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the Year 2000. In addition, the Year 2000 is a leap year, and some computer
programs may not properly provide for February 29, 2000. System failures and
miscalculations causing disruptions of normal business activities may occur
including, among other things, our temporary inability to provide
telecommunications, cable television and Internet access services or engage in
similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
Year 2000 requirements.
We retained IBM to review our computer systems and network switching, routing
and telecommunications equipment, constituting the equipment used in providing
our telecommunications, cable television and Internet access services, as well
as our internal management information systems, to identify those items and
systems that are not Year 2000 compliant. We paid IBM approximately $86,000 to
complete its review.
IBM recently completed its readiness review of our services, software, switches
and routers and other systems, as well as our analysis and planning,
remediation, readiness testing, staffing, and contingency planning for Year 2000
issues. IBM concluded that we are not ready for the Year 2000. However, IBM did
conclude that our proprietary software and databases were ready and would not
require any Year 2000 remediation.
Following the completion of IBM's readiness review, in August 1999, we hired
additional product development employees to address, among other things, Year
2000 issues. We also retained IBM to provide project management assistance for
our Year 2000 compliance efforts, to assist us with the implementation of the
recommendations included in IBM's readiness review, to develop action plans for
mission critical areas, and to provide other Year 2000 preparation services. IBM
also is conducting project management training for our personnel who will lead
our Year 2000 efforts. With the assistance of IBM, we will conduct an inventory
assessment of our mission critical systems during the third quarter of 1999. We
believe that our Year 2000 preparation, planning and remediation efforts will be
substantially complete when IBM completes its services for us during the third
quarter of 1999.
On a preliminary basis, we have estimated $400,000 as the maximum cost of
evaluating, testing, reprogramming, and modifying our services, systems and
equipment. This estimate includes the approximately $86,000 paid to IBM for its
readiness review and approximately $186,000 payable to IBM for their project
management, implementation assistance and other services. This estimate also is
based on the belief that no major problems will be encountered in becoming Year
2000 compliant.
We also utilize software and hardware developed by third parties both for our
network and internal information systems. We have made inquiries to our
significant suppliers regarding their Year 2000 compliance or the status of
their review and implementation of their own Year 2000 compliance programs.
While some of these suppliers have provided oral or written assurances, we do
not have any information regarding, or any oral or written assurances from, many
of our significant suppliers and providers of equipment, telecommunications and
data communications regarding their Year 2000 compliance or the status of their
review and implementation of their own Year 2000 compliance programs. With the
assistance of IBM, we intend to seek assurances from the remaining significant
suppliers and providers during the third quarter of 1999. If our primary
suppliers and providers experience business interruptions as a result of the
failure to achieve Year 2000 compliance, our ability to provide
telecommunications, cable television and Internet services could be impaired,
which could have a material adverse effect on our business, results of
operations and financial condition.
We will conduct tests of our product delivery system during the third quarter of
1999 and will document our tests with the assistance of IBM. To the extent that
our systems and equipment are not Year 2000 compliant, we are working with IBM
to modify such systems and equipment to make them compliant. Noncompliant items
will be replaced or otherwise remediated. We expect any necessary modifications
will
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<PAGE> 44
be made on a timely basis and do not believe that the cost of the modifications
will have a material effect on our business, results of operations or financial
condition. We estimate that the capital and other costs associated with any
upgrade and conversion of our existing services, systems and equipment relating
to the Year 2000 issue will not be material.
Our non-information technology systems are more difficult to assess and repair
than information technology systems. We may have to replace, prior to the end of
1999, the non-information technology systems that cannot be repaired. IBM has
reviewed our non-information technology systems and concluded that we did not
have compliance information from the suppliers of our non-information technology
systems. As a result, while we do not believe that we have many non-information
technology assets with microprocessors, we presently have no basis on which to
estimate the costs of assessing and repairing or replacing our non-information
technology systems or to determine whether such costs will have a material
adverse effect on our operations or our financial condition.
Our services and systems operate in complex network environments and directly
and indirectly interact with a number of other hardware and software systems. We
face risks to the extent that suppliers of products, services and systems
purchased by us and others with whom we transact business, including those which
form significant portions of our network and may be sole or limited source
suppliers, do not have business systems or products that comply with Year 2000
requirements, despite the implementation of a Year 2000 compliance program or
assurances of Year 2000 compliance by such suppliers. If these networks fail,
our business will be significantly impacted.
We do not currently have any information regarding the Year 2000 status of our
customers, many of whom are private companies and individuals. As is the case
with similarly situated companies, if our customers experience Year 2000
problems, which result in business interruptions or otherwise impact their
operations, we could experience a decrease in the demand for our Internet access
services. We have not made inquiries to our customers regarding their Year 2000
compliance because we do not believe that noncompliance by our customers will
have a material adverse effect on our business, results of operations and
financial condition.
We have not fully determined the risks associated with the reasonably worst-case
scenario. Contingency planning includes the identification of Year 2000
scenarios, including potential problems at various severity levels, and the
development of Year 2000 contingency plans for selected scenarios and the
testing of those plans. With the assistance of IBM, we are developing
contingency procedures that would go into effect if any of our systems or
suppliers experience Year 2000 problems. While we have customary plans for back-
up and recovery of our system, we have not enhanced these plans to address Year
2000 issues.
Our expectation that, with the assistance of IBM, we will be able to upgrade our
services, systems and equipment to address the Year 2000 issue and our
expectation regarding the costs associated with these upgrades are
forward-looking statements subject to a number of risks and uncertainties.
Actual results may vary materially as a result of a number of factors. We cannot
assure you that we will be able to timely and successfully modify our services,
systems and equipment to comply with Year 2000 requirements. Any failure to do
so could have a material adverse effect on our business, results of operations
and financial condition. Furthermore, despite testing by us and our suppliers,
our services, systems and equipment may contain undetected errors or defects
associated with Year 2000 date functions. In the event any material errors or
defects are not detected and fixed or third parties cannot timely provide us
with services, systems or equipment that meet the Year 2000 requirements, our
business, results of operations and financial condition could be materially
adversely affected. Known or unknown errors or defects that affect the operation
of our services, systems and equipment could result in delay or loss of
revenues, interruption of telecommunication, cable television and Internet
services, cancellation of subscriptions, diversion of development resources,
damage to our reputation, damages paid to customers and litigation costs.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to
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risks and uncertainties. Actual results could vary materially as a result of a
number of factors including those set forth in the section entitled "Risk
Factors." We do not use any derivative financial instruments for hedging,
speculative or trading purposes.
As of June 30, 1999, we had short-term investments and restricted investments of
approximately $8.4 million and $10.7 million, respectively. Substantially all of
the short-term investments consisted of highly liquid investments with remaining
maturities at the date of purchase of less than 90 days. The restricted
investments consisted of US Treasury securities with remaining maturities of
less than one year. These investments are subject to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical increase or
decrease in market interest rates by 10 percent from the June 30, 1999 rates
would cause the fair value of these investments to decline by an insignificant
amount. We have the ability to hold these investments until maturity and,
therefore, we do not expect our operating results, cash flows or the value of
these investments to be affected to any significant degree by the effect of a
sudden change in market interest rates. Declines in interest rates over time
will, however, reduce our interest income.
We do not own any equity investments. Therefore, we do not currently have any
direct equity price risk.
At June 30, 1999, we had fixed interest rate debt of $75.0 million. A
hypothetical increase or decrease in market interest rates by 10% from the June
30, 1999 rates would not have a material impact on the fair market value of this
debt. We do not hedge any interest rate exposure.
All of our revenues are realized currently in U.S. dollars. In addition, we do
not maintain any asset or cash account balances in currencies other than the
United States dollar. Therefore, we do not believe that we currently have any
significant direct foreign currency exchange rate risk.
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<PAGE> 46
BUSINESS
INTRODUCTION
We are the leading provider of bundled telecommunications, cable television and
Internet access services to the trucking community. Our current customers
include drivers, long-haul trucking fleets, truckstop operators, and trucking
industry suppliers and manufacturers. As of July 31, 1999, we had deployed our
private, integrated network at 230 truckstops in 41 states through which we
offer telecommunications, cable television and Internet access services to
fleets and truck drivers in the privacy of the truck cab, as well as
comprehensive telecommunications services to truckstop operators for the public
areas inside the truckstop. During July 1999, we had approximately 35,000
subscribers. To date, we have raised more than $140.0 million in debt and equity
capital, which has allowed us to deploy our network and establish our brand name
in the trucking industry. We believe that our competitive advantages position us
to become the preferred provider of communications and Internet information
solutions to the trucking community. These competitive advantages include:
- our integrated nationwide network which allows us to deliver our bundled
telecommunications, cable television and Internet access services to truck
drivers in the privacy and convenience of their truck cabs;
- our strategic relationships with major truckstop operators and major industry
suppliers, such as TA, Pilot and Volvo Trucks, as well as our brand name
recognition in the trucking industry. We have entered into long-term
contracts with the operators of approximately 450 of the approximately 1,100
full service truckstops across the country. We also have contracts with
trucking associations representing more than 300 additional independent
truckstops that permit us to offer our services to their members; and
- the flexible and cost-efficient design of our network, which enables us to
offer a private full-service telecommunications network to the trucking
community.
We believe our competitive advantages position us to offer our services and
products to additional drivers, long-haul trucking fleets, truckstop operators
and trucking industry suppliers and manufacturers, as well as other trucking
industry participants. We currently offer:
- in-cab telecommunications and cable television services to truck drivers and
fleets, including incoming and outgoing local and long distance calling,
basic and premium cable television, as well as value-added communications
services, including a locator service, voice mail and wake-up calls;
- Internet access as an ISP, as well as content and applications on our
Internet website, to truck drivers and their families, fleets and industry
suppliers. These offerings are available in the truck cab or any other
Internet access point. They will also be available through public Internet
kiosks which we are deploying inside certain truckstops;
- a total telecommunications solution inside the truckstops for truckstop
operators, including prepaid phone cards, public phone operations and public
Internet kiosks; and
- advertising for industry suppliers and other industry participants through
our cable channel known as the "Drivers' Entertainment Network," our monthly
television programming guide and lifestyle magazine, Connect!, our Internet
website, and our voice response system.
We believe the Internet will become a significant communications and commerce
medium for the trucking community. We intend to capitalize on our position as
the leading provider of bundled telecommunications, cable television and
Internet access services to the trucking community by providing a leading
trucking industry portal website and expanding our network to improve the
lifestyles of drivers and their families and the trucking industry's work
efficiencies. We are designing this portal to have the following components:
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<PAGE> 47
- business-to-business electronic commerce applications that provide a platform
for fleets, drivers and industry suppliers to exchange information and
conduct transactions, such as load posting, freight matching and classified
ads;
- business-to-consumer electronic commerce applications that allow drivers and
constituent groups to purchase goods and services for their personal and
occupational use, including books, music, parts and electronics;
- advertising opportunities that allow advertisers to market their products,
provide links to their websites and target the driver market which has unique
demographic characteristics;
- specialized content on a wide variety of subjects of interest to the trucking
community and those who interact with the industry; and
- a "life style" segment that provides truck drivers with interactive tools and
services that permit them to personalize their on-line experience, including
e-mail, chat rooms, news, weather and games.
The foundation for our bundled telecommunications, cable television and Internet
access services is our private, integrated nationwide network. Our network
utilizes Cisco routers, PC-based PBX switches with proprietary software, modem
banks and a cable headend system, as well as a dedicated backbone that connects
all sites to a central server at our headquarters in Coral Springs, Florida. Our
network provides flexible voice and data channels and dedicated long distance
and Internet access. We have no direct competitors for our bundled in-cab
services.
INDUSTRY BACKGROUND
Trucking Industry. The trucking industry consists of originating shippers,
end-point receivers, freight haulers, equipment suppliers, truckstop operators,
individual drivers and an extended network of service providers. According to
the American Trucking Associations, the estimated truck freight revenue in the
United States for 1997 was $371 billion. According to industry data, the
trucking industry has experienced an increase in intercity ton-miles every year
from 1987 through 1997 and a compound annual average growth rate of
approximately 4.7% over this 10-year period.
Industry data and a survey of approximately 800 truck drivers conducted for us
in December 1998 by a third party research firm indicate that the long-haul
trucking industry is telecommunications intensive. We believe that long-haul
drivers spend over $2.0 billion annually on long distance services while on the
road, excluding data, Internet access and messaging.
Our target customers are drivers, long-haul trucking fleets, truckstop
operators, advertisers and trucking industry suppliers, as well as other
trucking industry participants.
Drivers. Based on independent market research commissioned by us in September
1999, we estimate there are between 800,000 to 1,000,000 drivers in the United
States who regularly sleep in their cabs. This September 1999 research and our
December 1998 survey indicate that long-haul truck drivers spend an average of
between 19 and 23 days a month on the road. Industry data indicates that truck
drivers earn an average of approximately $30,000 to $50,000 per year. According
to our December 1998 survey, approximately 21% of long-haul truck drivers have
personal computers in their cab and approximately 30% of long-haul truck drivers
can access the Internet from home. A significant portion of the time a long-haul
truck driver spends on the road is spent at truckstops since:
- federal regulations prescribe minimum periods that a driver must be off-duty
during any one day;
- there frequently are restrictions on the roads and streets on which a
long-haul truck can travel;
- many truckstops have fueling agreements with fleet trucking companies that
require refueling at certain specified truckstops; and
- many full service truckstops provide a variety of services to long-haul truck
drivers, including showers, pay telephones, television rooms and stalls for
parking trucks.
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<PAGE> 48
While on the road, drivers need access to telecommunications and entertainment
services. Long-haul drivers must stay in regular contact with customers and
fleet dispatchers to coordinate load pickup, delivery, and routes. Truck drivers
also use telephones for personal communications purposes to stay in touch with
family and friends. According to our December 1998 survey, while on the road,
long-haul drivers use an average of approximately 1,100 minutes of long distance
a month. Drivers' options for entertainment while on the road are generally
limited to community television and video game rooms at truckstops. These
facilities are typically crowded, afford drivers little programming choice or
privacy, and are uncomfortable. Drivers can purchase satellite television
systems for their cabs, but these systems are cumbersome to install and have
relatively high up front costs and monthly subscription fees. We believe that
communications and entertainment services that provide privacy, choice and
flexibility are highly valued by drivers.
Truckstop Operators. According to industry data from 1997, there are
approximately 2,000 truckstops in the United States along the interstate highway
system, of which approximately 1,100 are full-service truckstops that provide
more than just fuel. A large number of truckstops are affiliated with or owned
by chains that maintain centralized control over operations. Full service
truckstops, generally located on major interstate highways, offer a wide range
of services for drivers and fleets including fueling facilities, certified
scales, repair facilities, restaurants, community television and game rooms,
public telephones and showers. These truckstops are the primary location at
which long-haul truck drivers stop to fuel, eat, shower, and park for their rest
periods, overnight stays and layovers. This is due to the range of services that
these truckstops offer, their location and the obvious limitations that a large
truck has in stopping at other venues, including regular gas stations, fast food
restaurants, malls and motels. Therefore, truckstops are the primary location at
which drivers conduct business with fleets and customers, communicate with
family and friends, and seek entertainment. Truckstop operators traditionally
have had to utilize multiple vendors and solutions to address their
telecommunication needs inside the truckstop, resulting in inefficient and
sub-optimal services. We believe truckstop operators have come to view
telecommunications as an important service and are seeking a complete suite of
telecommunication services, including prepaid phone cards, in stop phone
operations, in-bound and out-bound long distance, control over dial around
compensation for fleets and in-stop public Internet access.
Long-Haul Trucking Fleets. We believe there are over 750 trucking fleets in our
target market. Fleets must manage uniquely complex information and logistics
issues. In this industry, practically all of a fleet's assets are moving and
destinations are not consistent or, in some cases, even known until the load is
assigned. Fuel taxes must be filed quarterly, by state, for every mile driven in
that state and reconciled with taxes paid at the pump in each state by each
truck. Fleets and drivers must have logbooks updated, cargoes permitted,
manifests maintained, deliveries verified and billing initiated. Fleets have to
manage payroll for a mobile work force and that work force has to access funds
while on the road. This complexity, coupled with the relative lack of in-house
information management resources at the trucking companies, their suppliers and
customers, creates a tremendous opportunity to deliver information, data and
transaction-based services to all participants in this industry. An additional
significant issue facing the long-haul trucking industry is driver turnover. We
believe that many fleet trucking companies attempt to reduce costs of $3,000 to
$5,000 per driver associated with annual driver turnover approximating 100% and
to mitigate this driver turnover by seeking ways to improve the quality of life
for long-haul truck drivers on the road. We believe that services which address
the fleets' needs for efficient communication with drivers and customers and
effective management of high driver turnover rates are highly valued.
Trucking Industry Suppliers and Other Participants. The trucking industry is
served by a wide array of suppliers ranging from large truck manufacturers and
small accessory providers to financial service providers and load brokers. We do
not believe there is currently any comprehensive effective way for drivers,
long-haul trucking fleets, truckstop operators and trucking industry suppliers,
as well as other industry participants, to exchange information and conduct
transactions. For example, drivers looking for information on available loads
and destinations rely primarily on systems that provide information via text
scrolling at public video monitors in truck stops. The information is not
categorized and is not searchable. Some truck manufacturers install on-board
computers that capture significant engine performance
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<PAGE> 49
information, but still lack the means for regular or efficient access to this
data. We believe that, increasingly, the Internet will develop into a data
communications, commerce and advertising pipeline for industry suppliers.
BUSINESS STRATEGY
Our objective is to capitalize on our position as the leading provider of
bundled telecommunications, cable television, and Internet access services to
the trucking community and to become the preferred provider of communications
and Internet information solutions to the trucking community. We plan to achieve
our objective by:
- Continuing to deploy our network at additional truckstops and increasing
subscription sales. We intend to continue to deploy our network at
additional full-service truckstop locations, doubling by June 2002 the number
of truckstops at which our network is currently available. We believe that
the availability of our network at a larger number of truckstops, together
with our proposed marketing efforts and initiatives, will allow us to
increase our subscription sales to drivers and fleets.
- Becoming the leading trucking industry portal website. We are developing our
trucking industry portal to allow all participants in this vertical market to
communicate with each other, obtain industry-related information and
entertainment, and conduct commerce. Through the portal, we expect to offer
various business-to-business and business-to-consumer applications, including
applications unique to the industry, such as load posting, freight matching
and classified ads. We also intend to sell advertising on our website.
- Extending our brand name recognition. We intend to promote our strong brand
name in the trucking community and believe we will benefit from being an
early provider of content and services dedicated to the trucking community.
We believe that increasing the recognition of our strong brand name will
generate traffic growth on our portal and allow us to increase our
advertising revenues.
- Leveraging our position as an Internet service provider. We intend to use
our Internet access service to attract and retain subscribers by providing
connectivity between drivers, their families, fleets, truckstops, industry
suppliers and other industry participants. Our service allows drivers at
truckstops at which our network is deployed to access the Internet via a
local call from their truck cab.
- Providing a total communications solution to truckstop operators. We
recently contracted with TA, the largest truckstop chain in the United
States, to provide a total telecommunications solution inside its truckstops,
including public phone and prepaid phone card operations, as well as public
Internet kiosks. We intend to offer this solution to other major truckstop
chains.
- Providing comprehensive data and voice solutions to fleets and industry
suppliers. We intend to offer services to fleets and industry suppliers that
will allow them to install gateways into our network which will permit data
and voice communications among drivers, fleets and industry suppliers. We
also plan to offer fleets and industry suppliers the ability to integrate
their intranet sites with our network to access additional tools and
services.
- Expanding our entertainment services. We intend to expand our cable
television services to include additional programming, pay-per-view and other
channels specifically targeted to the trucking community that will increase
interest in our network among drivers and advertisers. We are designing our
website to provide content of interest to truck drivers and other trucking
community participants, as well as general information, including news,
weather, sports and entertainment.
- Maximizing and expanding our strategic relationships. We intend to expand
our relationships with trucking industry participants, including truckstop
operators, fleets and suppliers, including Volvo, to provide additional
distribution channels for our services and additional sources of advertising
revenue. We plan to continue to expand our sales force, focusing on driver
subscriptions funded through fleet payroll deduction programs. We have also
recently begun to offer several different service bundlings and price points
for our service offerings and plan to simplify the initial subscription
process.
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<PAGE> 50
PRODUCTS AND SERVICES
The following chart sets forth our current and planned services and target
customers.
<TABLE>
<CAPTION>
LOCAL AND LONG CABLE INTERNET WEB BASED
DISTANCE TELEVISION ACCESS CONTENT AND PUBLIC INTERNET
CUSTOMERS TELECOMMUNICATIONS SERVICE ADVERTISING SERVICE APPLICATIONS KIOSKS
--------- ------------------ ---------- ----------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Individual drivers - - - - - -
Fleets - - - - - X
Truck stops - - - - - -
Original equipment - - - X X N/A
manufacturers
Other product and X N/A - X X N/A
service providers
</TABLE>
- ---------------------------
- Current Services and Target Customers
X Planned Services and Target Customers
N/A Not Applicable
Current Services
We currently offer:
- in-cab telecommunications and cable television services;
- Internet access service, as well as content and applications on our Internet
website;
- comprehensive telecommunications services and public Internet kiosks to
truckstop operators; and
- advertising opportunities for industry suppliers and others.
Telecommunications and Cable Television Services. We provide local and long
distance telephone services and cable television service to truck drivers in the
privacy of their cabs. Subscriptions can be purchased from vending machines at
truckstops that dispense cards similar to prepaid phone cards or, in the case of
monthly subscriptions, can be automatically billed to a credit card or checking
account or automatically deducted from the driver's compensation if we have a
payroll deduction arrangement with the driver's fleet. Services are sold both
individually and in a bundled package. As part of a subscription, the user
obtains a membership card and kit that includes a telephone, coaxial and
telephone cable and an owner's manual for a $10 fee, which is waived for fleet
and ongoing monthly subscribers. A subscriber accesses our network by plugging
the coaxial and telephone cable into a bollard installed at each parking stall
at a truckstop. The subscriber then dials * and logs on to our network. A
computerized voice response prompts the subscriber to enter the subscriber's
membership number. If the subscriber is a daily or monthly user, the computer
prompts the user to enter the subscriber's daily or monthly card number. If the
subscriber is in good standing, service is activated and the subscriber has
access to telephone, cable television and Internet services.
We market long distance services primarily to individual drivers. Users purchase
the minutes by charging a credit card or using a "cash card" purchased from our
vending machine at the truckstop. We also have a payment plan that allows fleet
drivers to purchase long distance minutes for personal use through payroll
deductions. The cash card is a multi-purpose prepaid card, the value of which
can be applied to the purchase of various services, including long distance
minutes and premium programming. We anticipate that, in the future, the cash
card can be used as a payment mechanism for certain additional services.
The basic cable television service at most truckstops currently features 13
basic channels, including ABC, CBS, NBC, Fox and our Drivers' Entertainment
Network, as well as CNN Headline News, ESPN and The Weather Channel. We also
offer a premium cable service which currently includes the 13 basic channels
plus five premium channels, which currently consist of Showtime, Showtime
Extreme, Showtime 2, TNT and Playboy.
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<PAGE> 51
The telecommunications and cable television services that we offer drivers
address the needs of fleets to efficiently communicate with drivers and
efficiently manage high driver turnover rates as follows:
- Efficient Communications -- Dispatch Control. Our network provides truck
cabs the same communications capability as hotel rooms and homes. Drivers can
make and receive phone calls in the comfort and convenience of their cab.
Since dispatchers cannot call drivers at a pay phone, drivers calling
dispatch for next load or destination information may be put on hold or
forced to call back several times if information is not immediately
available. With the ability to receive as well as make calls, our network
streamlines the communication process.
- Efficient Communications -- Avoid Surcharges. We believe that control over
dial around compensation is a major issue for fleet operators. Many fleets
provide their drivers with a toll free "800#" for calling fleet operations.
When an 800# is called using a pay phone, the owner of the phone can charge
the 800# owner a per call surcharge of approximately $0.25. Surcharges add
significantly to fleet communications costs. If drivers make such toll-free
calls from a phone in their truck cabs connected to our network, fleets can
bypass these surcharges for comparable pay phone calls made by their drivers.
- Efficient Communications -- Targeted Messages. Fleets can use our voice mail
and voice response system to deliver messages targeted to their drivers. This
functionality allows fleets to broadcast general company information to their
highly mobile fleet.
- Driver Retention -- Lifestyle Improvement. We believe that the
telecommunications and cable television services that we offer through our
network greatly improve driver lifestyles on the road. Many fleets that have
purchased our services for their drivers have advised us that they have
experienced lower turnover rates and they consider providing our services to
be an effective recruiting tool. Fleets currently can purchase memberships
for their drivers directly or arrange for automatic deductions from driver
payrolls.
Internet Service Provider Services. We are an Internet service provider
offering Internet access to truck drivers from the privacy and convenience of
their truck cabs. We launched our Internet access service in July 1999. Until
October 1999, we are offering our Internet access service free of charge on a
promotional basis to our monthly subscribers. The service allows drivers at our
locations to access the Internet via a local call from their truck cabs.
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<PAGE> 52
The following table sets forth certain current pricing and content information
regarding the in-cab telecommunications, cable television and Internet access
services that we currently sell, or plan to sell in the near future to
individual truck drivers:
<TABLE>
<CAPTION>
DAILY PREMIUM INTERNET SERVICE
BASIC DAILY UPGRADE BASIC MONTHLY PREMIUM MONTHLY PROVIDER
----------- ------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
- - $5 per 24 hrs. - $5 per 24 hrs. - $20 per 30 - $30 per 30 - $10 per month
days days for members on
- - 13 basic - Must be any monthly
channels purchased in - 13 basic - 13 basic plan
conjunction channels channels and 5
- - Telephone access with basic or premium - $15 per month
monthly - Telephone channels for members on
- - No long distance access daily plan
minutes - 5 premium - 30 minutes
channels - 15 minutes free long - Unlimited
- - Can be purchased free long distance Internet
through vending - Can be distance access on
machines or cash purchased - Can be network; 800
card through - Can be purchased toll
vending purchased through connection for
machine or through vending off-network
cash card vending machines, cash use
machines, cash card or
card or monthly - Can be
monthly subscription purchased
subscription through through
through checking, vending
checking, credit cards machines, cash
credit cards and payroll card or
and payroll deduction monthly
deduction subscription
through
checking,
credit cards
and payroll
deduction
</TABLE>
We also offer these in-cab telecommunications, cable television and Internet
access services to fleets and drivers whose fleets have a payroll deduction
arrangement with us. The following table sets forth certain current pricing and
content information regarding these services:
<TABLE>
<CAPTION>
FLEET FUNDED PROGRAM DRIVER FUNDED PROGRAM FLEET/DRIVER FUNDED PROGRAM
-------------------- --------------------- ---------------------------
<S> <C> <C>
- - Fleet pays $25 per month - Driver pays $25 per month - Fleet pays $5 per month per
per driver for telephone via payroll deduction for driver for telephone
access; free 800# calls; 60 Telephone access; free 800# access; and free 800#
minutes of long distance; calls; and 60 minutes of calls.
and premium cable long distance.
television. - Driver can pay $25 per
- On network unlimited month for premium cable
- - On network unlimited Internet access for an television package and $10
Internet access for an additional $10 per month; per month for unlimited
additional $10 per month off-network use available Internet access on network;
per driver; off-network use with long distance toll off-network use available
available with long charge. with long distance toll
distance toll charge charge.
- For every driver who signs
up for cable television
and/or Internet access
upgrade, fleet receives $5
per driver per month
rebate.
</TABLE>
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<PAGE> 53
Comprehensive Telecommunication Services to Truckstop Operators. In March 1999,
we implemented a program to offer a comprehensive telecommunications solution to
truckstop operators. Under this program, we offer truckstop operators prepaid
phone cards, in-stop public phone operations, in-bound and out-bound long
distance, control over dial-around compensation for fleets and in-stop public
Internet access through kiosks. In March 1999, we entered into a four-year
contract with Travel Centers of America, or TA, the largest truckstop operator
in the United States, to provide a total communications solution, including
prepaid phone cards, public phone operations, and public Internet kiosks to
approximately 120 truckstops. In addition, we can provide support for frequent
fueler programs offered by the truckstop operators, which encourage drivers and
fleets to purchase fuel from a truckstop operator. We have also entered into a
contract with another large truckstop operator of more than 100 sites to provide
public Internet kiosks on an exclusive basis and prepaid phone cards on a
non-exclusive basis. We intend to offer other truckstop operators our
comprehensive telecommunications services.
Advertising. We have developed or are developing the following advertising
media specifically designed to allow suppliers to the trucking industry to
efficiently reach individual drivers and others:
- Connect! -- our monthly cable television programming guide and lifestyle
magazine. We distribute 100,000 copies of Connect! monthly at our truckstop
locations around the country free of charge. We believe that, due to its
television program guide section, copies will be read by drivers multiple
times during the month.
- Drivers' Entertainment Network -- our cable television channel. Drivers'
Entertainment Network currently features country music programming on a
two-hour video loop on which we offer advertising spots. We plan to expand
our programming content to include video magazine segments, educational
programming, business tools segments and sports-oriented content.
- Internet -- the trucking industry portal website that we are designing will
offer another medium for advertisers to reach individual drivers and others.
We are investing heavily to develop our portal and our business model
contemplates that we will expand our advertising base, and, in addition to
content and web banner advertising, sell strategic sponsorships for specific
services and content areas.
- Audio Messages -- can be delivered to drivers during service activation. In
order to activate service, our users interact with a voice response system
using their telephone. During this process we can play targeted audio
messages to the driver. This allows advertisers to play the equivalent of a
10 or 15 second radio spot with complete control over the frequency and
targeting of the advertisement.
We have recently entered into an advertising agreement with Volvo Trucks for its
advertising on our advertising media. Our agreement with Volvo Trucks restricts
until July 2000 our ability to accept advertising on our Drivers' Entertainment
Network for products or services of Volvo Trucks' competitors or on specified
portions of our website portal for trucks that compete with Volvo Trucks. Volvo
Trucks can terminate this agreement if our subscribers do not log-on to our
network at least 160,000 times each month in any three consecutive months.
PLANNED SERVICES AND PRODUCTS
With our established network deployed at the truckstops and our industry
alliances, we are positioned to expand the scope of our services and target
customers. We believe that the Internet will become the dominant platform for
information exchange and delivery as well as the primary medium for transactions
in the trucking industry. The development of our trucking industry portal
website will allow us to deliver various information services, transactions and
advertising services and solutions based on communication, customized
information, commerce and education. Our business model contemplates that these
services will expand our customer base among trucking industry participants,
including suppliers, fleets and truckstops. We also plan to expand our service
offering by providing voice and data communications and
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<PAGE> 54
on-line services to fleets and to expand the scope of our cable television
programming. We plan to introduce the following services in the months ahead:
- Trucking industry portal website. During fiscal 2000, we plan to expand our
trucking industry portal website. We expect the key features and applications
to include: trip planning, mapping and enroute fuel pricing information, site
location map, fleet services, load posting and matching, support for online
transactions, personalized services including a personal calendar, digital
logbook and e-mail, news, sports, weather, games and entertainment, on-line
banking and clearinghouse functions, and business-to-business and
business-to-consumer electronic commerce.
- Private Voice and Data Network and Tools for Fleets. As our network expands,
we will offer services to fleets that allow them to install gateways into our
network at their headquarters, terminal facilities and even key customer
facilities. Through these gateways, we can offer voice and data
communications among fleets, drivers and their customers. We plan to offer
installation of network nodes at select large fleet locations. We also will
make other applications and tools available to fleets over our network.
- Additional Cable Television Programming. We plan to expand our cable
television programming to include more dedicated format channels, including
educational channels, additional premium programming and pay-per-view events.
SALES, MARKETING AND CUSTOMER SERVICE
We offer our services to each of our customer groups through a combination of
our direct sales force, consisting of 84 full-time employees as of July 31,
1999, fleet sales force, retail distribution channels and telemarketing. We
support our sales activities with advertising in industry publications, our
website, our public Internet access kiosks, special promotions and other
activities. We have also developed a comprehensive customer support program.
Individual Drivers. We offer our services to individual drivers through a
combination of direct and indirect sales and marketing channels at each
truckstop at which we provide our service. We have installed vending machines at
all of the truckstops at which we have deployed our network. Drivers can
purchase monthly and daily subscriptions from these machines. To support our
vending machines, we deploy point of sale brochures, banners and other displays
throughout the truckstop. We also advertise in our own Connect! magazine, as
well as our Drivers' Entertainment Network and our voice response system. From
time to time we engage in special promotions and events in coordination with
truckstop operators.
We employ a field sales force that regularly visits our truckstop locations to
ensure that our materials are displayed and merchandised. We maintain additional
sales personnel at 50 to 60 of our largest truckstop locations to speak with
drivers and offer them monthly subscription plans. The field sales force also
supports subscription drives at fleet terminals. When a fleet agrees to allow
payroll deduction for our services, members of the field sales force spend
several days at the fleet terminal setting up displays and meeting with drivers.
We also have an in-house customer service and telemarketing group that sells
subscriptions to users who call us at the numbers provided on brochures and
other advertising materials. We also will be conducting on-going cross-selling
promotions, which will be heavily utilized to promote our ISP and our portal's
services and features. These promotions also will be supported by direct
marketing, print, online and point-of-purchase campaigns.
Pursuant to our contract with one large truckstop operator, we have entered into
an incentive arrangement pursuant to which the operator is compensated for
meeting subscription sales quotas. We are developing materials which will be
used to train the operators' employees to sell subscriptions and other services.
Truckstop Operators. We market our services to truckstop operators through
relationship account managers. Our marketing efforts with the truckstop
operators fall into two broad categories. First, we attempt to gain access to
the truckstop parking lot to install our network to provide in-cab telephone,
cable television and Internet access services for the drivers and fleets. Since
we already have contracts with many of the largest truckstops, we now focus most
of these efforts on account and relationship
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<PAGE> 55
management. We have entered into agreements with certain large truckstop chains
which provide such truckstops with incentives to market our products and
services.
We also market our comprehensive telecommunications solution to the truckstop
operator. For the larger truckstop operators, we use our existing relationships
to gain access to their top-level executives. Our top management is very
involved in developing comprehensive telecommunications agreements with
truckstop partners. We supplement our direct sales efforts with advertising in
trade publications, periodic direct mail campaigns and participation in industry
trade shows.
Fleets. Our fleet sales force markets our telecommunications, cable television
and Internet access services to fleets. Our fleet sales force targets fleets
with 100 or more trucks. Our fleet sales force emphasizes long-term partnerships
and the fact that we have developed our network to meet the needs of the fleet.
Specifically, we focus on the retention improvements that our network can
deliver by enhancing drivers' lifestyle with telecommunications, cable
television and Internet access services, as well as in-bound telephone access.
As we develop our portal, the availability and benefits of driver and fleet
business applications will become an important part of our marketing effort to
the fleets. The efforts of our fleet sales force are supported through periodic
advertising in trade journals targeted at fleet management, direct mail
campaigns and attendance at key industry tradeshows and events.
Our research indicates that there are a large number of fleet trucking companies
with less than 100 trucks. This segment represents a substantial but highly
fragmented sector of the fleet market. We primarily communicate with these fleet
owners with telemarketing and direct mail and expect to also market to them
through the Internet.
We have established a program with TA pursuant to which we jointly market our
products and services to large fleets.
Industry Suppliers. The primary service currently targeted at trucking industry
suppliers and other participants is advertising media. We market our advertising
media through a direct sales force that calls on potential advertisers and their
advertising agencies. We also are offering our advertising services as a part of
a broader strategic relationship with industry suppliers, including Volvo
Trucks. To sell these services, we utilize direct mail campaigns and participate
in trade shows.
Marketing of Internet Services and Solutions. As we develop our portal, we will
implement a multi-media marketing campaign, which will include print ads, direct
mail, direct sales, materials at truckstops and advertising on the Driver's
Entertainment Network, to support its launch. We plan to market our portal as
the electronic gathering place where industry players can obtain information,
communicate and transact business. We plan to tailor aspects of the campaign to
each market and to emphasize the features applicable to that marketing
initiative, including direct marketing, print, cable television, intercept
programs, extensive point-of-purchase and online advertising. We also plan to
place advertising in our Connect! magazine, as well as on our Drivers'
Entertainment Network, our voice response system and to use significant point of
sale placements in truck stops to support the portal launch and the ongoing
development of our portal. We are also planning special events and promotions at
the truckstops.
Customer Service. To retain customers, encourage more usage and promote the
purchase of additional services, we have developed a comprehensive customer
support program. To gauge customer satisfaction and to identify potential new
services, we regularly conduct customer satisfaction and market research; either
through interviews at the truckstops or through telephone surveys. We use
independent third party research firms to conduct more comprehensive studies
while our staff performs smaller scale surveys. These surveys have consistently
shown a very high degree of customer satisfaction and identified promising new
service bundles and pricing. Our recent introduction of new monthly and daily
pricing plans was based on the results of one such survey.
Another key component of our retention and promotion efforts is the in-house
customer service team. This group is comprised of approximately 30 members and
is on duty 19 hours per day. This group is trained to handle all inquiries from
customers including basic technical issues with a smaller subset of the group
also trained in telemarketing. Among the programs that the customer service team
supports is a "welcome call"
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<PAGE> 56
program whereby new customers are automatically forwarded to a representative on
their first or second activation to insure that the user understands service
features and functionality and to gather basic information on the customer which
can be used for future marketing.
NETWORK BUILDOUT; TRUCKSTOP RELATIONSHIPS AND CONTRACTS
As of July 31, 1999, our network has been installed at 230 truckstops in 41
states, and we installed our network at 106 sites during the twelve months
ending July 31, 1999. We intend to continue the buildout of our network to more
than double the number of sites by June 2002. We believe that the availability
of our network at a larger number of truckstops will significantly increase
membership sales to drivers and long-haul trucking fleets. The installation of
our network on a timely basis will be subject to, among other things, our
ability to satisfy significant capital requirements associated with the
installation. See the section entitled "Risk Factors" under the heading "Our
success will depend on the timely and cost-effective installation of our network
for which we rely on third parties."
We have contracted with truckstop chains, independent truckstop owners and
associations of truckstop owners to provide our services over our network.
According to industry data from 1997, there are approximately 2,000 truckstops
in the United States located on the interstate highway system of which
approximately 1,100 are full service truckstops that provide more services than
just fuel. As of June 30, 1999, we have long-term contracts with the operators
of 450 truckstops to install our network. These operators include three of the
four largest full-service truckstop chains in the United States, TA, Petro
Stopping Centers, Inc., and Pilot Corporation. We also have entered into
contracts with the three largest associations representing more than 300
additional independent truckstops that have agreed to permit us to offer our
services to their members. The truckstops represented by associations generally
consist of smaller truckstop chains generally having less than 10 truckstops.
These associations act as purchasing agents for their members. We have entered
into contracts with these associations in order to gain access to and establish
a relationship with numerous independently-owned truckstops. These associations
do not have authority to legally bind their members. Therefore, while each
association has granted us the right to provide cable television and telephone
services to its members, this contractual provision is not binding on each
member. Prior to installing our network at an association member's truckstop, we
enter into a contract with the association member granting us the right to
install our network at the member's truckstops.
While most independent truckstop owners who own a single truckstop execute a
standard contract, the contracts executed by truckstop chains that operate
multiple truckstops vary significantly. We offer a standard contract to the
truckstop owners and associations generally consisting of a term ranging from
five to ten years with an automatic five year renewal. Pursuant to the terms of
the standard contract, generally we are granted the right to provide
telecommunications and cable television services to all of the owners'
truckstops for a mutually agreed upon period of time which, if we achieve our
contractual buildout milestones, generally extends for 10 years. We generally
pay commissions to truckstop owners/operators based upon a percentage of our
revenues which, depending on the particular product, has ranged between 10% and
50%, less specified costs on a negotiated basis. We have entered into a contract
with one major truckstop chain that requires us to pay the operator a base
amount for each of the operator's truckstops at which our network is installed
and additional amounts upon meeting certain incentive sales criteria. See the
section entitled "Risk Factors" under the heading "We derive most of our revenue
from our operations at truckstops and truckstops may enter into contracts with
other providers if we do not meet our obligations" and the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the heading "Overview."
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<PAGE> 57
We believe that the average truckstop represents a substantial capital
investment for the truckstop operator. Despite the amount of capital invested in
the parking lot, the typical truckstop does not generate any revenue from that
asset, except for a limited number of truckstops which charge for parking. At
the same time, margins on fuel have been under pressure, forcing truckstop
operators to differentiate their truckstops from their competitors and find
other sources of revenue. We believe that our network offers truckstops:
- an amenity for long-haul truck driver customers;
- a means for competitive differentiation; and
- the ability to generate incremental revenue through the revenue and
profit-sharing provisions of the contracts.
The table below summarizes our current contracts with truckstop owners and
operators and the buildout of their sites, as of July 31, 1999:
<TABLE>
<CAPTION>
TOTAL NO. OF LOCATIONS TOTAL NO. OF
TRUCKSTOP CHAINS AND OWNERS UNDER CONTRACT LOCATIONS INSTALLED
--------------------------- ---------------------- -------------------
<S> <C> <C>
Travel Centers of America.............................. 160 79
Pilot Corporation...................................... 119 49
Petro Stopping Centers, Inc............................ 44 24
Additional Owners of Multiple or Single Truckstops..... 127 78
--- ---
Total............................................... 450 230
=== ===
</TABLE>
In addition, we have contracts with truckstop associations representing over 300
additional truckstops.
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<PAGE> 58
NETWORK AND TECHNOLOGY
Our Design. The current architecture of our network consists of a PC-based PBX
at each truckstop connected to the host server. The PC-based PBX controls and
manages all interaction with the subscriber, including telephone communications,
cable television activation, Internet access and communications with the host
server. The following diagram depicts the architecture of our network:
(PNVNET NETWORK ARCHITECTURE CHART)
[There appears here a diagram labeled "PNV.net Network Architecture." In the top
center of the diagram is the word "Internet" in an irregularly shaped box
connected by a line to the left labeled "T3" to a circle labeled "Fiber Ring."
This circle is connected by a line to the left labeled "OC-3" to an illustration
labeled "Frame Relay Switch/Router" inside a box labeled "PNV.net Headquarters."
The illustration labeled "Frame Relay Switch/Router" is connected by lines to
the left to illustrations labeled "Host Server," "Voice Mail/Driver Tracking
Server" and "Web Server" respectively, each of which appears in the box labeled
"PNV.net Headquarters." The circle labeled "Fiber Ring" also is connected by a
line to the right labeled "T3" to a box labeled "IXC," which has three lines
from it, one going to the right to an irregularly shaped box labeled "Frame
Relay Network", one going down and splitting to go to both another box labeled
"IXC" and an irregularly shaped box labeled "Public Network," and one labeled
"T1" going down to an illustration labeled "Router" in a box formed by broken
lines labeled "Truckstop Headquarters." This illustration labeled "Router" is
connected by a line to the left to an illustration labeled "PBX" which also
appears in the box formed by broken lines labeled "Truckstop Headquarters." The
irregularly shaped box labeled "Frame Relay Network" has a line going to the
right to another box labeled "IXC," which is connected by a line to the right
labeled "T1" to an illustration labeled "Routers/Modems" inside a box formed by
broken lines labeled "Fleet Headquarters." This illustration labeled
"Routers/Modems" is connected by a line to the right to an illustration labeled
"PBX" which also appears in the box formed by broken lines labeled "Fleet
Headquarters." The box labeled "IXC" which is connected by a line to the
irregularly shaped box labeled "Frame Relay Network" also is connected by a line
down to the irregularly shaped box labeled "Public Network." The irregularly
shaped box labeled "Public Network" is connected by a line to the left to a box
labeled "IXC" and by a line down to a box labeled "LEC." This box labeled "IXC"
is connected by a line down labeled "T1" to an illustration labeled "Router"
inside a box labeled "Truck Stop." This illustration labeled "Router" is
connected by a line down to an illustration labeled "PC Based PBX," which also
appears in the box labeled "Truck Stop." The box labeled "LEC" is connected by a
line down labeled "Local Lines" to the illustration labeled "PC Based PBX"
inside the box labeled "Truck Stop." This illustration labeled "PC Based PBX" is
connected by a line up to illustrations labeled "Video Control Unit,"
"Modulators," "Receivers" and "Digital Satellite dish," respectively, each of
which is inside the box labeled "Truck Stop." The illustration labeled "PC Based
PBX" also is connected by a line to the left to an illustration labeled
"Bollard," which is inside a box labeled "Parking Lot." The illustration labeled
"Bollard" is connected by lines up to illustrations labeled "Telephone," "Laptop
Computer," "Fax" and "TV" respectively, each of which appears in a box labeled
"Driver Truck Cab." The box labeled "Driver Truck Cab" is inside the box labeled
"Parking Lot." The illustration labeled "PC Based PBX" also is connected by a
line to the right to illustrations labeled "Coinless Phones," "Data Port" and
"Laptop Computer" respectively, each of which appears in a box labeled
"Restaurant." The illustration labeled "PC Based PBX" also is connected by a
line to the right to illustrations labeled "Coin/Coinless Phones," "Data Port"
and "Laptop Computer" respectively, each of which appears in a box labeled
"Phone Room." The illustration labeled "Router" which appears in the box labeled
"Truck Stop" also is connected by a line to the right to an illustration labeled
"Public Internet Kiosk" which appears in the box labeled "Phone Room." The
broken lines forming the boxes labeled "Truckstop Headquarters" and "Fleet
Headquarters" denote future services.]
The current architecture of the various components of our network and related
services are described below. In the future, we may modify the configuration of
our network architecture for deployment at smaller truckstop locations. In
addition, we are currently exploring wireless technology with respect to
telecommunications services offered at truckstops at which our network is
deployed.
Components and Related Items Located at our headquarters. The following
components and related items are located at our corporate headquarters:
Host Server. The host server maintains control of all membership information
and determines individual membership privileges. The PC-based PBX located at the
truckstop communicates via frame relay to the host server each time a member
attempts to log-on to or log-off of our network. The membership number is
checked in the database and specific information about the user, including their
membership expiration date, number of long distance minutes available and voice
mail messages, is downloaded to the site server for subsequent interaction with
and access by the user. We have multiple server redundancy capable of performing
all critical host server functions.
Software. We developed our software in-house and this software performs
numerous functions including:
- subscriber log-on entry;
- subscriber log-on host server validation;
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- membership information maintenance, including membership cards and renewal
card tracking;
- log on information communicated to subscribers including expiration date,
stall number and call back number;
- wake-up call notification;
- cable television system control including activation of basic and premium
channels;
- outbound call control and tracking;
- least cost call routing;
- prepaid long distance call control and tracking including account balance
maintenance;
- extension to extension call control and tracking;
- call detail record storage and reporting;
- inbound call control and tracking;
- subscriber location tracking and voice mail services;
- subscriber voice messaging with broadcast capability; and
- stall maintenance tracking.
Billable Long Distance Call Management. We have the advantage of having an
intelligent PC-based PBX switch controlling each call at the place of
origination and can thereby reduce our cost per call. Prepaid calling card
vendors require the user to dial an 800 number, enter their card and access
numbers and then dial the number they wish to dial. Therefore, they are actually
making two calls each time. An inbound call to the calling switch and then an
outbound call from the calling switch to the applicable number. All completed
calls have double costs associated with them. If any calls are busy or not
answered, the calling card company must absorb the costs of the inbound call.
The long distance services that we offer have the equivalent of a prepaid
calling card switch at each site. All call management functions including adding
new minutes, deducting minutes for each call and terminating a call when all
minutes have been used are performed by PC-based PBX. Since call management is
performed locally at each site, the user can simply make long distance calls by
dialing 9,1 + number. The call is originated from the truckstop directly to the
applicable number as a single call. Therefore, if there is no answer or the line
is busy, the user is not billed and we do not incur the cost of an incoming
call. This feature reduces our cost per call as compared to typical prepaid
phone card vendors.
Components and Related Items Located at Each Truckstop. The following
components and related items are located at each truckstop:
PC-Based PBX. The PC-based PBX is both the controlling computer and intelligent
PBX. Each telephone extension and outside telephone line is connected and
controlled by the PC-based PBX. The hardware architecture utilizes off-the-shelf
components. Our software controls all aspects of user interaction. Unlike a
standard PBX, once a user picks up their telephone, all interaction with the
user is controlled by our software. Also, unlike a standard PBX system with
computer interfaces, our network is programmable, allowing for upgradability and
flexibility as new capabilities are needed or made available in the future.
Dedicated T-1 Access at Truckstop. We have installed a T-1 line at each
truckstop in order to obtain additional telecommunications capacity. Each T-1
line offers 24 channels of long distance voice or data capability at a fixed
cost. All 24 channels can be designated as voice channels for a flat monthly fee
or can be designated for data at an additional cost. The ability to designate
between voice or data channels allows flexibility as requirements change. Use of
T-1 lines allows us to bypass the local exchange carrier and associated LEC
access charges and obtain favorable pricing from long distance carriers,
creating a private network.
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Frame Relay Network. We connect each truckstop via frame relay in a hub and
spoke configuration and can increase the bandwidth to each truckstop as traffic
warrants. The frame relay network protocol is Transmit Control Protocol/Internet
Protocol. This speeds up user access to the system and greatly increases system
flexibility. Additionally, we also perform site system monitoring and remote
access over the frame network, greatly enhancing site manageability.
Telephone Wiring. The telephone jack in each bollard in the truckstop parking
lot connects by twisted pair wiring to a pedestal box in the parking lot that in
turn is connected to the PC-based PBX inside the truckstop. Public pay phones
have been installed at certain truckstops that are connected to our network. The
PC-based PBX is connected to the public network through T-1 lines. Each
truckstop also has local telephone lines which are used to connect all local
calls.
Cable Television Headend and Wiring. The cable headend system is comprised of a
DBS satellite dish connected to an individual receiver. Other conventional
methods of Off-Air antennas and C-Band technologies are also used in supplying
channels to the user. An encrypted control unit is used to control Pay-Per-View
access. The television plug-in terminal in each bollard is connected through a
single coaxial cable to the pedestal box. The pedestal box is connected through
a single coaxial cable to the cable headend system inside the truckstop.
Internet Access. We have equipped each truckstop with a modem bank for locally
connecting Internet access calls from the truck cab. This gives us the ability
to offer Internet access at all truckstops. Since connections between the member
and the on site modems are over our private network, no local telephone lines
are used. The user only ties up bandwidth on the frame network when active. Idle
users have no effect on the frame network bandwidth.
Voice Over IP. We have equipped each site additionally with a voice
compression/decompression capability allowing the transfer of point-to-point
voice calls over the frame relay network. We use industry standard voice
compression allowing near toll quality voice to travel over the network. We use
this system for calls between truckstops and our offices. Subscriber service
calls are transferred over the network and calls to drivers from the voice
mail/driver locator system are routed directly to the driver's telephone rather
than requiring the user to hang up and dial the callback number. There is no
variable cost associated with this type of call. If network bandwidth is
unavailable at the time, including during peak hours, the call can be routed as
a voice call over the T-1. This allows us the ability to build network capacity
based on normal usage patterns instead of adding redundant capacity to handle
peak usage.
Fleet Telecommunications Opportunities. By installing a router and PC-based
PBX, fleets can connect to our network allowing direct connections to their
drivers when they are connected to our network.
Truckstop Headquarters Telecommunications Opportunities. Large truckstop chains
can install a router and PC-based PBX, thereby connecting to our network
allowing voice and data communications among their truckstop locations.
COMPETITION
Overview. The market to provide telecommunications, cable television and
Internet access services to the trucking industry is highly competitive and
fragmented and is affected by the constant introduction of new products and
services by industry participants. Competition is based upon pricing, the
accessibility of services, and the perceived quality and reliability of the
telecommunications, cable television and Internet access services. Our
competition includes various providers and carriers of telecommunications, cable
television and Internet access services, many of which are substantially larger
than us and which have greater financial, technical, personnel and marketing
resources than we have.
Our ability to compete effectively in the market to provide telecommunications,
cable television and Internet access services to the trucking industry will
depend upon our continued ability to:
- enter into long-term contracts with truckstop owners and operators to become
their total communications solution;
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- buildout additional sites for our network;
- provide our services at prices competitive with, or lower than, those charged
by our competitors;
- establish and maintain our strong relationships in the trucking industry;
- enhance the brand recognition of our network and our services; and
- provide a broad suite of services which can be bundled to meet the needs of
the customer at competitive prices.
Because we provide bundled telecommunications, cable television and Internet
access services, we face competition, with respect to one or more of these
services, from a number of sources.
Telecommunications. We compete with a large number of providers of
telecommunications services, including public phones, cellular and other
wireless telephones, long distance service providers, calling cards, prepaid
phone cards, collect calls and toll-free numbers. Many of our competitors have
significantly larger capitalization and resources than us, which allow these
companies to achieve economies of scale and lower costs of funds employed. If
any of our competitors were to devote additional resources to the provision of
telecommunications services to our target customer base, there could be a
material adverse effect on our business and the price of our common stock.
In addition, the continuing trend toward consolidation of telecommunications
companies and the formation of strategic alliances within the telecommunications
industry is giving rise to significant new competitors. Many of these combined
entities have, or will have, resources far greater than us. These combined
entities may, now or in the future, be able to provide bundled packages of
telecommunications products, including local and long distance services and data
services and prepaid services in direct competition with the products offered,
or to be offered by us, and may be capable of offering these products sooner and
at more competitive rates. These types of consolidations and strategic alliances
could put us at a competitive disadvantage.
As a result of the 1996 Telecommunications Act, the RBOCs could compete with us
in the long distance telecommunications industry, both outside of their service
territory and, upon satisfaction of certain conditions, within their service
territory. A number of RBOCs have made initial applications for the approvals
necessary to enter their "in-region" long distance markets, although to date,
all such applications have been denied on the basis that the RBOC has not
satisfied the list of competitive requirements. However, there have recently
been extensive discussions among the PUCs, the FCC, and RBOCs in order to
develop a definitive understanding of these requirements and the specific
criteria to measure their satisfaction. These discussions may lead to one or
more successful RBOC "in-region" applications in the future. We believe that the
RBOCs expect to offset share losses in their local markets by capturing a
significant percentage of the in-region long distance market, especially in the
residential segment where the RBOCs' strong regional brand names and extensive
advertising campaigns may be very successful. This may have an unfavorable
effect on our business.
We also expect increasing competition from Internet telephony service providers
and others using newer and developing technologies. The use of the Internet to
provide telecommunications services, in particular, is a recent development.
This technology promises to substantially reduce the cost of carrying voice
conversations. Existing competitors are likely to continue to develop new
services that they offer to the trucking industry.
We believe that increasing competition in the telecommunications market will
result in significantly lower prices for long distance services. We may not be
able to reduce our prices sufficiently to compete effectively. Our failure to
increase our long-distance sales on a profitable basis could have a material
adverse effect on our financial condition and results of operations.
Our ability to compete effectively will depend partly upon our ability to
develop additional products and services which appeal to truckstop owners and
operators and drivers, as well as fleets. We believe that drivers currently use
public pay phones located at truckstops for a significant number of the calls
they
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make. We believe that our ability to offer telephone access at a cost comparable
to public phones with the added convenience and privacy of the truck cab allows
us to compete favorably. Cellular and other wireless service remains unavailable
in some remote truckstop locations and, even when cellular or other wireless
service is available, it historically has been expensive due to the roaming
charges that drivers frequently incur when they are away from home. We believe
that the accessibility of our network and our data transmission capability
allows us to compete effectively with cellular and other wireless carriers.
However, we expect competition from cellular and other wireless
telecommunications providers to be dynamic and increasingly more intense as a
result of the entrance of new competitors and the development of new
technologies, products and services, which may reduce the cost of cellular and
other wireless service by eliminating roaming charges and otherwise reducing
prices. At least one of our competitors, HighwayMaster, resells cellular service
to provide both voice and data communications to truck cabs. Our long distance
services, including our prepaid phone cards, compete with those provided by long
distance calling cards, prepaid phone cards and toll-free numbers, including
AT&T and MCI WorldCom, that drivers use to call fleet headquarters and home. We
may compete with other issuers of prepaid phone cards that may distribute cards
at or below our cost. Our contractual arrangements with third parties relating
to the prepaid phone cards that we offer may make it difficult or impossible for
us to reduce our prices for prepaid long distance minutes to compete effectively
on a profitable basis. Our failure to increase our sales of prepaid phone cards
on a profitable basis could have a material adverse effect on our financial
condition and results of operations. We believe that our dedicated long distance
network will allow us to compete successfully with these providers by providing
long distance services at competitive rates.
Qualcomm's OmniTRACS service, a satellite based system, is used primarily for
mobile vehicle location and two-way text messaging. Based on publicly available
information, as of September 1998, the OmniTRACS service had an installed base
of approximately 250,000 units in 33 countries worldwide. The OmniTRACS service
addresses the trucking fleets' need for real-time mobile text communication. We
believe that our ability to provide communication capabilities and Internet
access over our network will allow us to compete effectively with the OmniTRACS
service.
Cable Television. The competition for our cable television offerings currently
consists of alternatives located outside the truck cab and primarily in the
truckstop. Community television and game rooms inside the truckstop are the most
readily available entertainment alternatives for truck drivers. These rooms
offer no privacy and limited choices in programming. We believe that a small
number of professional truck drivers have purchased DBS dishes to receive
television programming in their cabs. Cable, DBS and other video service
providers could seek to compete by offering cable television programming to
truckstops. We believe that our cable television services in the comfort and
convenience of the truck cab at a competitive price will allow us to compete
effectively against these alternatives.
Internet. The market for the provision of Internet access, content, transaction
processing and commerce solutions is extremely competitive and highly
fragmented. There are no substantial barriers to entry, and we expect that
competition will continue to intensify. Telecommunications carriers, including
RBOCs, Internet service providers, network and system integrators, and online
network service providers each offer Internet access. While we believe that our
network infrastructure, bundled services, and established relationships in the
trucking industry distinguish us from these providers, many of these competitors
have greater financial, technical and marketing resources, larger customer bases
and greater name recognition. We believe that Pay-Net, TIMM Communications and
certain other companies also have installed Internet/e-mail kiosks in
truckstops. Our Internet-based transaction processing services also will compete
with established providers of integrated transaction solutions for fleet
operators and their customers, including Ceridian's Comdata and J.B. Hunt
Logistics. Various websites, including www.trucknet.com, www.nettrans.com,
www.layover.com, www.truckstop.com, and www.yondar.com, also provide content and
commerce solutions to the trucking community. Several of these websites offer
specialized content directed to the trucking community and those who interact
with the industry, as well as "life style" segments that provide truck drivers
with interactive tools and services that permit them to personalize their
on-line experience, including free e-mail, chat rooms, news, weather and games.
These websites also offer tools and applications to assist the trucking
community, including mileage, routing and fuel optimization tools.
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Other websites offer targeted electronic commerce solutions, such as load
posting and freight matching services, that are very similar to those that we
plan to offer. These websites, which offer content, tools and applications more
extensive than those that we believe that our portal will have at the time of
its initial launch, have market acceptance and established customer and
advertising bases. In the market for advertising revenue, we will compete with
other online content providers and traditional forms of media, including
newspapers, magazines, radio and television. We believe that the principal
competitive factors in attracting advertisers will include the amount of traffic
on our website, brand recognition, the demographics of our users, our ability to
offer targeted audiences and the overall cost-effectiveness of the advertising
medium that we offer.
REGULATORY MATTERS
Telecommunications. Regulation of the telecommunications industry is changing
rapidly. As a provider of telecommunications services nationwide, we are subject
to varying degrees of regulation in each of the jurisdictions in which we
provide our services. Laws and regulations and the interpretation of such laws
and regulations, differ significantly among the jurisdictions in which we
operate. These laws and regulations are, moreover, subject to change as a result
of ongoing regulatory implementation proceedings, subject to review by courts
and otherwise. There can be no assurance that future regulatory, judicial and
legislative charges will not have a material adverse effect on our company, that
regulators and/or third parties will not raise material issues with regard to
our compliance or non-compliance with applicable regulations, and/or that we
will be in compliance with all such laws and regulations at any one point in
time.
We are subject, in our provision of telecommunications services, to the
provisions of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, the FCC regulations thereunder, as well as the
applicable laws and regulations of the various states administered by state
PUCs. The recent trend for both federal and state regulation of
telecommunications service providers has been in the direction of reduced
regulation. Although this trend facilitates market entry and competition by
multiple providers, it has also given AT&T, the largest international and
domestic long distance carrier in the United States, increased pricing and
market entry flexibility that has permitted it to compete more effectively with
smaller carriers. In addition, the Telecommunications Act of 1996 has opened the
United States market to increased competition from the RBOCs. We cannot be
certain whether future regulatory, judicial and/or legislative changes will
materially affect our business and the price of our common stock.
On the federal level, we are considered a non-dominant domestic interstate
carrier subject to minimal regulation by the FCC. We are not required to obtain
FCC authority to provide domestic interstate telecommunications services, but we
are required to maintain, and do maintain, a domestic interstate tariff on file
with the FCC. The FCC presumes the tariffs of non-dominant carriers to be
lawful. Therefore, the FCC does not carefully review such tariffs. The FCC
could, however, investigate our tariffs upon its own motion or upon complaint by
a member of the public. As a result of any such investigation, the FCC could
order us to revise our tariffs, or the FCC could prescribe revised tariffs. In
late 1996, the FCC ruled that interexchange carriers are no longer required to
file their tariffs for domestic interstate interexchange services. In August
1997, the FCC affirmed its decision to end tariff filing requirements for
domestic interstate long distance services provided by non-dominant carriers.
The FCC also eliminated the requirement that non-dominant carriers disclose
information on rates and terms of their products. These detariffing orders have
been stayed by the US Court of Appeals for the District of Columbia. Most
recently, on March 18, 1999, the FCC adopted an order that would permit the
alternative of posting rates on a carrier's website. This order will not become
effective until the Court affirms the FCC's mandatory detariffing plan.
In addition to the general requirement that before providing U.S. international
telecommunications services we obtain authority under Section 214 of the
Communications Act and file a tariff containing the rates, terms and conditions
applicable to such international services, we are also subject in our provision
of such U.S. international services to FCC rules requiring, among other things,
the filing of certain carrier-to-carrier contracts, notifications or approvals
of certain foreign carrier investments, approval for assignments of FCC licenses
and transfers of control of certified carriers, and other international service
regulations.
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We are also subject to a number of reporting requirements including requirements
to report on our international revenue, traffic flows, and use of international
facilities. We have recently filed a Section 214 application seeking
international authority, which we expect to be granted as a matter of course.
Upon such grant we intend to file an international tariff with the FCC. Because
we have provided U.S. international service prior to obtaining such Section 214
authorization, we are subject to sanctions, including fines, other penalties
and/or denial or revocation of our 214 authority. We do not believe that an
enforcement action is likely, and if such action is taken, we do not believe
that any such penalties or fines would be onerous, or that our authorization
would be revoked. There can be no assurance, however, that this will be the
case.
The Telecommunications Act was intended to increase competition in the U.S.
telecommunications markets. Among other things, the Telecommunications Act
contains special provisions that eliminate the restrictions on incumbent local
exchange carriers ("ILECs") such as the RBOCs from providing long distance
service. These provisions permit an RBOC to provide certain long distance
services (including international service) outside of its current home region
immediately upon the receipt of any state and/or federal regulatory approvals
otherwise applicable in the provision of long distance service. The provisions
also permit an RBOC to provide certain long distance services (including
international service) within its home region if it satisfies procedural and
substantive requirements, including showing that facilities-based local
competition is present in its market, that it has entered into interconnection
agreements which satisfy a "14-point" checklist of competitive requirements and
that its entry into this market is in the public interest.
A number of RBOCs have made initial applications for the approvals necessary to
enter their "in-region" long distance markets, although to date, all such
applications have been denied on the basis that the RBOC has not satisfied the
list of competitive requirements. However, there have recently been extensive
discussions among the PUCs, the FCC, and RBOCs in order to develop a definitive
understanding of these requirements and the specific criteria to measure their
satisfaction. These discussions may lead to one or more successful RBOC
"in-region" applications in the future. In particular, Bell Atlantic, which
serves the New York metropolitan and mid-Atlantic regions is considered by
industry observers to be the most likely RBOC to be the first to be permitted to
offer "in-region" long distance services.
The Telecommunications Act also addresses a wide range of other
telecommunications issues that may potentially impact our operations by spurring
additional competition in the telecommunications markets. For example, on August
1, 1996, the FCC adopted a Local Competition Order that required ILECs to allow
new competitors to interconnect to the ILEC network, to allow competitors to
lease portions of the ILEC network and offer, at wholesale rates, retail local
services that competitors may resell. The requirements of the Local Competition
Order have withstood challenges in the courts, for the most part. A 1999 Supreme
Court decision seems likely to promote competition for telecommunications
services generally, but it also required the FCC to conduct additional
proceedings. Consequently, there may be future changes to FCC rules that we
cannot predict and which may have adverse effects on our business.
The FCC has also taken steps to spur competition in the international
telecommunications markets in accordance with certain commitments made by the
U.S. under the World Trade Organization Basic Telecommunications Agreement which
have already resulted in additional competitors entering the U.S.
telecommunications markets. The World Trade Organization ("WTO") recently
concluded an agreement, known as the WTO Basic Telecommunications Agreement (the
"WTO Agreement"). Under the WTO Agreement, the U.S. and other members of the WTO
committed themselves to, among other things, opening their telecommunications
markets to foreign carriers. The FCC has adopted streamlined procedures for
processing market entry applications from foreign carriers, making it easier for
such carriers to compete in the U.S.
The FCC has also significantly revised the universal service subsidy regime.
Beginning on January 1, 1998, interstate telecommunications carriers and certain
other entities became obligated to make FCC-mandated contributions to universal
service funds based upon end-user revenue. These funds subsidize, among other
things, the provision of telecommunications services in certain high cost areas
and to low-income
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customers. All telecommunications carriers providing interstate
telecommunications services, including us, must contribute to the universal
service support fund. These contributions became due beginning in 1998 for all
providers of interstate telecommunications services. Such contributions are
assessed as a percentage of end user telecommunications revenues and are based
on the amount of a carrier's interstate and international revenues. Since
January 1998, this percentage has been in the range of 4 to 5%. Contribution
factors vary quarterly and carriers are billed monthly. On July 30, 1999, the
United States Court of Appeals for the Fifth Circuit released a decision
reviewing the FCC's Universal Service Order. Among other things, the Fifth
Circuit found that the FCC does not have authority to include intrastate
revenues in the calculation of universal service contributions and reversed and
remanded for further reconsideration the FCC's decision to include international
revenues in the contribution base. On September 9, 1999, the FCC filed a motion
for stay of the Fifth Circuit's mandate and, in that motion, reportedly stated
an intent to file a petition for rehearings of the July 30, 1999 opinion. Until
this and certain other proceedings are completed, there can be no assurance as
to how the FCC's USF response will ultimately be implemented or enforced or what
effect it will have on competition within the telecommunications industry or
specifically on our competitive position.
Interstate and international telecommunications carriers are also subject to
access charges imposed by local exchange carriers ("LEC's") for origination and
termination of calls over local telephone lines. Telephone companies' costs of
providing long distance services are greatly affected by the access charges. The
FCC has significantly revised its access charge rules in recent years to permit
LEC's greater pricing flexibility and relaxed regulation of switched and special
access services in those markets where there are other providers of access
services. The most recent pricing flexibility rules, which were adopted August
5, 1999, have not yet been released. These rules would, among other things,
grant certain LECs the ability to file access tariffs on a streamlined basis
with no cost support and to provide volume and term discounts after certain
competitive triggers have been met. The FCC continues to adjust its access
charge rules, and we cannot predict future rates.
The Telecommunications Act also requires interexchange carriers to compensate
payphone owners when a payphone is used to originate a coinless telephone call.
This rate is currently set at $0.24 per call.
The FCC also imposes requirements for the marketing of telephone services and
for obtaining customer authorization for changes in a customer's primary long
distance carriers. The FCC has recently imposed severe penalties on a number of
carriers for "slamming." Under an order recently issued by the FCC, carriers are
required to take certain additional steps to prevent slamming. The FCC is
continuing to examine its slamming rules.
The state PUCs also regulate telecommunications service providers. Most states
require carriers to obtain authorization, either pursuant to certification, the
fulfillment of tariff requirements or notification requirements, to provide
intrastate telecommunications services, or to be found exempt from regulation,
before commencing such services. Many states also require carriers to file and
maintain detailed tariffs or price lists listing the rates, terms and conditions
under which they provide service. We are currently authorized pursuant to
registration, certification, tariffs, notifications, or on an unregulated basis
to provide intrastate telecommunications services in the 48 contiguous states
and Hawaii.
The relevant regulatory authorities could find that we provided intrastate long
distance service prior to obtaining necessary authorization. In the event of any
such finding, we may be subject to sanctions, including fines, other penalties
and/or revocation of our authority. We do not believe that any enforcement
action is likely, or that if such action is taken, we do not believe that any
such fines or penalties would be onerous, or that our authorizations would be
revoked. There can be no assurance, however, that this will be the case.
While we believe that our service offerings do not subject us to rules and
regulations governing pay phone providers, competitive local exchange carriers,
operator service providers, and facilities-based providers, there can be no
assurance that all relevant regulatory authorities would agree, since such rules
and regulations are subject to different interpretations, and are subject to
change. In the event that any regulatory authorities were to determine that we
are subject to regulations governing pay phone, CLEC,
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operator service, or facilities-based providers, including additional
authorization requirements, we could be subject to sanctions for providing
service without appropriate authorizations or for otherwise failing to comply
with applicable regulatory requirements. While we do not believe that such
determinations would result in a material adverse effect upon us or our
operations, there can be no assurance that this will be the case.
Many states impose various reporting and other requirements. A number of state
PUCs have also adopted rules governing the marketing of telephone services and
obtaining customer authorizations for changes of a customers' primary long
distance carrier, access charges, and also contributions to state universal
funds, among other issues. State PUCs also regulate access charges and other
pricing for telecommunications services within each state. We may also be
required to contribute to universal service funds in some states.
Additionally, many states require prior approval or notification for corporate
actions including transfers of control of certified carriers, transfers of
carrier assets, including customer bases, carrier stock offerings, incurrence by
carriers of significant debt obligations and name changes. The FCC also requires
prior approval or notification under certain circumstances. We recently changed
our name from Park 'N View, Inc. to PNV.net, Inc. We are in the process of
notifying the various state PUCs and, where necessary, seeking approval in
connection with the name change, this offering, a prior debt offering and our
Series D preferred stock offering. We are also in the process of making required
filings with the FCC. We cannot be certain that we will obtain all necessary
regulatory approvals in connection with the name change and such offerings.
Additionally, we may be subject to fines or other sanctions for failure to seek
prior approval, where necessary, for certain of these corporate actions or for
failure to notify the FCC or state PUCs in a timely enough fashion.
States generally retain the right to sanction a carrier and/or to condition,
modify, cancel, terminate or revoke authorization to provide telecommunications
services within the state for failure to comply with these and other state law
and/or rules, regulations and policies of the state regulatory authorities. Any
such penalties, including revocation, termination or suspension of our authority
to provide service would limit our ability to provide telecommunications
services to the long-haul trucking industry and could have a material adverse
effect on our business, financial condition and results of operation.
Cable Television. Cable television companies are subject to extensive
governmental regulation. We do not believe that we are subject to such
regulations. However, in the event we are required to comply with such
regulations, the expense, potential delay and management distraction potentially
resulting from the compliance process could have a material adverse effect on
our results of operations and financial condition.
Internet. Both the provision of Internet access service and the provision of
underlying telecommunications services are affected by federal, state and local
regulation. Currently only a small body of laws and regulations directly apply
to access to or commerce on the Internet. Moreover, in an April 1998 report to
Congress, the FCC determined that Internet service providers were not
telecommunications carriers and should consequently not be regulated as such.
However, this report stated that it expected the regulatory status of Internet
service providers in the future to continue to be uncertain. For example, the
report concluded that some services offered over the Internet, including
phone-to-phone Internet protocol telephony, may be functionally
indistinguishable from traditional telecommunications service offerings, and
their non-regulated status may have to be re-examined.
Due to the Internet's increasing popularity and use, additional laws and
regulations may be adopted at the international, federal, state and local levels
with respect to the Internet, covering issues, which are currently largely
subject to policies set by individual ISPs, such as user privacy, freedom of
expression, pricing, characteristics and quality of products and services,
taxation, advertising, intellectual property rights, information security and
the convergence of traditional telecommunications services with Internet
communications. Moreover, a number of laws and regulations have been proposed
and are currently being considered by federal, state and foreign legislatures
with respect to such issues. The nature of any new laws and regulations and the
manner in which existing and new laws and regulations may be interpreted and
enforced cannot be fully determined. The adoption of any future laws or
regulations might decrease
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the Internet's growth, decrease demand for our service, impose taxes or other
costly technical requirements or otherwise increase the cost of doing business
or in some other manner have a material adverse effect on us. In addition,
applicability to the Internet of existing laws governing issues including
property ownership, copyrights and other intellectual property issues, taxation,
libel, obscenity and personal privacy is uncertain. As our services are
available over the Internet in multiple states, and as we facilitate sales by
our customers to end users located in such states, one or more states may seek
to assert jurisdiction over various aspects of our business. Any new legislation
or regulation, or the application of laws or regulations from jurisdictions
whose laws may not currently apply to our business, could have a material
adverse effect on us.
The Communications Decency Act of 1996 imposed criminal liability on persons
sending or displaying in a manner available to minors indecent material on an
interactive computer service, including the Internet, and on any entity
knowingly permitting facilities under its control to be used for such
activities. Sections of this Act that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet, were held to be unconstitutional by the United States Supreme Court.
Subsequently, the Child Online Protection Act of 1998 prohibited and imposed
criminal penalties and civil liability on anyone engaged in the business of
selling or transferring, by means of the World Wide Web, material that is
harmful to minors without restricting access to such material by persons under
seventeen years of age. The Child Online Protection Act has been challenged by
civil rights organizations in part on the grounds that, like the Communications
Decency Act, it violates the First Amendment. A United States District Court has
preliminarily enjoined enforcement of the law until final resolution of the
case. Numerous states have adopted or are currently considering similar types of
legislation. Such legislation could subject us and/or our customers to potential
liability, which in turn could have an adverse effect on us. The potential
liability could require us to implement measures to reduce our exposure to such
liability. Such measures may require the expenditure of substantial resources or
the discontinuation of some of our product or service offerings. Further, the
costs of defending against any such claims and potential adverse outcomes of
such claims could have a material adverse effect on us. Moreover, we do not
currently have an acceptable use policy in place which would bar unlawful use of
our network. As a result, we are currently at increased risk of liability for
unlawful use of our network.
Even with such a policy in place, we still cannot control the content of
information transferred over our network. The law relating to the liability of
online service providers, private network operators and Internet service
providers for information carried on or disseminated through the facilities of
their networks is continuing to evolve and remains unsettled. In the past, one
federal district court in the northern district of California, where we conduct
business, has ruled that Internet service providers could be found liable for
copyright infringement as a result of information disseminated through their
networks. We cannot assure you that similar claims will not be asserted in the
future. Federal laws have been enacted, however, which provide Internet service
providers with immunity from publisher or speaker liability for information that
is disseminated through their networks when they are acting as mere conduits of
information. A Federal Court of Appeals has recently held that the
Telecommunications Act creates immunity from liability on the part of Internet
service providers for libel claims arising out of information disseminated over
their services by third-party content providers.
In addition, the Digital Millennium Copyright Act, enacted in 1998, creates a
safe-harbor from copyright infringement liability for Internet service providers
if:
- the transmission was initiated by or at the direction of a person other than
us;
- the transmission or routing is carried out through an automatic technical
process without selection of the material by us;
- we do not select the recipients of the material except as an automatic
response to the request of another person;
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- no copy of the material in the course of intermediate or transient storage is
maintained on the system in a manner ordinarily accessible to anyone other
than the recipients nor for a period longer than is reasonably necessary for
the transmission or routing to occur; and
- no modification of the transmission's content occurs through our system.
We cannot assure you, however, that the Digital Millennium Copyright Act or any
other legislation will protect us from copyright infringement liability. We
maintain general liability insurance. However, any imposition of liability on us
for alleged negligence, intentional harmful acts, including infringement, or
other liability could have a material adverse effect on us.
Changes in the regulatory structure and environment affecting the Internet
access market, including regulatory changes that directly or indirectly affect
telecommunications costs or increase the likelihood of competition from RBOCs or
other telecommunications companies, could have an adverse effect on our
business. Although the FCC has decided not to allow local telephone companies to
impose per-minute access charges on Internet service providers, and that
decision has been upheld by the reviewing court, further regulatory and
legislative consideration of this issue is likely. In addition, some telephone
companies are seeking relief through state regulatory agencies. Such rules, if
adopted, are likely to have a greater impact on consumer-oriented Internet
access providers than on business-oriented Internet service providers, including
us. Nonetheless, the imposition of access charges would affect our costs of
serving dial-up customers and could have a material adverse effect on us.
PROPRIETARY RIGHTS
We believe that recognition of our products and services is an important
competitive factor in our industry and attempt to protect them with copyrights,
trademarks, trade secret laws, restrictions on disclosure and other methods. We
cannot be certain that these methods will offer sufficient protection. We have
entered into proprietary rights agreements with key technical employees. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use our products, services or technology without authorization, or to
develop similar technology independently. Accordingly, we have filed an
application for a United States trademark registration for the following: "PARK
'N VIEW," "INCAB PNV," "PNV USA," "YOUR CAB. YOUR CABLE. YOUR CALL," "PNV
CONNECT" and "PNV NET" and hold trademark registrations for "WHERE SMART DRIVERS
STAY CONNECTED" and "PARK 'N VIEW" (with design).
We regard our software as proprietary and attempt to protect it as a trade
secret. We hold no patents or copyrights on our software technology. We are
currently drafting a patent application on our truck stop bollard for filing
with the United States Patent and Trademark Office. Other products exist for
which possible patent registration is being investigated.
A substantial amount of uncertainty exists concerning the scope of protection
copyright and trademark laws afford on the Internet, and we cannot be assured
that copyright and trademark laws will be afforded on the Internet.
EMPLOYEES
As of July 31, 1999, we had 242 employees, including 12 part-time employees,
none of whom are represented by a collective bargaining agreement. These
employees do not include temporary personnel and consultants who we retain from
time to time. We consider our employee relations to be good.
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PROPERTIES
We are headquartered in Coral Springs, Florida, where we lease an approximately
28,000 square foot facility in which our administrative offices and warehouse
facility are located. This lease extends to August 2002. We also lease an
approximately 11,650 square foot facility in Ft. Lauderdale which previously
served as our headquarters and warehouse facilities prior to our move to our
Coral Springs facility. This lease extends to June 2001. We have sublet a
portion of the Ft. Lauderdale facility to a third party. In addition, we
recently entered into a lease, extending to June 2004, for an approximately
5,500 square foot facility in New York, New York in which our media and Internet
product development staff are located. See note 4 of notes to financial
statements for information about our commitments under these real estate leases.
LEGAL MATTERS
In July 1998, Lorenzo Ortiz filed a lawsuit against a truckstop chain at which
our network is deployed, as well as a contractor utilized by us in connection
with the installation of our network at a truckstop owned by the chain, in the
11th Judicial District, Webb County, Texas, seeking unspecified actual and
punitive damages allegedly resulting from an injury suffered by Mr. Ortiz at the
truckstop in connection with the installation. On July 6, 1999, defendant Red
Line Contracting, Inc. filed a third-party complaint against us seeking
indemnity and/or contribution for the plaintiff's claims. Pursuant to our
contract with the truckstop chain defendant, we agreed, among other things, to
indemnify the truckstop chain for claims relating to the installation of our
network. Further, pursuant to the contract, we maintain liability insurance in
the amount of $1.0 million on each truckstop at which our network is deployed
and we agreed to name the truckstop chain as an additional insured on our
insurance policy. Our insurance policy does not cover any punitive damages that
may be awarded in this lawsuit. We inadvertently failed to timely name the
truckstop chain defendant as an additional insured and our commercial insurance
carrier has, as a result, denied coverage of the truckstop chain with respect to
this lawsuit and is defending us under a reservation of its rights. The
truckstop chain has agreed to our assumption of the defense of this lawsuit. We
have agreed to indemnify the truckstop chain from any losses relating to this
lawsuit and have secured this obligation with a letter of credit in the amount
of $.2 million.
In March 1999, Daniel Ray Claybaugh filed a lawsuit against us and a truckstop
chain at which our network is deployed that seeks unspecified actual damages
resulting from an injury suffered by Mr. Claybaugh at a truckstop in Arizona in
the Circuit Court for Knox County, Tennessee. Although our insurance carrier is
providing a defense and indemnification pursuant to the terms of its policy, it
has refused to recognize the truck stop chain as an additional insured on the
policy. In accordance with our contract with the truckstop owner, we have agreed
to assume the costs of defense for the truckstop owner.
In August 1999, Robert T. and Julie McCurry filed a lawsuit against us in
Superior Court of Shasta County, California and a truckstop chain at which our
network is deployed that seeks a total of $2.0 million in actual damages
resulting from an injury suffered by Mr. McCurry. The amount sought exceeds the
limit of our insurance policy. We have notified our insurance carrier of this
lawsuit and are unaware of any issues which would result in the denial of
insurance coverage.
We also have received 20 to 25 additional claims arising from slip and fall
incidents relating to our network. We have advised our insurance carrier of
these incidents and the carrier has denied coverage or is reserving its rights
to deny coverage on several of these incidents due to our alleged failure to
provide timely notice of such incidents. Our present understanding of these
claims is preliminary. Based upon our understanding, however, management does
not believe that the outcome of any of these lawsuits or claims will have a
material adverse effect on our financial condition or results of operations.
We anticipate that we will be, from time to time, subject to claims and suits
for personal injury arising in the ordinary course of our business. We
anticipate that these future claims and suits, to the extent for actual damages,
will generally be covered by insurance.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers, and their ages and positions, as of August
31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert P. May.......................... 50 Chief Executive Officer and Director
Ian Williams........................... 49 Chairman of the Board and Director
Stephen L. Conkling.................... 54 President and Chief Operating Officer
R. Michael Brewer...................... 55 Vice President -- Finance and Chief Financial
Officer
Anthony W. Allen....................... 37 Vice President -- Operations and Secretary
Richard K. Brenner..................... 44 Vice President -- Marketing
Bill J. Buzbee......................... 53 Vice President -- Business Development
Mark Cleveland......................... 36 Vice President -- Sales
James D. Green......................... 40 Vice President -- Product Development
Yves Roland Maynard.................... 38 Vice President -- Engineering
Steven Yevoli.......................... 29 Vice President -- New Media and E-Business
Robert M. Chefitz...................... 39 Director
Thomas P. Hirschfeld................... 35 Director
Richard M. Johnston.................... 64 Director
Daniel K. O'Connell.................... 69 Director
</TABLE>
Robert P. May has served as our Chief Executive Officer since March 1999. Prior
to joining PNV.net, from March 1998 to February 1999, Mr. May was a private
investor. From October 1996 to February 1998, Mr. May served as Chief Operating
Officer of Cablevision Systems Corporation. In this position he oversaw several
key transactions including the successful integration of the New York-area cable
systems of Tele-Communications, Inc. From April 1995 to September 1996, Mr. May
served as Chief Operating Officer of Towne Air Freight, a regional airfreight
trucking company. From 1993 to October 1995, Mr. May also served as a Chief
Executive Officer of Intelligent Electronics' Intelogistics Division, a
distributor of desktop hardware and related outsourcing services. From 1973 to
1993, Mr. May was employed by Federal Express Corporation where he served in a
variety of senior management positions. Mr. May attended Curry College and
Boston College.
Ian Williams, a founder of PNV.net, has served as our Chairman of the Board
since August 1998 and as a director of PNV.net since its incorporation in
September 1995. From September 1995 to March 1999, Mr. Williams served as our
Chief Executive Officer. From September 1995 to July 1998, Mr. Williams served
as our President. From March 1993 to September 1995, Mr. Williams served as
President of Park 'N View, Ltd., the predecessor of PNV.net. Prior to joining
Park 'N View, Ltd., from 1991 to March 1993, Mr. Williams served as President of
Arden Technologies, Inc., a manufacturer and distributor of wireless cable
transmitters. Mr. Williams' responsibilities at Arden, as well as other previous
employers, included the design of numerous satellite master antenna television
systems, multi-channel low-power television systems, FM rebroadcast and
distribution systems and wireless television broadcast systems and the
installation of low-power television and cable systems throughout Canada, the
Arctic, and over thirty other countries throughout the world. Mr. Williams holds
a diploma from West Gloucestershire College of Education in the United Kingdom.
Stephen L. Conkling has served as our President since August 1998 and as Chief
Operating Officer since December 1997. From April 1996 to July 1998, Mr.
Conkling served as our Vice President -- Finance. Prior to joining PNV.net, from
January 1995 to March 1996, Mr. Conkling served as Chief Financial Officer of
Advanced Promotion Technologies, a publicly held database marketing company that
filed for
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Chapter 11 bankruptcy protection within two years after Mr. Conkling left the
company. From November 1993 to January 1995, Mr. Conkling was a consultant,
providing strategic and financial strategy services. From 1991 to November 1993,
Mr. Conkling served as Chief Executive Officer of Imagery, a document imaging
software company. Mr. Conkling served as Chief Financial Officer of Interactive
Systems, a systems software company, from 1984 to January 1991. Prior to 1984,
he worked for Xerox Corporation for 16 years in various finance and marketing
positions. Mr. Conkling holds a B.S. in Industrial Management from Purdue
University and an M.B.A. from the University of Southern California.
R. Michael Brewer has served as our Chief Financial Officer and Vice
President -- Finance since August 1998. Prior to joining PNV.net, from January
1994 to August 1998, Mr. Brewer served as Vice President of Finance and Chief
Financial Officer for Boca Research, Inc., a computer peripheral manufacturing
company. From 1978 to January 1994, Mr. Brewer served as Vice President of
Finance for the U.S. operations of Mitel Corporation, a Canadian company which
manufactured PBX telephone equipment and semiconductors. Mr. Brewer holds a B.S.
in Business Administration from the University of Minnesota. Mr. Brewer received
his Florida CPA in 1975.
Anthony W. Allen has served as our Vice President -- Operations since March 1997
and Secretary since our incorporation in September 1995. Prior to joining
PNV.net from 1993 to August 1997, Mr. Allen served as Director of Marketing for
Arden Technologies, Inc., a manufacturer and distributor of wireless cable
transmitters. From September 1995 to March 1997, Arden Technologies, Inc.
contracted with us to provide Mr. Allen's services to PNV.net. From 1990 to
1993, he served as Director & General Manager of International Microwave
Distribution Systems, Ltd. in Barbados, where he was responsible for the
international distribution and installation of wireless cable products. From
1988 to 1990, he served as Regional Sales Manager for Southfields Coachworks
Ltd., located in the United Kingdom, a manufacturer of semi-trailers and heavy
truck bodywork. Mr. Allen holds a diploma in mechanical engineering from Harper
Adams in the United Kingdom.
Richard K. Brenner has served as our Vice President -- Marketing since June 1999
and as our Vice President -- Sales from November 1997 to May 1999. Prior to
joining PNV.net from February 1996 to October 1997, Mr. Brenner was the founder
and President of Brenner Consulting Group, a consulting firm that provided
marketing consulting services to PNV.net. See the section entitled "Certain
Transactions." From June 1995 to February 1996, Mr. Brenner served as Vice
President -- Worldwide Business Planning for Scott Paper Company, where he
directed business planning for all Scott brands. From January 1994 to June 1995,
Mr. Brenner served as Vice President -- Marketing of Advanced Promotion
Technologies, a publicly held database marketing company that filed for Chapter
11 bankruptcy protection within two years after Mr. Brenner left the company.
Mr. Brenner worked for Procter & Gamble from 1986 to January 1994 in various
marketing and product management positions. Prior to joining Procter & Gamble,
Mr. Brenner worked for Leo Burnett USA, an advertising agency, as an account
supervisor. Mr. Brenner holds a B.A. in Business Administration from the
University of Maryland and a M.A. in Management from Northwestern University.
Bill J. Buzbee has served as our Vice President -- Business Development since
October 1997 and Vice-President -- Marketing and Sales from April 1995 to
October 1997. Prior to joining PNV.net from October 1993 to April 1995, he
served as Manager of Fuel/Ancillary Sales for National Auto/Truckstops Corp., a
truckstop operator. From 1989 to 1993 and from 1972 to 1984, Mr. Buzbee worked
for Truckstops of America and served in various capacities, including general
manager of several truckstop facilities. Mr. Buzbee worked for a Petro Stopping
Center franchisee from 1984 to 1986. Mr. Buzbee attended State Community College
in Columbia, Tennessee and David Lipscomb University in Nashville, Tennessee.
Mark A. Cleveland has served as our Vice President of Sales since June 1999.
Prior to joining PNV.net, from April 1990 to April 1999, Mr. Cleveland served as
Vice President of Jubitz Fleet Services, a division of Jubitz Corporation, a
company that provides a variety of services to fleets. From July 1997 to April
1999, Mr. Cleveland also served as the Vice President of Network Development for
SmartStop Inc., a company, partially-owned by Jubitz Fleet Services, that
marketed prepaid phone cards and public access
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telephone services in truckstops. From July 1984 to August 1989, Mr. Cleveland
was the President of Horizon Satellite Systems, Inc., a retail and commercial
satellite communications services provider, and he was elected to the board of
directors of the Satellite Broadcasting and Communications Association. From
September 1989 to March 1999, Mr. Cleveland was a sales and marketing
consultant. From June 1986 to June 1989, Mr. Cleveland was a founder and Vice
President of ONTOP Software Systems, a developer of business operating software
products in Portland, Oregon. Mr. Cleveland holds a B.A. in Marketing and
Finance from the University of Oregon.
James D. Green has served as our Vice President -- Product Development since
November 1996. Prior to joining PNV.net, Mr. Green served as President of
GreenLight Technologies, Inc., a software development company specializing in
frequency marketing and transaction processing services for truckstops and
trucking companies from its formation in March 1994 to November 1996. GreenLight
performed certain software programming consulting services for us. See the
section entitled "Certain Transactions." From 1984 to February 1994, Mr. Green
worked for Comdata Corporation as Senior Product Manager responsible for all
transportation card based products. Mr. Green worked as Product Manager for
Financial Institutional Services Inc. from 1982 to 1984 and as consultant for
Computer Sciences Corporation from 1980 to 1982. Mr. Green holds a B.S. in
Business Administration from The Evergreen State College in Olympia, Washington.
Yves Roland Maynard has served as our Vice President -- Engineering since
September 1995 and as Vice President -- Engineering of our predecessor, Park 'N
View, Ltd., from 1993 to August 1995. Mr. Maynard was employed by Glocom
Engineering from August 1990 to May 1993, and by Glocom Engineering Ltd./ Canada
from 1987 to May 1990, as Director of Engineering, where he was responsible for
the engineering and installation of microwave distribution systems. His
experience at Glocom includes the engineering and installation of microwave
distribution systems for companies in Canada, the United States and the
Caribbean, and the design of equipment and construction methods necessary to
deliver cable television and telephone services. From 1986 to 1987, Mr. Maynard
was employed by Island Engineering BWI as Director of Engineering. Mr. Maynard
holds a degree in Industrial Electronics from Red River Community College in
Winnipeg, Manitoba.
Steven Yevoli has served as our Vice President of New Media/E-Business since May
1999. Prior to joining PNV.net, from May 1998 to May 1999, Mr. Yevoli served as
Director of Cablevision Systems Corporation's E-commerce Division. In this
position, he was responsible for the electronic commerce operations of various
entities, including Madison Square Garden and Radio City Music Hall. From
September 1996 to April 1998, Mr. Yevoli served as one of the five original
members of Cablevision System's New Media Team. In this position, he assisted in
launching one of the country's first cable modem services, Optimum Online. From
October 1997 to June 1998, for Cablevision Systems, Mr. Yevoli also assisted in
the development and launch EZSeek.com, a portal in Long Island, NY. From
September 1995 to September 1996, Mr. Yevoli served as Director of New Media of
Rainbow Interactive, the first interactive group of Rainbow Media, a subsidiary
of Cablevision Systems. From September 1993 to August 1995, Mr. Yevoli served as
Vice President -- Music Division of Sabbeth Industries, in which position he was
responsible for distribution of overruns and out-of-stock music to foreign
markets. Mr. Yevoli holds a B.S. in Business from Ithaca College.
Robert M. Chefitz has served as a director of PNV.net since November 1995. Mr.
Chefitz has served as a Managing Director of Patricof & Co. Ventures, Inc., a
venture capital firm, since 1991. Mr. Chefitz joined Patricof in 1987 and served
as Vice President until 1991. From 1981 to 1987, Mr. Chefitz served in various
management positions with Golder, Thoma & Cressey Co. of Chicago, Illinois. Mr.
Chefitz's experience includes consulting with management teams to consolidate
fragmented industries, including communications, security and specialty
retailing. Mr. Chefitz serves as a director of Protection One, Inc. and several
privately held companies in which the limited partnerships managed by Patricof
are investors. Mr. Chefitz holds a B.A. in History from Northwestern University
and an M.B.A. from Columbia University.
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Thomas P. Hirschfeld has served as a director of PNV.net since November 1995.
Mr. Hirschfeld has served as a Managing Director of Patricof since March 1999
and as a Principal of Patricof from January 1995 through February 1999. From
January 1994 to January 1995, he served as Assistant to the Mayor of New York
City. From August 1986 to December 1993, Mr. Hirschfeld worked for Salomon
Brothers as an investment banker. Mr. Hirschfeld serves as a director of Talk
City, Inc., a provider of on-line communities and interactive services for
businesses and consumers, and Audible, Inc., a provider of spoken audio content
over the Internet. Mr. Hirschfeld serves as a director of a number of privately
held companies in which the limited partnerships managed by Patricof are
investors. Mr. Hirschfeld holds a B.A. in Classics from Harvard College, and an
M.A. in Politics and Economics from Ballise College, Oxford University.
Richard M. Johnston has served as a director of PNV.net since August 1997. Mr.
Johnston has served as Vice President-Investments since 1970 and is a director
of The Hillman Company, an investment holding company with diversified
operations. Mr. Johnston served as Assistant to the President of Hillman from
1965 to 1970 and Assistant to the Vice President-Investments of Hillman from
1961 to 1965. Mr. Johnston serves as a director of Metrocall, Inc., a leading
provider of paging and other wireless messaging services, Superconductor
Technologies, Inc., a development and manufacturing company of super cooled
filters for communication applications, and several privately held companies in
which Hillman is an investor. Mr. Johnston holds a B.S. in Commerce from
Washington & Lee University and an M.B.A. from Wharton School of Finance of the
University of Pennsylvania.
Daniel K. O'Connell has served as a director of PNV.net since November 1995. Mr.
O'Connell has been a private investor since April 1991. From 1964 to April 1991,
Mr. O'Connell worked for Ryder System, Inc., an international transportation
services company and served in various capacities including Executive Vice
President from 1974 to 1991, Financial Vice President from 1970 to 1974, General
Counsel from 1968 to 1970 and attorney from 1964 to 1968. He is a director of
American Retirement Corporation in Nashville, Tennessee, which develops, owns
and manages assisted living, continuing care and congregate living retirement
communities throughout the United States, and of Fortress-FAE Corporation in
Boston, Massachusetts, which transports and stores art objects and other
high-value personal property. Mr. O'Connell holds a B.A. from Southern Illinois
University and a J.D. from Georgetown University Law Center. Mr. O'Connell's son
is a partner in the law firm of Kilpatrick Stockton LLP, which provides legal
services to us.
Executive officers are appointed by the board of directors on an annual basis
and serve until their successors have been duly elected and qualified. There are
no family relationships among any of our directors or executive officers, except
that Mr. Williams and Mr. Allen are brothers-in-law.
COMPOSITION OF THE BOARD OF DIRECTORS
Our bylaws provide that the number of members of our board of directors will
consist of between one and seven and that the board has the power to determine
the number of directors, when not determined by the stockholders, and to fill
vacancies on the board. Currently, the number of directors is fixed at seven and
we have six directors and one vacancy on the board of directors. All directors
are elected annually to serve until the next annual stockholders' meeting
following their election and until their successors are elected and qualified.
Of our current directors, under the terms of the preferred stock designations
and stockholder agreement to which we are a party, Mr. Chefitz and Mr.
Hirschfeld are the designees of the holders of the Series A preferred stock, Mr.
May is the designee of the holders of the Series B preferred stock, Mr. Johnston
is the designee of the holders of the Series C preferred stock and Mr. Williams
and Mr. O'Connell are the designees of the holders of the common stock. Upon the
completion of this offering, these designations will be eliminated and the
agreement will terminate. Thereafter, Mr. Chefitz, Mr. Hirschfeld, Mr. May, Mr.
Johnston, Mr. Williams and Mr. O'Connell will continue to serve as our
directors, at least until their respective successors, if any, are elected. We
intend to fill the vacancy on the board prior to the completion of this
offering.
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BOARD COMMITTEES
The audit committee of the board of directors reviews, acts on and reports to
the board of directors with respect to various auditing and accounting matters,
including the recommendation of our auditors, the scope of the annual audits,
fees to be paid to the auditors, the performance of our independent auditors and
our accounting practices. The members of the audit committee are Mr. O'Connell,
Mr. Hirschfeld and Mr. Johnston.
The compensation committee of the board of directors reviews the performance of
all executive officers and determines the salaries and benefits for all
executive officers. The members of the compensation committee are Mr. Chefitz
and Mr. Williams. Prior to the completion of this offering, we plan to delegate
to the compensation committee the authority to administer our stock option plan
and to add another non-employee director to this committee.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, we do not currently
compensate our directors for serving in this capacity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee made decisions concerning the compensation of our
executive officers for the years ended June 30, 1998 and June 30, 1999, during
which time, Mr. Williams, our Chairman of the Board, has been a member of the
committee. No interlocking relationship exists between any member of our board
or our compensation committee and any member of the board of directors or
compensation committee of any other company, and no such interlocking
relationship has existed in the past.
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EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth all compensation during fiscal 1998 and 1999 for
each of our chief executive officers during fiscal 1999 and our four other most
highly compensated executive officers during fiscal 1999 who were serving as
executive officers as of the end of fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
--------------------------- ---- -------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. May.................... 1999 $ 91,667 -- $15,775 567,083 $1,375
Chief Executive Officer and 1998 -- -- -- -- --
Director(2)
Ian Williams..................... 1999 165,000 $50,000 -- -- 1,856
Chairman of the Board, Chief 1998 157,000 -- -- -- --
Executive
Officer and Director(3)
Stephen L. Conkling.............. 1999 140,000 50,000 -- 65,735 1,575
President and Chief Operating 1998 132,501 -- -- -- --
Officer
R. Michael Brewer................ 1999 95,474 48,000 -- 81,096 1,238
Vice President -- Finance and 1998 -- -- -- -- --
Chief Financial Officer(4)
James D. Green................... 1999 130,000 20,000 -- 75,867 1,556
Vice President -- Product 1998 127,500 -- -- -- --
Development
Richard K. Brenner............... 1999 130,433 10,000 -- 101,912 1,425
Vice President -- Marketing(5) 1998 73,333 27,500 -- -- --
</TABLE>
- ---------------------------
(1) Represents our contribution under our 401(k) Profit Sharing Plan on behalf
of this executive officer.
(2) Mr. May joined us in March 1999. Mr. May's "Other Annual Compensation"
includes reimbursements of $6,470 for premiums paid by Mr. May on a
whole-life insurance policy for the benefit of Mr. May's designated
beneficiaries and $7,805 paid to Mr. May for temporary living and relocation
expenses.
(3) Mr. Williams served as our Chief Executive Officer until March 1999.
(4) Mr. Brewer joined us in August 1998. His bonus compensation consists of a
hiring bonus of $10,000 and a guaranteed bonus of $38,000 that was earned in
the fiscal 1999, but paid in fiscal 2000.
(5) Mr. Brenner joined us in November 1997.
Stock Options
The following table sets forth information regarding options granted to each of
our executive officers named in the Summary Compensation Table during fiscal
1999. All of the options were granted under our stock option plan and are
"nonqualified" options. We have not granted any stock appreciation rights.
To the extent the options set forth in the table below have become exercisable,
these options may be exercised for a period of three years following a
termination of the optionee's employment, except for the option granted to Mr.
May, which may be exercised at any time during the term of his option. All
options set forth in the table below terminate ten years from the date of grant,
except for the option granted to Mr. May, which terminates seven years from the
date of grant.
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<PAGE> 76
The potential realizable values are based on an assumption that the price of our
common stock will appreciate at the compounded annual rate shown from the date
of grant until the end of the option term. These amounts are calculated based on
the requirements of the Securities and Exchange Commission and do not reflect
our estimate of future common stock prices.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
-------------------------------------------------------- -----------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR(%) PER SHARE DATE 0% 5% 10%
---- ---------- ---------------- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert P. May(2)........ 567,083 42.45% $5.00 03/02/09 -- $1,750,643 $4,519,652
Ian Williams............ -- -- -- -- -- -- --
Stephen L. Conkling..... 65,735(3) 4.92 5.00 03/02/09 -- 206,408 523,908
James D. Green.......... 43,000(5) 3.22 5.00 03/02/09 -- 135,020 342,710
32,867(3) 2.46 5.00 03/02/09 -- 103,202 261,950
Richard K. Brenner...... 80,000(4) 5.99 3.00 03/02/09 $160,000 151,200 382,400
21,912(3) 1.64 5.00 03/02/09 -- 68,804 174,639
R. Michael Brewer....... 80,000(5) 5.99 5.00 03/02/09 -- 251,200 637,600
1,096(3) .08 5.00 03/02/09 -- 3,441 8,735
</TABLE>
- ---------------------------
(1) The exercise price of the options granted was the fair market value of the
common stock on the date of grant as determined by our board of directors
based on our financial condition and prospects, except that the exercise
price of options granted to Mr. Brenner was below this value. We
subsequently determined that the exercise price of the options granted was
below the deemed fair market value of the common stock for financial
reporting purposes. See the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under the heading
"Overview."
(2) This option becomes exercisable, subject to continued employment, in equal
monthly increments of approximately 2% each until the first anniversary of
the completion of this offering, when this option becomes exercisable in
full. The exercise price per share is $5 or any lower per share price at
which we sell common stock prior to the first anniversary of the completion
of this offering.
(3) This option becomes exercisable, subject to continued employment, in
cumulative annual increments of 20% each beginning on the date of grant and
the first, second, third and fourth anniversaries of the date of grant.
(4) This option becomes exercisable, subject to continued employment, as to
68,000 of the underlying shares on the date of grant and as to 4,000 shares
each in November 1999, 2000 and 2001.
(5) This option becomes exercisable, subject to continued employment, in
cumulative increments of 20% on the date of grant and in August 1999, 2000,
2001 and 2002.
75
<PAGE> 77
The following table sets forth information concerning the number and value of
unexercised options held by the executive officers named in the Summary
Compensation Table as of June 30, 1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AS OF JUNE 30, 1999 AS OF JUNE 30, 1999 (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert P. May................................ 35,442 531,641 $354,420 $5,316,410
Ian Williams................................. -- -- -- --
Stephen L. Conkling.......................... 71,874 91,739 917,648 1,049,994
Richard K. Brenner........................... 72,382 29,530 859,820 319,300
R. Michael Brewer............................ 16,219 64,877 162,190 648,770
James D. Green............................... 37,900 75,845 464,226 815,266
</TABLE>
- ---------------------------
(1) Based on a value of $15.00 per share, the deemed fair market value of our
common stock as of June 30, 1999 for financial reporting purposes, less the
per share exercise price, multiplied by the number of shares issued upon
exercise of the option. All options were granted under our stock option
plan.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
In March 1999, under an employment agreement without a fixed term that either
party may terminate at any time, we employed Robert P. May as our chief
executive officer, and agreed to nominate him as a director. Under this
agreement, Mr. May's base annual salary is $275,000 and he is eligible for a
bonus initially targeted at 50% of his base annual salary based upon goals and
objectives to be established by the board of directors annually following our
fiscal year-end. This bonus may be increased or decreased by the board of
directors. Mr. May may also receive a discretionary bonus. We have agreed to
reimburse Mr. May for certain expenses related to his temporary living and
relocation, to pay certain life insurance premiums on his behalf and to
establish a nonqualified deferred compensation plan under which he may defer
amounts in excess of permissible contributions to our 401(k) plan. We have not
yet established the deferred compensation plan.
In March 1999, in accordance with this employment agreement, we issued to Mr.
May 23,000 shares of our Series C preferred stock for a purchase price of $8.00
per share. In partial payment of this purchase price, Mr. May issued to the
company his promissory note, also dated March 1999, in the original principal
amount of $92,000, which amount accrues interest at the rate of 6% per annum.
The principal balance of this note, together with accrued interest, is due in
March 2003. Under his employment agreement, Mr. May has agreed to pay the
remaining $92,000 of this purchase price over an eight month period that began
in March 1999.
If we terminate Mr. May's employment without cause, we are obligated to pay him
his base salary and the amount of the life insurance premiums that we have
agreed to pay on his behalf for six months. If a change in our control occurs
and we terminate Mr. May's employment without cause during the 18 months
following the change in control, we are obligated to pay him his base salary for
18 months and the amount of the life insurance premiums for six months, as well
as an amount equal to any bonus paid to Mr. May in the previous year. If Mr. May
does not agree to release the company and our representatives from liability
relating to his employment, we are obligated to pay him his base salary for one
month only upon termination.
In March 1999, in accordance with his employment agreement, we granted Mr. May,
under our stock option plan, an option to purchase 567,083 shares of common
stock for $5.00 per share. We also agreed with Mr. May that, if certain sales of
our stock in an aggregate amount up to $20.0 million closed prior to February
29, 2000, we would grant him additional options to purchase shares of common
stock such that, immediately following any such grant of additional options, he
would hold options to purchase an aggregate of up to five percent of the common
stock, calculated on a fully diluted basis, outstanding after
76
<PAGE> 78
such sale. Under this agreement, we granted to Mr. May an option to purchase
130,097 shares of common stock having an exercise price of $5.00 per share upon
the closing of the sale of our Series D preferred stock in September 1999. This
option became exercisable as to 12.48% of the underlying shares of common stock
on the date of grant and becomes exercisable in equal monthly increments of
approximately 2.08% until the first anniversary of the completion of this
offering, when this option becomes exercisable in full.
In November 1996, we acquired computer software from a software development
company known as GreenLight Technologies, Inc., of which James D. Green owned
50% of its capital stock. In connection with the acquisition, we agreed to pay
Mr. Green an annual salary of at least $100,000 as long as he is employed by us.
For additional information relating to the acquisition of GreenLight
Technologies, see the section entitled "Certain Transactions."
Other than Mr. May, we do not have an employment agreement with any executive
officer named in the Summary Compensation Table. In the event the employment of
any executive officer is terminated, we have verbally agreed to pay each of
these officers his base annual salary for a three-month period other than Mr.
Conkling or Mr. Brenner, each of whom we have agreed to pay for a six-month
period. Pursuant to our stock option plan, the exercisability of options granted
under the plan is accelerated in the event of certain changes in control of
PNV.net.
BONUS PLAN
In February 1998, the board of directors adopted a bonus plan to provide annual
cash and/or stock awards to some of our key employees, including all of our
executive officers. Pursuant to the bonus plan, each of these key employees are
each eligible for bonuses of up to 61% of annual base salary depending upon the
employee's position with PNV.net and achievement of certain subjective employee
goals and objective company goals, both of which are determined by the board of
directors. The allocation of the bonus between cash and/or stock awards is
determined by the board of directors. To date, we have not established any goals
or made any awards under this bonus plan.
STOCK OPTION PLAN
Our stock option plan was adopted by our board of directors on February 7, 1996,
and approved by our stockholders on the same date for the benefit of our
officers, directors, employees and consultants. This plan has been amended, most
recently in August 1999 to approve an additional 250,000 shares of common stock
for issuance under this plan, and this amendment was subsequently approved by
our stockholders. An aggregate of 2,184,166 shares of common stock is reserved
for issuance under this plan. As of September 16, 1999, we had outstanding
options to purchase an aggregate of 1,951,493 shares of common stock under this
plan at a weighted average exercise price of approximately $4.09 per share.
This plan is administered by our board of directors. Our board of directors may
interpret this plan and may prescribe, amend and rescind rules and make all
other determinations necessary or desirable for the administration of this plan.
This plan permits our board of directors to select the officers, directors,
employees, and consultants who will receive awards and generally to determine
the terms and conditions of those awards. Prior to the completion of this
offering, we intend to amend this plan to provide for its administration by the
compensation committee of our board.
We may issue two types of stock options under this plan: incentive stock
options, which are intended to qualify under the Internal Revenue Code of 1986,
as amended, and nonqualified stock options. The option price of each incentive
stock option granted under this plan must be at least equal to the fair market
value of a share of common stock on the date the incentive stock option is
granted.
In the event of a merger, consolidation, reorganization, recapitalization, stock
dividend or other change in corporate structure affecting the number of issued
shares of our common stock, then our board of directors may make equitable
adjustments to the terms of this plan. In particular, our board of directors may
make an equitable substitution or proportionate adjustment in the number and
type of shares authorized by this
77
<PAGE> 79
plan, the number and type of shares covered by outstanding awards under this
plan, and the exercise prices of these awards.
The terms of this plan provide that our board of directors may amend or
terminate this plan at any time, provided, however, that some amendments require
approval of our stockholders. No action may be taken which adversely affects any
rights under outstanding awards without the holder's consent.
We intend to file a registration statement on Form S-8 upon the completion of
this offering to register the sale of common stock issuable upon exercise of
options issued under our stock option plan.
401(K) PLAN
We adopted a Section 401(k) profit sharing plan in February 1999. The 401(k)
plan is designed as a tax-qualified plan under which all employees who are at
least 18 years of age and have completed at least one year of service with us
are eligible to participate. If, however, an employee was employed by us on
January 1, 1999, this employee became eligible to participate in the 401(k) plan
regardless of age or length of service with us. Under the 401(k) plan,
participants may elect to defer a portion of their compensation on a pre-tax
basis. In addition, at the discretion of the board of directors, we may make
matching contributions and/or nonelective employer contributions to the 401(k)
plan for all eligible employees. During fiscal 1999, we made contributions of
$59,430.
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<PAGE> 80
CERTAIN TRANSACTIONS
FINANCING TRANSACTIONS IN CONNECTION WITH THE ORGANIZATION OF PNV.NET
In November 1995, PNV.net, which was organized by Patricof & Co. Ventures, Inc.,
Ian Williams and the then partners of Park 'N View, Ltd., Sam Hashman, Monte
Nathanson and Nelgo Investments, of which Daniel O'Connell is a general partner,
acquired the business and assets, and assumed the liabilities, of Park 'N View,
Ltd. In connection with this purchase, we issued approximately 2.3 million
shares of common stock to Park 'N View, Ltd. Park 'N View, Ltd. subsequently
distributed those shares to its partners. The amount of the net liabilities
assumed by PNV.net was $84,000. In addition, over a 12-month period commencing
in November 1995, funds managed by Patricof invested $3.8 million in PNV.net in
exchange for which we issued to the funds managed by Patricof an aggregate of
2.0 million shares of common stock, 70,010 shares of Series A preferred stock
and $3.0 million aggregate principal amount of our 8% subordinated notes. During
the fall of 1996, we issued to the funds managed by Patricof an additional $1.5
million aggregate principal amount of our 8% subordinated notes and warrants to
purchase 239,250 shares of common stock. In connection with the sale of the
Series A preferred stock, PNV.net entered into certain agreements with certain
holders of our capital stock. Pursuant to these agreements, certain holders of
common stock and Series A preferred stock obtained rights of first refusal with
respect to proposed sales of stock by PNV.net or by certain holders of shares of
our common stock. The holders of our outstanding shares of common stock and
Series A preferred stock also had certain co-sale rights. These rights of first
refusal and co-sale will terminate upon the completion of this offering.
1996 PRIVATE EQUITY INVESTMENT
In November 1996, in connection with the sale of the Series B preferred stock,
the funds managed by Patricof:
- converted $3.0 million aggregate principal amount of our 8% subordinated
notes plus $.2 million in interest accrued on those notes into 318,065 shares
of the Series A preferred stock;
- converted $1.5 million aggregate principal amount of those notes and warrants
to purchase 239,250 shares of common stock, into 137,237 shares of the Series
B preferred stock; and
- purchased 45,746 shares of Series B preferred stock for $.5 million.
The State of Michigan Retirement System purchased 731,930 shares of the Series B
preferred stock for $8.0 million and the Benefit Capital Management Corporation
purchased 274,474 shares of the Series B preferred stock for $3.0 million. In
connection with the sale of the Series B preferred stock, we entered into
various agreements with certain holders of our capital stock. Pursuant to these
agreements, we granted demand and piggy-back registration rights to various
holders of shares of common stock and to holders of the shares of common stock
issuable upon the conversion of the Series B preferred stock and any additional
shares of common stock acquired as a result of a stock dividend, stock split or
other distribution in respect of the Series B preferred stock. Various holders
of common stock and Series B preferred stock also obtained rights of first
refusal with respect to proposed sales of stock by PNV.net or by various holders
of shares of common stock pursuant to these agreements. The holders of our
outstanding shares of common stock and Series B preferred stock also had certain
co-sale rights pursuant to these agreements. These rights of first refusal and
co-sale will terminate upon the completion of this offering.
ACQUISITION OF GREENLIGHT TECHNOLOGIES, INC.
From November 1995 to November 1996, GreenLight Technologies, Inc., of which
James Green owned 50% of the capital stock, and Lewis Tatham, also an employee
of PNV.net, owned the remaining 50% of the capital stock, provided certain
software programming consulting services to PNV.net relating to our software
pursuant to a software development agreement. Pursuant to the provisions of this
agreement, during this period, we paid Greenlight Technologies an aggregate of
approximately $49,800 in fees. In November 1996, pursuant to a technology
transfer agreement, Greenlight Technologies, Mr. Green and
79
<PAGE> 81
Mr. Tatham transferred and assigned to us certain software relating to our
software developed by them, including rights in software developed pursuant to
the software development agreement, in consideration of our payment to each
individual of a $100,000 annual salary as long as he is employed by us and the
grant to each of them of an option to purchase 37,878 shares of common stock.
Each option has an exercise price of $1.25 per share and vests in five annual
cumulative increments of 20% each commencing on the date of grant so long as
employment continues.
1997 PRIVATE EQUITY INVESTMENT
In August 1997, we issued an aggregate of 2,328,543 shares of Series C preferred
stock for $18.6 million, of which (i) Henry L. Hillman, Elsie Hilliard Hillman
and C.G. Grefenstette, Trustees, purchased 812,500 shares of Series C preferred
stock for $6.5 million, (ii) funds managed by Patricof purchased 125,000 shares
of Series C preferred stock for $1.0 million, (iii) Benefit Capital Management
Corporation purchased 125,000 shares of Series C preferred stock for $1.0
million and (iv) the State of Michigan Retirement System purchased 125,000
shares of Series C preferred stock for $1.0 million. In connection with the sale
of the Series C preferred stock, we entered into certain amendments to the
agreements with various holders of our capital stock that we had entered into in
connection with the sale of the Series A preferred stock and the Series B
preferred stock. Pursuant to these amendments, we granted demand and piggy-back
registration rights to holders of the shares of common stock issuable upon the
conversion of the Series C preferred stock and any additional shares of common
stock acquired as a result of a stock dividend, stock split, or other
distribution in respect of the Series C preferred stock. These amendments also
provided holders of Series C preferred stock rights of first refusal with
respect to proposed sales of stock by PNV.net or by various holders of shares of
common stock. The holders of the Series C preferred stock also had certain
co-sale rights pursuant to these amendments. These rights of first refusal and
co-sale will terminate upon the completion of this offering.
1999 PRIVATE EQUITY INVESTMENT
In September 1999, we sold an aggregate of 3,000,000 shares of Series D
preferred stock for $31.5 million, of which ABRY Broadcast Partners III, L.P.
purchased 1,904,762 shares of Series D preferred stock for $20.0 million,
Halpern Denny Fund II, L.P. purchased 619,048 shares of Series D preferred stock
for $6.5 million and Cummins Engine Company, Inc. purchased 476,190 shares of
Series D preferred stock for $5.0 million.
In connection with the closing of the sale of the Series D preferred stock, we
entered into certain amendments to the agreements with various holders of our
capital stock that we had entered into in connection with the sale of our Series
A, Series B and the Series C preferred stock. Pursuant to these amendments, we
granted registration rights to holders of the shares of common stock issuable
upon the conversion of the Series D preferred stock. We also granted
registration rights to Volpe Brown Whelan & Company, LLC the placement agent for
the Series D preferred stock, to which we issued a warrant to purchase 60,000
shares of common stock for $10.50 per share. These amendments also provide
holders of Series D preferred stock rights of first refusal with respect to
proposed sales of stock by PNV.net or by various holders of common stock. The
holders of the Series D preferred also have certain co-sale rights. These rights
of first refusal and co-sale will terminate upon the completion of this
offering.
REDEMPTION OF SERIES A PREFERRED STOCK
We intend to use a portion of the net proceeds of this offering to redeem our
Series A preferred stock for $3.9 million, plus accrued dividends, which would
have been $.8 million as of June 30, 1999. Funds managed by Patricof, which will
beneficially own a total of approximately % of our common stock upon the
completion of this offering, own more than 99% of our Series A preferred stock.
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<PAGE> 82
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of September 16, 1999, and as adjusted to
reflect the sale of the shares of common stock offered hereby, by each person or
group of affiliated persons who is known by PNV.net to beneficially own 5% or
more of our common stock, each director, each executive officer named in the
Summary Compensation Table and all of our directors and executive officers as a
group. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially
owned.
Information with respect to beneficial ownership has been furnished by each
director, officer or 5% or more stockholder, as the case may be. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. These rules generally attribute beneficial ownership of
securities to persons who possess sole or shared voting power or investment
power with respect to those securities and include shares of common stock
issuable upon the exercise of stock options or warrants that are immediately
exercisable or exercisable within 60 days.
The number and percentage of shares of common stock beneficially owned are based
on shares of common stock outstanding as of September 16, 1999,
assuming the conversion of our Series B, Series C and Series D preferred stock,
the issuance of common stock in payment of accrued dividends on our convertible
preferred stock and the exercise of certain outstanding warrants to purchase
common stock.
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
----------------------
NUMBER OF SHARES BEFORE THE AFTER THE
NAME BENEFICIALLY OWNED OFFERING OFFERING
---- ------------------ ---------- ---------
<S> <C> <C> <C>
Patricof & Co. Ventures, Inc., as Manager(1).......... 2,373,602
445 Park Avenue, New York, New York 10022
ABRY Broadcast Partners III, L.P...................... 1,904,762
18 Newbury Street, Boston, Massachusetts 02116
State of Michigan Retirement System(2)................ 1,143,663
430 West Allegan Street, Lansing, Michigan 48922
Sam Hashman(3)........................................ 1,011,560
Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette, Trustees(4)............................ 825,000
2000 Grant Building, Pittsburgh, Pennsylvania 15219
Halpern Denny Fund II, L.P............................ 619,048
500 Boylston Street, Boston, Massachusetts 02116
Robert M. Chefitz(5).................................. 2,373,602
c/o Patricof & Co. Ventures, Inc.,
445 Park Avenue, New York, New York 10022
Thomas P. Hirschfeld(6)............................... 2,373,602
c/o Patricof & Co. Ventures, Inc.,
445 Park Avenue, New York, New York 10022
Richard M. Johnston(7)................................ 0
Daniel K. O'Connell(8)................................ 270,810
Robert P. May(9)...................................... 153,719
Ian Williams(9)(10)................................... 441,953
Stephen L. Conkling(9)................................ 85,449
Richard K. Brenner(9)................................. 76,382
R. Michael Brewer(9).................................. 32,219
James D. Green(9)..................................... 54,075
All directors and officers as group
(15 persons)(11)..................................... 3,634,743
</TABLE>
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<PAGE> 83
- ---------------------------
* Less than 1%
(1) Consists of shares of common stock beneficially owned as follows:
- 1,755,698 shares held by APA Excelsior IV, L.P.
- 309,602 shares held by APA Excelsior IV/Offshore, L.P.
- 308,302 shares held by The P/A Fund, L.P.
Patricof & Co. Ventures, Inc., directly or indirectly, controls, and has
sole voting or investment power with regard to shares beneficially owned by
such limited partnerships.
(2) Does not include shares held by APA Excelsior IV, L.P., a limited
partnership of which the State of Michigan Retirement System is a limited
partner.
(3) Includes 22,950 shares of common stock beneficially owned by PNV General
Partner, Inc., of which Mr. Williams, Mr. Hashman and Monte Nathanson, the
general partner of MPN Partners, Ltd., each owns one-third of such shares.
(4) Consists of shares of common stock beneficially owned as follows:
- 625,000 shares held by Juliet Challenger, Inc., an indirect, wholly-owned
subsidiary of The Hillman Company.
- 187,500 shares held by a trust for the benefit of Henry L. Hillman.
- 12,500 shares held by The Hillman Company.
The Hillman Company is controlled by the trust for the benefit of Henry L.
Hillman. The trustees of the trust are Henry L. Hillman, Elsie Hilliard
Hillman and C. G. Grefenstette. The trustees share voting and investment
power with respect to the shares held of record by the trust and the assets
of The Hillman Company. Does not include an aggregate of 250,000 shares
held by four trusts for the benefit of members of the Hillman family, as to
which shares the trustees (other than Mr. Grefenstette, who is one of the
trustees of such family trusts) disclaim beneficial ownership. Also does
not include 187,500 shared held by Venhill Limited Partnership, as to which
shares the trustees disclaim beneficial ownership. Howard B. Hillman, the
general partner of Venhill Limited Partnership, is a step-brother of Henry
L. Hillman.
(5) Represents an aggregate of 2,373,602 shares of common stock beneficially
owned by funds managed by Patricof. Mr. Chefitz, a director of PNV.net, is
a Managing Director of Patricof, and a general partner in the limited
partnerships which Patricof & Co. Ventures, Inc. manages. Mr. Chefitz does
not exercise sole or shared voting or investment power with respect to such
shares and disclaims beneficial ownership of such shares, except to the
extent of his pecuniary interest therein.
(6) Represents an aggregate of 2,373,602 shares of common stock beneficially
owned by funds managed by Patricof. Mr. Hirschfeld, a director of PNV.net,
is a Managing Director of Patricof. Mr. Hirschfeld does not exercise sole
or shared voting or investment power with respect to such shares and
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest therein.
(7) Does not include 1,250,000 shares beneficially owned by affiliates and
related parties of The Hillman Company. Mr. Johnston is Vice
President-Investments and a director of The Hillman Company. Mr. Johnston
does not exercise sole or shared voting or investment power with respect to
such shares and disclaims beneficial ownership of such shares.
(8) Represents an aggregate of 270,810 shares of common stock beneficially
owned by Nelgo Investments, a partnership of which Mr. O'Connell is a
general partner. Mr. O'Connell owns 15% of Nelgo Investments.
(9) The following table indicates those people whose total number of
beneficially owned shares include shares subject to options exercisable
prior to December 31, 1999:
<TABLE>
<CAPTION>
SHARES SUBJECT TO OPTIONS
-------------------------
<S> <C>
Robert P. May............................................... 130,719
Stephen L. Conkling......................................... 85,449
Richard K. Brenner.......................................... 76,382
R. Michael Brewer........................................... 32,219
James D. Green.............................................. 54,075
</TABLE>
(10) Includes 22,950 shares of common stock beneficially owned by PNV General
Partner, Inc., of which Mr. Williams, Mr. Hashman and Monte Nathanson, the
general partner of MPN Partners, Ltd., each owns one-third of such shares.
(11) Includes an aggregate of 525,378 shares of common stock subject to options
that are presently exercisable or become exercisable by December 31, 1999.
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<PAGE> 84
DESCRIPTION OF OUR CAPITAL STOCK
In accordance with our amended and restated certificate of incorporation, we are
authorized to issue up to 50,000,000 shares of common stock, par value $0.001
per share, and 8,750,000 shares of preferred stock, par value $0.01 per share.
As of September 16, 1999, there were 4,331,014 shares of common stock
outstanding and 7,111,978 shares of preferred stock outstanding. Upon the
completion of this offering, all 6,723,913 shares of our convertible preferred
stock will automatically convert into 7,226,543 shares of common stock and our
388,065 shares of redeemable preferred stock will be redeemed.
The following summary description of our capital stock is not intended to be
complete and is qualified by reference to the provisions of applicable law and
to our amended and restated certificate of incorporation and our amended and
restated bylaws, filed as exhibits to the registration statement of which this
prospectus is a part.
COMMON STOCK
As of September 16, 1999, there were 4,331,014 shares of common stock
outstanding held by 19 stockholders of record. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the
shares of common stock offered by us in this offering, the
conversion of the outstanding shares of convertible preferred stock, the payment
with common stock of accrued dividends on our convertible preferred stock and
the issuance of common stock upon the exercise of certain outstanding warrants,
there will be shares of common stock outstanding upon the
completion of this offering. In addition, as of September 16, 1999, there were
outstanding stock options to purchase 1,951,493 shares of common stock and
outstanding warrants to purchase 949,774 shares of common stock.
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors.
Holders of common stock are entitled to receive ratably the dividends, if any,
declared from time to time by the board of directors out of legally available
funds. Holders of common stock have no conversion, redemption or preemptive
rights to subscribe to any of our securities. In the event of any liquidation,
dissolution or winding-up of our affairs, holders of common stock will be
entitled to share ratably in our assets remaining after provision for payment of
liabilities to creditors. The rights, preferences and privileges of holders of
common stock are subject to the rights of the holders of any shares of preferred
stock which we may issue in the future.
PREFERRED STOCK
As of September 16, 1999, there were 7,111,978 shares of preferred stock
outstanding held by 49 stockholders of record. Upon the completion of this
offering, all of our currently outstanding convertible preferred stock will
automatically convert into common stock and our redeemable preferred stock will
be redeemed. In addition, upon completion of this offering we will issue
shares of common stock, valued at the initial public offering price of
$ per share, in payment of all accrued dividends on our convertible
preferred stock. The holders of our Series B, Series C and Series D preferred
stock are entitled to a per annum dividend equal to seven percent of the
liquidation value of the preferred stock, which value is set at $10.93, $8.00
and $10.50 per share, respectively. The dividend will be paid by issuing to the
holders of our Series B, Series C and Series D preferred stock, upon the
completion of this offering, an aggregate number of shares of common stock equal
to the quotient obtained by dividing (1) the aggregate accrued dividends then in
effect, by (2) the initial public offering price. By way of example, if the
initial public offering price is $ per share and the offering closes on
, the holders of our Series B, Series C and Series D preferred stock
would be entitled to receive approximately shares, shares
and shares, respectively.
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<PAGE> 85
The board of directors has the authority, without action by the stockholders, to
designate and issue preferred stock in one or more series and to designate the
rights, preferences and privileges of each series, which may be greater than the
rights of the common stock. We cannot predict the effect of the issuance of any
shares of preferred stock upon the rights of holders of the common stock until
the board of directors determines the specific rights of the holders of the
preferred stock. However, the effects could include one or more of the
following:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- discouraging or preventing a change in our control.
Upon the completion of this offering, we intend to eliminate the certificates of
designations relating to our existing preferred stock and all of our authorized
preferred stock will be undesignated. Upon the completion of this offering, no
shares of preferred stock will be outstanding, and we have no present plans to
issue any shares of preferred stock.
WARRANTS
In August 1997, we issued warrants to purchase 100,399 shares of our common
stock for $8.00 per share to the placement agent for our Series C preferred
stock offering. These warrants expire on August 22, 2002.
In March 1998 and March 1999, we issued warrants to purchase an aggregate of
280,000 shares of our common stock to a customer. These warrants have a weighted
average exercise price of $8.43 per share. Warrants to purchase 180,000 shares
expire on March 12, 2003 and warrants to purchase 100,000 shares expire on March
12, 2004.
In May 1998, we sold units consisting of our 13% notes and warrants to purchase
a total of 505,375 shares of our common stock for $.01 per share. These warrants
expire on May 15, 2008.
In August 1999, we issued warrants to purchase 4,000 shares of our common stock
for $10.50 per share to certain customers. These warrants expire upon the
completion of this offering.
In September 1999, we issued a warrant to purchase 60,000 shares of common stock
to the placement agent for our Series D preferred stock offering. This warrant
has an exercise price of $10.50 per share and expires five years from the date
of issuance.
REGISTRATION RIGHTS
After the completion of this offering, the holders of 9,666,110 shares of common
stock, plus the shares of common stock to be issued in payment of accrued
dividends on our convertible preferred stock, will be entitled to rights with
respect to the registration of these shares under the Securities Act of 1933, as
amended. We have granted demand registration rights to the beneficial owners of
9,326,110 shares of our common stock, including the holders of 7,226,543 shares
issuable on the conversion of our Series B, Series C and Series D preferred
stock and 100,399 shares issuable on the exercise of outstanding warrants. These
demand registration rights also will apply to the shares of our common
stock, valued at the initial public offering price of $ per share, to be
issued in payment of accrued dividends on our Series B, Series C and Series D
preferred stock upon completion of this offering. Under the terms of the
agreements providing registration rights, the holders of a specified minimum
number of shares can demand that we register their shares. We are required to
use our best efforts to effect any such registration, subject to conditions and
limitations. We are not required to effect more than three of these
registrations pursuant to these demand registration rights. Under the terms of
the agreements providing registration rights, if we propose to register any of
our securities under the Securities Act, either for our own account or for the
account of other security holders exercising registration rights, these holders
are entitled to notice of this
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<PAGE> 86
registration and are entitled to include shares of common stock in the
registration. The rights are subject to conditions and limitations, among them
the right of the underwriters of an offering subject to the registration to
limit the number of shares included in the registration. These registration
rights have been waived with respect to this offering. Furthermore, stockholders
with demand registration rights may require us to file additional registration
statements on Form S-3, subject to conditions and limitations. We are generally
required to bear all of the expenses of all of these registrations, except
underwriting discounts and selling commissions. We also have agreed to indemnify
stockholders whose shares are included in a registration statement from losses
arising from violations by us of applicable securities laws in connection with
the registration. Registration of any of the shares of common stock held by
securityholders with registration rights would result in shares becoming freely
tradable without restriction under the Securities Act immediately upon
effectiveness of such registration.
We have also agreed with the holders of outstanding warrants to purchase 505,375
shares of common stock to maintain an effective registration statement under
which the warrants and the underlying common stock can be resold or issued until
such time as these securities can be distributed under Rule 144 under the
Securities Act. We have previously filed a registration statement on Form S-1
registering the resale or issuance of these securities. In July 1999, we
notified the holders of these warrants that they must discontinue using the
prospectus in such registration statement in connection with dispositions of the
registered securities until further notice from us. As of August 31, 1999, we
had accrued liquidated damages of $2,527 to such holders under the terms of the
registration rights agreement relating to these warrants and these liquidated
damages will continue to accrue at a per week per warrant rate of $.0025 until
the end of September 1999 and at increasing rates thereafter until we have
satisfied our obligations under this registration rights agreement.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless:
- before the date of the business combination, the transaction is approved by
the board of directors of the corporation;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at least
85% of the outstanding stock; or
- the business combination is approved by the board and by the affirmative vote
of at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.
In addition, various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the completion of the offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.
Board of Directors Vacancies. Our amended and restated certificate of
incorporation authorizes the board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a
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<PAGE> 87
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies created by this removal with
its own nominees.
Stockholder Action; Special Meeting of Stockholders. Our amended and restated
certificate of incorporation provides that stockholders may not take action by
written consent, but only at duly called annual or special meetings of
stockholders. The amended and restated certificate of incorporation further
provides that special meetings of our stockholders may be called only by the
chairman of the board of directors or a majority of the board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Our amended and restated bylaws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to or mailed and received at our principal executive offices
not less than 120 days nor more than 150 days prior to the first anniversary of
the date of our notice of annual meeting provided with respect to the previous
year's annual meeting of stockholders; provided, that if no annual meeting of
stockholders was held in the previous year or the date of the annual meeting of
stockholders has been changed to be more than 30 calendar days earlier than or
60 calendar days after this anniversary, notice by the stockholder, to be
timely, must be so received not more than 90 days nor later than the later of:
- 60 days prior to the annual meeting of stockholders, or
- the close of business on the 10th day following the date on which notice of
the date of the meeting is given to stockholders or made public, whichever
occurs first.
Our amended and restated bylaws also specify certain requirements as to the form
and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
Authorized but Unissued Shares. The authorized but unissued shares of common
stock are available for future issuance without stockholder approval, subject to
various limitations imposed by the Nasdaq National Market. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
common stock could make more difficult or discourage an attempt to obtain
control of the company by means of a proxy contest, tender offer, merger or
otherwise. The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated certificate of incorporation provides that the
liability of a director of PNV.net will be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law. Under the Delaware
General Corporation Law, the directors have a fiduciary duty to us which is not
eliminated by this provision of the amended and restated certificate of
incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available. In
addition, each director will continue to be subject to liability under the
Delaware General Corporation Law for:
- breach of the director's duty of loyalty to us;
- acts or omissions which are found by a court of competent jurisdiction to be
not in good faith or which involve intentional misconduct, or knowing
violations of law;
- actions leading to improper personal benefit to the director; and
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<PAGE> 88
- payment of dividends or approval of stock repurchases or redemptions that are
prohibited by the Delaware General Corporation Law.
This provision also does not affect the directors' responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.
Section 145 of the Delaware General Corporation Law empowers a corporation to
indemnify its directors and officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision will not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
The Delaware General Corporation Law provides further that the indemnification
permitted thereunder will not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. Our amended and restated
certificate of incorporation eliminates the personal liability of directors to
the fullest extent permitted by Section 102(b)(7) of the Delaware General
Corporation Law and provides that we will fully indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that that person is or was a director or
officer of PNV.net, or is or was serving at the request of PNV.net as a director
or officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. This indemnification will be against expenses
including attorney's fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnitee in connection with such
action, suit or proceeding.
Prior to the completion of this offering, we intend to obtain liability
insurance for our directors and officers. At present, there is no pending
litigation or proceeding involving any director, officer, employee or agent as
to which indemnification will be required or permitted under the amended and
restated certificate of incorporation. We are not aware of any threatened
litigation or proceeding that may result in a claim for this type of
indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is First Union National
Bank, Charlotte, North Carolina.
LISTING
We have reserved the Nasdaq National Market symbol "PNVN." We have applied to
include the common stock on the Nasdaq National Market.
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<PAGE> 89
DESCRIPTION OF OUR 13% NOTES
In May 1998, we issued 75,000 units consisting of $75.0 million in aggregate
principal amount of 13% Senior Notes due 2008 and warrants to purchase 505,375
shares of our common stock for $.01 per share. Interest on our 13% notes accrues
at the rate of 13% per annum and is payable semiannually in arrears on May 15
and November 15 of each year. Our 13% notes mature May 15, 2008.
We used $19.2 million of the net proceeds from the unit offering to purchase
U.S. Government Securities which were placed in an escrow account. The escrow
account was pledged as security for repayment of the first four scheduled
interest payments on our 13% notes (estimated at approximately $19.5 million)
and, under certain circumstances, as security for repayment of principal of the
13% notes. We made our first two scheduled interest payments due in November
1998 and May 1999 from funds in the escrow account and anticipate that these
funds will be sufficient to make our next two scheduled interest payments due in
November 1999 and May 2000.
Our 13% notes are not secured by any of our assets, other than the pledge of the
U.S. Government Securities described above, rank equally in right of payment
with all of our unsubordinated and unsecured indebtedness and are senior in
right of payment to all of our future subordinated indebtedness.
We may redeem our 13% notes at our option, in whole or in part, at anytime on or
after May 15, 2003. The initial redemption price is 106.5% of their principal
amount, plus accrued interest. The redemption price will decline each year and
will be 100% of their principal amount, plus accrued interest, beginning on May
15, 2006. In addition, at any time on or before May 15, 2001, we may redeem up
to 35% of the aggregate principal amount of our 13% notes with the proceeds of
certain public equity offerings at a redemption price equal to 113.0% of their
accreted value on the redemption date. We may make this redemption only so long
as at least $48.75 million aggregate principal amount of our 13% notes remains
outstanding immediately after such redemption.
If a change in our control (as defined in our indenture) occurs, we must make an
offer to purchase all outstanding 13% notes then outstanding at a purchase price
equal to 101% of their principal amount plus accrued and unpaid interest. This
requirement could deter a change of control transaction in which stockholders
could receive a premium.
The indenture governing our 13% notes contains certain restrictive covenants,
including among others, limitations on our ability and our restricted
subsidiaries to:
- incur additional debt;
- pay dividends and make other distributions;
- prepay subordinated indebtedness;
- repurchase capital stock;
- make investments and other restricted payments;
- engage in transactions with affiliates;
- engage in business other than the provision of telecommunications,
television, Internet and other related services to the trucking industry
- enter into sale and leaseback transactions;
- create liens;
- sell assets; or
- engage in mergers and consolidations and certain other events which could
cause an event of default.
Events of default under the indenture governing our 13% notes include, among
other things:
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<PAGE> 90
- defaults in the payment of interest or liquidated damages on our 13% notes
when it becomes due and payable, which default continues for a period of 30
days or more; if such a default occurs before May 15, 2000, there will be no
30 day grace or cure period;
- default in the payment of the principal of, or premium, if any, on our 13%
notes when due;
- default in the performance, or breach, of covenants relating to the changes
of control, consolidations, mergers, asset sales, restricted payments and
incurrence of indebtedness;
- default in the performance, or breach, of any other covenant in the indenture
which is continued for a period of 60 days or more after written notice to
us;
- failure to perform any term, covenant, condition or provision of one or more
classes or issues of indebtedness in an aggregate principal amount of $3.0
million or more, and either such indebtedness is already due and payable in
full, or such failure results in the acceleration of the maturity of such
indebtedness;
- one or more final non-appealable judgements, orders or decrees for the
payment of money of $3.0 million or more, either individually or in the
aggregate, shall be entered against us and is not discharged, and 60 days
shall have passed without such judgement being stayed; or
- a bankruptcy, insolvency, reorganization or receivership or similar
proceedings with respect to us or one of our significant subsidiaries.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, we will have an aggregate of
shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options or
warrants, other than warrants to purchase 4,000 shares of common stock. All of
the shares sold in the offering will be freely tradable, except for any such
shares held by our "affiliates," as that term is defined in Rule 144 under the
Securities Act without restriction or further registration under the Securities
Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities and any shares purchased in the
offering by one of our "affiliates" may not be sold in the public market without
registration under the Securities Act or in compliance with an applicable
exemption from registration as provided in Rule 144 or 701 under the Securities
Act, which rules are summarized below. These remaining shares, which will also
be restricted for 180 days as a result of lockup agreements, will be available
for public sale as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<S> <C>
After 180 days from the date of this prospectus, the 180-day
lock-up is released and these shares are saleable under Rule
144 (subject, in some cases, to volume limitations), Rule
144(k) or Rule 701
After 180 days from the date of this prospectus, restricted
securities that have been held for less than one year and
are not yet saleable under Rule 144
</TABLE>
In general, under Rule 144, as currently in effect, a person, or persons whose
shares are required to be aggregated, including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of common stock, which will be
approximately shares immediately after the offering; or
- the average weekly trading volume in the common stock during the four
calendar weeks preceding the date on which notice of such sale is filed,
subject to certain restrictions.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been one of our affiliates
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including the holding
period of any prior owner other than an affiliate, is entitled to sell the
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, of Rule 144. Any of our employees, officers, directors or
consultants who purchased shares under a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. All holders of
Rule 701 shares are required to wait until 90 days after the date of this
prospectus before selling their shares. However, substantially all Rule 701
shares are subject to lock-up agreements and will only become eligible for sale
at the earlier of the expiration of the 180-day lock-up agreements or no sooner
than 90 days after the offering upon obtaining the prior written consent of CIBC
World Markets Corp.
As of the date of this prospectus, options to purchase a total of 1,951,493
shares of common stock are outstanding, of which 738,969 are currently
exercisable or become exercisable by December 31, 1999. All directors and
officers and certain stockholders of PNV.net, holding substantially all of the
outstanding shares of common stock, as well as substantially all of our option
holders and holders of warrants to purchase 440,399 shares of common stock, have
agreed to a 180-day "lock-up" with respect to these
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securities. This generally means that they cannot sell these securities during
the 180 days following the date of this prospectus. See the section entitled
"Underwriting." The holders of warrants to purchase 505,375 shares of common
stock have agreed not to sell the common stock issuable on the exercise of these
warrants for at least 90 days after the date of this prospectus. After these
lock-up periods expire, these securities may be sold in accordance with
applicable securities laws, including Rule 144.
We intend to file a registration statement on Form S-8 upon the completion of
this offering to register the common stock issuable upon exercise of options
granted under our stock option plan. Accordingly, shares of common stock
underlying such options will be eligible for sale in the public markets, subject
to vesting restrictions or the lock-up agreement described above. See the
section entitled "Management" under the heading "Stock Option Plan."
We have agreed not to sell or otherwise dispose of any shares of common stock
during the 180-day period following the date of the prospectus, except we may
issue, and grant options to purchase, shares of common stock under the stock
option plan. In addition, we may issue shares of common stock in connection with
any acquisition of another company if the terms of such issuance provide that
such common stock shall not be resold prior to the expiration of the 180-day
period referenced above.
Following this offering, under specified circumstances and subject to customary
conditions, holders of 9,326,110 shares of our common stock, including the
holders of 7,226,543 shares issuable on the conversion of our Series B, Series C
and Series D preferred stock and 100,399 shares issuable on the exercise of
outstanding warrants, will have certain demand registration rights with respect
to their shares of common stock, subject to the 180-day lock-up arrangement
described above, to require us to register their shares of common stock under
the Securities Act. These demand registration rights also will apply to the
shares of our common stock, valued at the initial public offering
price of $ to be issued in payment of accrued dividends on our Series
B, Series C and Series D preferred stock upon completion of this offering. In
addition, if we propose to register any of our common stock under the Securities
Act, these stockholders and warrantholders, as well as the holders of warrants
to purchase an additional 340,000 shares of common stock, are entitled to
participate. We are not required to effect more than an aggregate of three
demand registrations on behalf of such holders. If the holders of these
registrable securities request that we register their shares, and if such
registration is effected, these shares will become freely tradable without
restriction under the Securities Act. Any sales of securities by these
stockholders could have a material adverse effect on the trading price of our
common stock.
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UNDERWRITING
PNV.net has entered into an underwriting agreement with the underwriters named
below. CIBC World Markets Corp., Allen & Company Incorporated, Volpe Brown
Whelan & Company, LLC and William Blair & Company, L.L.C. are acting as the
representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
------------------- ---------
<S> <C>
CIBC World Markets Corp.....................................
Allen & Company Incorporated................................
Volpe Brown Whelan & Company, LLC...........................
William Blair & Company, L.L.C..............................
Total....................................................
========
</TABLE>
The underwriters have agreed to purchase all of the shares offered by this
prospectus (other than those covered by the over-allotment option described
below) if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of nondefaulting
underwriters may be increased or the defaulting underwriter may be substituted,
depending on the circumstances. The shares should be ready for delivery or about
______, ____ against payment in immediately available funds.
The representatives have advised PNV.net that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to other securities dealers at such price less a concession
of $ per share. The underwriter may also allow, and such dealers may
reallow, a concession not in excess of $ per share to other dealers.
After the shares are released for sale to the public, the representatives may
change the offering price and other selling terms at various times.
PNV.net has granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of additional
shares from PNV.net to cover over-allotments. If the underwriters exercise all
or part of this option, they will purchase shares covered by the option at the
initial public offering price that appears on the cover page of this prospectus,
less the underwriting discount. If this option is exercised in full, the total
price to public will be $ , and the total proceeds to PNV.net will be
$ . The underwriters have severally agreed that, to the extent the
over-allotment option is exercised, they will each purchase a number of
additional shares proportionate to the underwriter's initial amount reflected in
the foregoing table.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by PNV.net:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE OF TOTAL WITH FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
---------- ------------------------- ---------------------------
<S> <C> <C> <C>
PNV.net.......................... $ $ $
</TABLE>
92
<PAGE> 94
PNV.net estimates that the total expenses of the offering, excluding the
underwriting discount, will be approximately $ .
PNV.net has agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
PNV.net, its officers and directors and other stockholders have agreed to a
180-day "lock up" with respect to approximately shares of common
stock and certain other PNV.net securities that they beneficially own, including
securities that are convertible into shares of common stock and securities that
are exchangeable or exercisable for shares of common stock. This means that, for
a period of 180 days following the date of this prospectus, PNV.net and such
persons may not offer, sell, pledge or otherwise dispose of these PNV.net
securities without the prior written consent of CIBC World Markets Corp.
The representatives have informed PNV.net that they do not expect discretionary
sales by the underwriters to exceed five percent of the shares offered by this
prospectus.
The underwriters have reserved for sale up to shares for
employees, directors and other persons associated with PNV.net. These reserved
shares will be sold at the initial public offering price that appears on the
cover page of this prospectus. The number of shares available for sale to the
general public in the offering will be reduced to the extent reserved shares are
purchased by such persons. The underwriters will offer to the general public, on
the same terms as other shares offered by this prospectus, any reserved shares
that are not purchased by such persons.
There is no established trading market for the shares. The offering price for
the shares has been determined by PNV.net and the representatives, based on the
following factors:
- negotiations among PNV.net and the representatives;
- prevailing market and economic conditions;
- certain financial information of PNV.net;
- the history of, and the prospects for PNV.net;
- PNV.net and the industry in which it competes;
- an assessment of PNV.net management, its past and present operations, the
prospects for, and timing of, future revenues of PNV.net; and
- the present stage of PNV.net's development and the above factors in relation
to market values and various valuation measures of other companies engaged in
activities similar to those of PNV.net.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares, so
long as stabilizing bids do not exceed a specified maximum.
- Over-allotments and syndicate covering transactions -- The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created in
connection with the offering, the representatives may engage in syndicate
covering transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option.
- Penalty bids -- If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may reclaim
a selling concession from the underwriters and selling group members who sold
those shares as part of this offering.
93
<PAGE> 95
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither PNV.net nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
Volpe Brown Whelan & Company, LLC has acted as placement agent in connection
with our Series D preferred stock offering. In September 1999, upon the closing
of the transaction, we issued Volpe Brown Whelan & Company, LLC a warrant to
purchase 60,000 shares of common stock for $10.50 per share which is exercisable
for a five year period and paid Volpe Brown Whelan & Company, LLC 6% of the
gross proceeds of the offering which was $1.9 million.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for us by Kilpatrick Stockton LLP, Raleigh, North Carolina. James M. O'Connell,
a partner in the law firm of Kilpatrick Stockton LLP, is a general partner of
Nelgo Investments, a general partnership that owns 270,810 shares of our common
stock. Mr. O'Connell owned 17.0% of Nelgo Investments as of August 31, 1999. Mr.
O'Connell is the son of Daniel K. O'Connell, a director of PNV.net. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Swidler Berlin Shereff Friedman, LLP, New York, New York.
EXPERTS
The financial statements as of June 30, 1998 and 1999 and for each of the three
years in the period ended June 30, 1999 included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
94
<PAGE> 96
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission, including the exhibits, schedules and amendments thereto,
under the Securities Act with respect to the shares of common stock to be sold
in the offering. This prospectus is part of the registration statement and does
not contain all of the information included in the registration statement. For
further information with respect to us and the shares of common stock to be sold
in the offering, we refer you to the registration statement. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to may not be complete and you should refer to the
exhibits that are a part of the registration statement for a copy of the
contract or document.
You may read and copy all or any portion of the registration statement or any
other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. Our Securities and Exchange Commission filings,
including the registration statement, are also available to you on the SEC's Web
site (http://www.sec.gov).
We intend to furnish our stockholders annual reports containing audited
financial statements and will make available copies of quarterly reports for the
first three quarters of each year containing unaudited interim financial
information.
95
<PAGE> 97
PNV.NET, INC.
(FORMERLY PARK 'N VIEW, INC.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of June 30, 1998 and 1999................. F-3
Statements of Operations for the years ended June 30, 1997,
1998 and 1999............................................. F-4
Statements of Changes in Common Stockholders' Deficiency for
the years ended June 30, 1997, 1998 and 1999.............. F-5
Statements of Cash Flows for the years ended June 30, 1997,
1998 and 1999............................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 98
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
PNV.net, Inc.:
We have audited the accompanying balance sheets of PNV.net, Inc. (formerly Park
'N View, Inc.) (the "Company") as of June 30, 1998 and 1999, and the related
statements of operations, changes in common stockholders' deficiency and cash
flows for each of the three years in the period ended June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1998 and 1999,
and the results of its operations and its cash flows for each of the three years
in the period ended June 30, 1999 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida
August 27, 1999
F-2
<PAGE> 99
PNV.NET, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 19,810,656 $ 4,100,848
Short-term investments..................................... 32,039,916 8,367,324
Restricted investments (Note 5)............................ 9,750,000 10,704,210
Accounts receivable, net of allowance for doubtful accounts
of $5,400 and $25,083 at June 30, 1998 and 1999,
respectively............................................. 184,180 301,503
Inventory.................................................. 362,738 341,208
Prepaid expenses and other................................. 100,877 181,788
------------ ------------
Total current assets..................................... 62,248,367 23,996,881
Property and equipment, Net (Note 3)........................ 18,448,601 32,053,824
Restricted investments (Note 5)............................. 9,513,000
Deferred financing costs.................................... 3,744,366 3,755,927
Other assets................................................ 623,793 1,579,037
------------ ------------
Total.................................................... $ 94,578,127 $ 61,385,669
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable........................................... $ 2,067,113 $ 1,256,994
Accrued expenses........................................... 1,550,888 1,621,271
Accrued interest on senior notes........................... 920,831 1,245,831
Deferred revenue........................................... 205,853 724,850
Current portion of capital lease obligations (Note 4)...... 330,814 294,887
Current portion of long-term debt (Note 5)................. 33,727 25,365
------------ ------------
Total current liabilities................................ 5,109,226 5,169,198
------------ ------------
Obligations under capital leases, less current portion (Note
4)........................................................ 185,174 263,519
------------ ------------
Long-term debt, less current portion (Note 5)............... 70,419,566 70,846,069
------------ ------------
Commitments and Contingencies (Note 4)
Series A Redeemable Preferred Stock and Accrued
Dividends -- Par value $.01 per share; 627,630 shares
authorized; 388,065 shares issued and outstanding ($10.00
per share liquidation preference, including accrued
dividends of $542,538 and $839,493 as of June 30, 1998 and
1999, respectively). (Note 6).............................. 4,301,345 4,609,809
------------ ------------
Series B Cumulative Convertible Preferred Stock and Accrued
Dividends -- Par value $.01 per share; 1,372,370 shares
authorized, issued and outstanding ($10.93 per share
liquidation preference, including accrued dividends of
$1,712,083 and $2,762,083 as of June 30, 1998 and 1999,
respectively). (Note 6).................................... 16,316,432 17,403,860
------------ ------------
Series C Cumulative Convertible Preferred Stock and Accrued
Dividends -- Par value $.01 per share; 3,750,000 shares
authorized, 2,328,543 and 2,351,543 issued and outstanding
as of June 30, 1998 and 1999, respectively, ($8.00 per
share liquidation preference, including accrued dividends
of $1,115,631 and $2,423,904 as of June 30, 1998 and 1999,
respectively). (Note 6).................................... 18,516,147 20,079,630
------------ ------------
Common Stockholders' Deficiency:
Common stock -- par value $.001 per share; 7,000,000 and
12,000,000 shares authorized at June 30, 1998 and 1999,
respectively; 4,318,182 and 4,328,614 shares issued and
outstanding at June 30, 1998 and 1999, respectively........ 4,318 4,328
Additional paid-in capital................................. 1,465,923 13,011,612
Receivable from stockholder (Note 4)....................... -- (145,000)
Deferred stock based compensation.......................... -- (8,345,375)
Accumulated deficit........................................ (21,740,004) (61,511,981)
------------ ------------
Total common stockholders' deficiency.................... (20,269,763) (56,986,416)
------------ ------------
Total.................................................... $ 94,578,127 $ 61,385,669
============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 100
PNV.NET, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net Revenues....................................... $ 888,397 $ 3,503,776 $ 8,452,720
----------- ------------ ------------
Cost of Revenues:
Service cost...................................... 996,260 3,336,176 9,464,192
Service depreciation.............................. 643,316 1,906,732 4,517,850
Equipment cost.................................... 422,557 1,356,085 1,673,190
Advertising....................................... 15,556 -- 61,547
----------- ------------ ------------
Total cost of revenues.......................... 2,077,689 6,598,993 15,716,779
----------- ------------ ------------
Gross margin....................................... (1,189,292) (3,095,217) (7,264,059)
Selling, general and administrative expenses....... 4,431,889 10,378,471 19,546,324
Stock-based compensation........................... -- -- 5,035,315
Write-down of equipment............................ 594,691 35,151 --
----------- ------------ ------------
Loss from operations............................... (6,215,872) (13,508,839) (31,845,698)
Interest expense................................... 157,416 1,030,594 10,514,610
Interest income and other.......................... (328,268) (805,686) (2,588,331)
----------- ------------ ------------
Net loss........................................ (6,045,020) (13,733,747) (39,771,977)
Preferred stock dividends and amortization of
preferred stock issuance costs............... (917,382) (2,792,537) (2,842,603)
Accretion of Series C Preferred shares to fair
value........................................ -- -- (88,420)
----------- ------------ ------------
Net loss attributable to common stockholders.... $(6,962,402) $(16,526,284) $(42,703,000)
=========== ============ ============
Basic and diluted net loss per share............ $ (1.61) $ (3.83) $ (9.89)
=========== ============ ============
Shares used to compute basic and diluted net loss
per share........................................ 4,318,182 4,318,182 4,318,456
=========== ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 101
PNV.NET, INC.
STATEMENTS OF CHANGES IN
COMMON STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFERRED STOCK RECEIVABLE
------------------ PAID-IN BASED FROM ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDER DEFICIT TOTAL
--------- ------ ----------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30,
1996................. 4,318,182 $4,318 $ (12,606) -- -- $ (1,961,237) $ (1,969,525)
Dividends accrued for
Series A preferred
stock................ -- -- (190,882) -- -- -- (190,882)
Dividends accrued for
Series B preferred
stock................ -- -- (662,068) -- -- -- (662,068)
Amortization of
preferred stock
issuance cost........ -- -- (64,432) -- -- -- (64,432)
Net loss............... -- -- -- -- -- (6,045,020) (6,045,020)
--------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE, JUNE 30,
1997................. 4,318,182 4,318 (929,988) -- -- (8,006,257) (8,931,927)
Dividends accrued for
Series A preferred
stock................ -- -- (330,286) -- -- -- (330,286)
Dividends accrued for
Series B preferred
stock................ -- -- (1,050,015) -- -- -- (1,050,015)
Dividends accrued for
Series C preferred
stock................ -- -- (1,115,631) -- -- -- (1,115,631)
Amortization of
preferred stock
issuance cost........ -- -- (296,605) -- -- -- (296,605)
Issuance of common
stock warrants....... -- -- 5,188,448 -- -- -- 5,188,488
Net loss............... -- -- -- -- -- (13,733,747) (13,733,747)
--------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE, JUNE 30,
1998................. 4,318,182 4,318 1,465,923 -- -- (21,740,004) (20,269,763)
Dividends accrued for
Series A preferred
stock................ -- -- (296,955) -- -- -- (296,955)
Dividends accrued for
Series B preferred
stock................ -- -- (1,050,000) -- -- -- (1,050,000)
Dividends accrued for
Series C preferred
stock................ -- -- (1,308,273) -- -- -- (1,308,273)
Amortization of
preferred stock
issuance cost........ -- -- (187,375) -- -- -- (187,375)
Issuance of common
stock warrants....... -- -- 789,704 -- -- -- 789,704
Issuance of conversion
feature attached to
Series C preferred
stock................ -- -- 155,648 -- -- -- 155,648
Accretion of Series C
preferred stock to
fair value........... -- -- (88,420) -- -- -- (88,420)
Exercise of stock
options.............. 10,432 10 680 -- -- -- 690
Receivable from
stockholder.......... -- -- -- -- $ (184,000) -- (184,000)
Payment of receivable
from stockholder..... -- -- -- -- 39,000 -- 39,000
Stock options issued
for services......... -- -- 149,990 -- -- -- 149,990
Deferred stock based
compensation......... -- -- 13,380,690 $(13,380,690) -- -- --
Amortization of
deferred stock based
compensation......... -- -- -- 5,035,315 -- -- 5,035,315
Net loss............... -- -- -- -- -- (39,771,977) (39,771,977)
--------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE, JUNE 30,
1999................. 4,328,614 $4,328 $13,011,612 $ (8,345,375) $ (145,000) $(61,511,981) $(56,986,416)
========= ====== =========== ============ =========== ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 102
PNV.NET, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................... $(6,045,020) $(13,733,747) $(39,771,977)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 705,418 2,117,387 5,663,490
Amortization of deferred stock based compensation......... -- -- 5,035,315
Write-down of equipment................................... 594,691 35,151 --
Provision for losses on accounts receivable............... -- -- 19,672
Stock options issued for services......................... -- -- 149,990
Loss on disposal of property and equipment................ 2,150 -- 20,274
Changes in assets and liabilities:
Accounts receivable..................................... 40,864 (172,653) (136,995)
Inventory............................................... (118,127) (102,912) 21,530
Prepaid expenses and other.............................. (21,696) 37,737 (80,911)
Other assets............................................ (3,776) (285,567) (295,531)
Accounts payable........................................ 717,374 950,649 (810,119)
Accrued expenses........................................ 744,622 684,129 70,383
Accrued interest on senior notes........................ -- 920,831 325,000
Deferred revenue........................................ (16,628) 173,924 518,997
----------- ------------ ------------
Net cash used in operating activities................. (3,400,128) (9,375,071) (29,270,882)
----------- ------------ ------------
INVESTING ACTIVITIES:
Proceeds from (purchases) sales of short-term
investments............................................ -- (32,039,916) 23,672,592
Proceeds from sales of restricted investments............. -- -- 9,452,562
Purchases of restricted investments....................... -- (19,263,000) (893,772)
Purchases of property and equipment....................... (6,443,899) (12,596,875) (17,874,247)
----------- ------------ ------------
Net cash (used in) provided by investing activities... (6,443,899) (63,899,791) 14,357,135
----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt and common stock
warrants, net of offering commission................... 1,500,000 72,375,000 --
Proceeds from issuance of preferred stock................. 13,500,000 18,628,344 --
Proceeds from exercise of stock options................... -- -- 690
Payment of stock and debt issuance costs and other........ (509,560) (1,225,705) (373,575)
Payment of obligations under capital leases............... (227,327) (365,412) (428,449)
Deferred financing costs.................................. (143,869) (1,010,700) --
Receivable from stockholder............................... -- -- 39,000
Notes payable............................................. 76,446 (33,403) (33,727)
----------- ------------ ------------
Net cash provided by (used in) financing activities... 14,195,690 88,368,124 (796,061)
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents....... 4,351,663 15,093,262 (15,709,808)
Cash and cash equivalents, beginning of period............. 365,731 4,717,394 19,810,656
----------- ------------ ------------
Cash and cash equivalents, end of period................... $ 4,717,394 $ 19,810,656 $ 4,100,848
=========== ============ ============
Supplemental cash flow information:
Interest paid............................................ $ 48,987 $ 33,030 $ 9,516,653
=========== ============ ============
Non-Cash financing and investing activities:
Capital lease obligations relating to acquisition of
property and equipment................................. $ 357,932 $ 249,801 $ 470,096
=========== ============ ============
Exchange of promissory notes and accrued interest for
Series B preferred stock............................... $ 1,533,000 -- --
===========
Exchange of promissory notes and accrued interest for
Series A preferred stock............................... $ 3,180,646 -- --
===========
Issuance of common stock warrants......................... -- $ 538,998 $ 789,704
============ ============
Issuance of Series C preferred stock for notes
receivable............................................. -- -- $ 184,000
============
</TABLE>
See notes to financial statements.
F-6
<PAGE> 103
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS
1. FORMATION OF THE COMPANY AND NATURE OF BUSINESS
PNV.net, Inc. (formerly Park 'N View, Inc.) (the "Company"), a Delaware
corporation, was incorporated on September 18, 1995 and provides cable
television and telephone service to long-haul truck drivers at truckstops
("sites") throughout the country. The Company's name was changed effective July
29, 1999. This change has been reflected in the financial statements. As of June
30, 1999, the Company has 221 sites in operation and has contracts to provide
its service to over 600 sites. The final determination on the number of sites to
be provided with the service will be made by the Company on a site-by-site
basis.
The Company commenced commercial operations as a result of the Securities
Purchase Agreement (the "Agreement") dated November 2, 1995 between the former
partners of Park 'N View, Ltd., the Company's predecessor entity, and an
investor group led by Patricof & Company ("Patricof").
Pursuant to the Agreement, Park 'N View, Ltd. transferred certain of its assets,
intangible assets, contractual rights, and certain liabilities to the Company in
exchange for 2,318,182 shares of common stock issued to the former partners of
Park 'N View, Ltd. These net liabilities were recorded by the Company at the
historical carrying amounts. Patricof was issued 2,000,000 shares of common
stock for $100,000.
The Company has experienced net operating losses since its inception and as of
June 30, 1999 had an accumulated deficit of $61.5 million. Management believes
that the Company must significantly increase the sales of service subscriptions
in order to achieve profitability. Management further believes that a
significant increase in sales of subscriptions is dependent on truck drivers'
perception that the Company's system is installed and operating at a sufficient
number and location of truckstops that potential uses of the system justify the
subscription fee. The Company's future success will depend on achieving market
acceptance in sufficient numbers and at commercially viable subscription rates,
the timely and cost-effective installation of the Company's system at a
significant number of additional truckstops, and obtaining the financing
necessary both to fund operating losses and to install its system in a
sufficient number of locations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows:
Accounting Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. The Company's cash and cash equivalents are primarily composed of
bank deposits and overnight funds held by a bank.
Inventory. Consists principally of telephones and components and is stated at
lower of cost (first-in, first-out method) or market.
Property and Equipment. Property and equipment is stated at cost, less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets, generally three to ten
years. Expenditures for improvements that substantially extend the capacity or
useful life of an asset are capitalized. Routine repairs and maintenance are
expensed as incurred.
The Company currently expenses the costs associated with developing internal use
proprietary software. In March 1998, the American Institute of Certified Public
Accountants (the "AICPA") issued Statement of
F-7
<PAGE> 104
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Position 98-1 ("SOP 98-1"), "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 establishes that computer
software costs that are incurred in the preliminary project stage should be
expensed as incurred. Once the application development stage criteria is met,
certain costs are required to be capitalized. SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998.
Adoption of SOP 98-1 is not expected to have a material impact on the Company's
financial position or results of operations.
Leases. The Company capitalizes leases that meet at least one of the following
criteria: (a) the lease transfers ownership of the property by the end of its
lease term; (b) the lease contains a bargain purchase option; (c) the lease term
is equal to 75% or more of its estimated economic life of the leased property or
(d) the present value at the beginning of the lease term of the minimum lease
payments equals or exceeds 90% of the fair value of the leased property. All
other leases are accounted for as operating leases.
Deferred Financing Costs. Costs incurred in connection with obtaining financing
are being amortized based on the interest method over the term of the related
obligations. Amortization of deferred financing costs relating to debt are
amortized to interest expense and amortization of deferred financing costs
relating to preferred stock are amortized to additional paid-in capital.
Revenue Recognition/Deferred Revenue. Initial membership provides a new member
identification within but no access to or usage of the Company's network and
provides a starter kit. To the extent initial membership fees exceed the
incremental direct cost (primarily the cost of the starter kit) of obtaining a
subscriber, such amount is deferred and recognized over the expected membership
life of the customer. An allowance for defective starter kits has been
established based on past experience. The starter kits do not have a warranty
and cannot be returned once the service is activated. Subscription fees charged
by the Company provide the customer with unlimited access to 16 channels of
cable television programming, unlimited local telephone access and 60 minutes of
long distance telephone time. Such fees are apportioned to these services based
on estimated fair value. Revenue is apportioned to the long distance telephone
time based on market rates for such service. The remaining revenue which is not
attributed to the long distance usage is apportioned to the cable television and
local telephone services which are provided throughout the subscription period.
Net revenues apportioned to the cable television and local telephone services
are recognized ratably throughout the period the service is activated. The
revenue related to the long distance telephone time that is provided with each
monthly subscription is deferred and recognized when the service is provided.
The revenue associated with additional long distance telephone time to current
members is recognized as such telephone time is used. Revenue attributable to
unused minutes is deferred. Fees from the daily and premium programs, which
allow access for a 24 hour period, are recognized as revenue when activated.
Advertising revenue, specifically designed commercials, ads or programming
designed to run on our network, is recognized throughout the period the service
is provided. The production costs associated with this advertising are amortized
throughout the period the service is provided. Driver referral program cost
consists of one hour of long distance telephone time and is accrued and expensed
in the month the driver is referred to the Company. Revenues from equipment
sales are derived from the sale by the Company of cable and telephone line
extension kits to truckstops for resale to truck drivers. Net unearned revenue
associated with the Company's subscriptions, long distance, cable service and
advertising is the result of recording revenue as earned when the service is
provided and used. Deferred revenue as of June 30, 1998 and 1999 was $205,853
and $724,850, respectively.
Income Taxes. The provision for income taxes for the Company represents the
amount payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities. The Company provides for deferred
taxes under the liability method. Under such method, deferred taxes are adjusted
for tax rate changes as they occur. Deferred income tax assets and liabilities
are computed annually for differences between the financial reporting and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are recorded
F-8
<PAGE> 105
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
when necessary to reduce deferred tax assets to the amount that management
believes is more likely than not to be realized.
Long-Lived Assets. Management reviews long-lived assets for possible impairment
whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. If there is an indication of impairment, management
prepares an estimate of future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition. If these cash flows are less than the carrying amount of the asset,
an impairment loss is recognized to write down the asset to its estimated fair
value. Assets, if any, which management has committed to a plan to dispose,
whether by sale or abandonment, are reported at the lower of carrying amount or
fair value, less cost to sell. Preparation of estimated expected future cash
flows is inherently subjective and is based on management's best estimate of
assumptions concerning future conditions.
Financial Instruments. The carrying amount for cash, accounts receivable and
accounts payable approximates fair value due to their short-term maturity.
Short-term investments consist of commercial paper that is carried at amortized
cost, which approximates fair value. Restricted investments consist of US
Treasury securities that are actively traded and are carried at fair value, with
unrealized gains and losses included in earnings.
At June 30, 1999, the carrying value and fair value of the Company's long-term
debt approximates $71 million, net of discounts, and $23 million, respectively.
The fair value was based on the quoted market prices for the same or similar
issues or on the current rate offered to the Company for debt of the same
remaining maturities. The Company believes that it is not practical to estimate
a fair value different from the preferred stocks' carrying value as these
securities have numerous features unique to these securities.
Stock-Based Compensation. The Company accounts for its employees stock option
plan in accordance with the intrinsic value method and discloses the pro forma
net loss as required by Statement of Financial Accounting Standard ("SFAS") No.
123 "Accounting for Stock-Based Compensation."
Basic Loss Per Share. Basic loss per share is computed by dividing the net loss
attributable to common stockholders by the number of weighted average common
shares outstanding. The effect of potential common stock would have been
antidilutive and therefore basic loss per share for the Company is equivalent to
diluted loss per share.
Reclassifications. Certain 1997 and 1998 amounts have been reclassified to
conform with the 1999 presentation.
New Accounting Pronouncements. In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral
of the Effective Date of FAS Statement 133," which postponed the adoption of
SFAS No. 133. As such, the Company is not required to adopt SFAS No. 133 until
fiscal year end 2002. The Company has not yet assessed the impact that SFAS No.
133 will have on its financial statements.
The Company currently expenses costs associated with start-up activities. In
April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities." This SOP requires that costs incurred to open a new facility,
introduce a new product, commence a new operation or other similar activity, be
expensed as incurred. The Company will adopt SOP 98-5 for fiscal year ending
June 30, 2000. The Company does not believe this SOP will have a material impact
on its financial statements.
F-9
<PAGE> 106
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Site equipment and improvements............................. $16,484,956 $34,592,877
Construction equipment...................................... 150,059 150,058
Computer equipment.......................................... 352,643 760,719
Vehicles.................................................... 451,382 985,014
Furniture, fixtures and other equipment..................... 65,869 75,854
----------- -----------
Subtotal................................................... 17,504,909 36,564,522
Less accumulated depreciation............................... 2,630,706 7,332,654
----------- -----------
Subtotal................................................... 14,874,203 29,231,868
Component equipment......................................... 3,574,398 2,821,956
----------- -----------
Property and equipment, net................................. $18,448,601 $32,053,824
=========== ===========
</TABLE>
Component equipment represents equipment that is awaiting installation at a
site. Upon installation the cost of the related equipment is transferred to site
equipment and improvements and depreciation commences once the site is
operational. Component equipment is temporarily staged at the Company's
warehouse until all equipment for a site is received, certain assembly
operations are complete and the site is ready to accept the equipment for
installation. Component equipment is reclassified to site equipment upon
completion of the site on a FIFO basis for all components.
Depreciation expense was $696,278, $2,008,560 and $4,719,617 for the years ended
June 30, 1997, 1998 and 1999, respectively.
During the year ended June 30, 1997, the Company replaced certain telephone
switches with updated technology. At the time this equipment was taken out of
service there existed a related capital lease obligation of $538,957. The
Company is continuing to make the scheduled capital lease payments and has
written-off the idle equipment, which had a carrying value of $594,691.
4. COMMITMENTS AND CONTINGENCIES
In March 1999, the Company entered into an employment agreement with its Chief
Executive Officer, Robert May. The agreement provides for a minimum annual
compensation of $275,000 and he is eligible for an incentive bonus upon
satisfaction of certain goals and objectives. The Company may terminate Mr.
May's employment at any time pursuant to the agreement. In connection with his
employment agreement, the Company sold to Mr. May 23,000 shares of transferable
Series C 7% Cumulative Convertible Preferred Stock at $8.00 per share, for a
total purchase price of $184,000. In payment for this purchase, Mr. May issued
to the Company two unsecured promissory notes, each for $92,000. One note
accrues interest at 6% per annum with interest and principal due March 2003. The
second note, which is non-interest bearing, is being paid over an eight month
period that began in March 1999. At June 30, 1999, Mr. May's aggregated
indebtedness to the Company was $145,000, which has been recorded as a component
of common stockholders' deficiency.
The Company allocated the $184,000 of proceeds as follows: $28,352 to the Series
C Preferred and $155,648 to the common stock conversion feature based on the
fair value determined as of the closing date using the minimum value method. The
following assumptions were used: zero dividend yield, no volatility, risk free
rate of 5.88%, and expected life of one year. The Company is recognizing
accretion of value on the Series C Preferred to redemption value (fair value)
over the period between the effective date of the employment agreement and the
anticipated conversion date.
F-10
<PAGE> 107
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Mr. May also received from the Company a nonqualified stock option to purchase
567,083 shares of the Company's common stock having an exercise price of $5.00
per share. The options vest at the rate of approximately 2.08% monthly, but
becomes exercisable in full upon a change in control of the Company (as defined
in the employment agreement) or if Mr. May is employed with the Company as of
the first anniversary of the closing of an initial public offering of the
Company's common stock. The Company also agreed that, if certain sales of the
Company's stock in an aggregate amount up to $20,000,000 closed prior to
February 29, 2000, the Company would grant to Mr. May additional options to
purchase shares of the Company's common stock such that, immediately following
any such grant of additional options, Mr. May will hold options to purchase an
aggregate of up to five percent of the common stock (calculated on a fully
diluted basis) outstanding after such sale.
If Mr. May's employment is terminated without cause he will receive six months
base salary and certain additional payments. If a change in control of the
Company occurs and Mr. May's employment is terminated without cause during the
eighteen months following the change in control, the Company will pay Mr. May
eighteen months base salary and certain additional payments. If Mr. May does not
execute a general release of the Company and its representatives from liability
relating to his employment or association with the Company, then Mr. May only
will be entitled to a severance payment of one month of his base salary upon
termination.
In May 1999, the Company entered into an employment agreement with its Vice
President of New Media and E-Business, Steven Yevoli. The agreement provides for
a minimum annual compensation of $135,000 and he is eligible for an incentive
bonus upon satisfaction of certain goals and objectives. The Company may
terminate Mr. Yevoli's employment at any time pursuant to the agreement. In
connection with his employment agreement, the Company granted to Mr. Yevoli a
nonqualified stock option to purchase 80,000 shares of the Company's common
stock at an exercise price of $5.00 per share. The options vest one-fifth on the
date of grant and one-fifth on each anniversary of the date of grant over the
next four years. Also, in connection with his employment agreement, the Company
granted to Mr. Yevoli an additional nonqualified stock option to purchase 25,000
shares of the Company's common stock at an exercise price of $5.00 per share.
The options will vest in 12,500 share increments upon meeting certain
performance achievements and milestones established by the Chief Executive
Officer for the fiscal years ended June 30, 2000 and 2001, respectively.
In June 1999, the Company entered into an employment agreement with its Vice
President of Sales, Mark Cleveland. The agreement provides for a minimum annual
compensation of $160,000 and he is eligible for an incentive bonus upon
satisfaction of certain goals and objectives. The Company may terminate Mr.
Cleveland's employment at any time pursuant to the agreement. In connection with
the employment agreement, the Company granted to Mr. Cleveland a nonqualified
stock option to purchase 80,000 shares of the Company's common stock at an
exercise price of $5.00 per share. The options vest one-fifth on the date of
grant and one-fifth on each anniversary of the date of grant over the next four
years.
Cash compensation expense and stock-based compensation expense under the above
employment agreements were $110,955 and $2,159,024, respectively, for the year
ended June 30, 1999.
F-11
<PAGE> 108
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company leases routers, T-1 telephone lines, office sites and equipment
maintained at various facilities under operating leases. Capital leases
primarily consist of automobiles. Future minimum lease payments under capital
leases and noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30: OPERATING CAPITAL
- -------------------- ----------- --------
<S> <C> <C>
2000........................................................ $ 4,318,528 $340,905
2001........................................................ 4,499,982 231,715
2002........................................................ 3,039,262 51,416
2003........................................................ 49,482 --
----------- --------
Total.................................................... $11,907,254 624,036
===========
Imputed interest on capital leases.......................... (65,630)
--------
Present value of capital leases............................. 558,406
Less current portion........................................ 294,887
--------
Long-term portion........................................... $263,519
========
</TABLE>
Rent expense was $149,401, $355,765 and $1,760,963 for the years ended June 30,
1997, 1998 and 1999, respectively.
In July 1999, the Company entered into a five-year operating lease for office
space to be used as its Internet development site. Total future minimum lease
payments under this lease approximate $1,000,000.
5. LONG-TERM DEBT
In May 1998, the Company issued $75 million of 13% Senior Notes (the "Senior
Notes"). The Senior Notes are general senior obligations of the Company and will
rank pari passu with all current and future unsecured senior indebtedness of the
Company. The Senior Notes have a maturity date of May 15, 2008. Interest will be
paid semiannually on May 15 and November 15 to holders of record on the
immediately preceding May 1, and November 1, respectively. The Company placed
$19.2 million of the net proceeds from the Senior Notes in an escrow account.
The escrow account is pledged as security for payment of the first four
scheduled interest payments on the Senior Notes. The current and long-term
amounts in this escrow account are presented as restricted investments in the
accompanying balance sheet.
The Senior Notes are redeemable at the Company's option after May 15, 2003, at
which time the Company will pay a decreasing premium for this redemption until
maturity at May 15, 2008. At any time prior to May 15, 2001, the Company, at its
option, may redeem up to 35% of the then outstanding Senior Notes with the net
proceeds of an initial public equity offering at a redemption price of 113% of
the principal amount and accrued interest. The Senior Notes are mandatorily
redeemable at the option of the holders in the event of a change in control (as
defined) or an asset sale.
The Senior Notes were issued together with 75,000 detachable warrants in the
form of units. Each warrant, when exercised, will entitle the holder to receive
6.73833 shares of common stock at an exercise price of $.01 per share. The
warrants will become exercisable upon the earlier of November 23, 1998, the
effective date of a registration statement related to a registered exchange
offer of the Senior Notes or upon the occurrence of certain other events
(including a change in control, as defined, or default) as specified in the
related agreements and will automatically expire on May 15, 2008. The relative
fair market values for the Senior Notes and warrants were determined by the
negotiations with the purchasers of the units. The agreed upon original issue
discount resulted in an allocation of $70,350,000 of the proceeds to the Senior
Notes and $4,650,000 to the warrants, their deemed fair value.
F-12
<PAGE> 109
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At June 30, 1998 and 1999, the Company had outstanding $59,092 and $25,365,
respectively, of notes payable relating to the purchase of vehicles. These notes
have an average interest rate of 10.7% and mature on various dates through March
2000.
Scheduled debt maturities are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
--------------------
<S> <C>
2000........................................................ $ 25,365
2001........................................................ --
2002........................................................ --
2003........................................................ --
2004........................................................ --
Thereafter.................................................. 75,000,000
-----------
Subtotal................................................. 75,025,365
Less debt discount....................................... 4,153,931
-----------
Total.................................................... $70,871,434
===========
</TABLE>
At June 30, 1996, the Company had outstanding $3,000,000 of 8% Subordinated
Promissory Notes ("Notes") due November 1, 2000, with interest payable
semiannually on June 30 and December 31. The Notes were held by Patricof. On
August 5, 1996, Patricof provided the Company with an additional $1,500,000 in
exchange for 8% Subordinated Promissory Notes due November 2, 2000 and 239,250
common stock warrants. On November 13, 1996, the Company completed a private
placement (the "1996 Offering") with certain investors of 1,372,370 shares of
Series B 7% Cumulative Convertible Preferred Stock (the "Series B Preferred")
due November 7, 2003 for a purchase price of $10.93 per share and a total
offering amount of $15,000,000. As payment for 137,237 shares of the Series B
Preferred, Patricof exchanged the $1,500,000 8% Subordinated Promissory Notes
and the 239,250 common stock warrants. In addition, the $3,000,000 in Notes and
related accrued interest of $180,646 were exchanged by Patricof for 318,065
shares of Series A Redeemable Preferred Stock (the "Series A Preferred").
6. PREFERRED STOCK
Series A Redeemable Preferred Stock. On November 13, 1996, in connection with
the 1996 Offering, $3,000,000 in Notes and related accrued interest of $180,646
were exchanged for 318,065 shares of Series A Preferred. In November 1995, in
accordance with the Agreement, 32,210 shares of Series A Preferred were issued
at $10 per share to Patricof. In April 1996, Patricof purchased an additional
37,800 shares of Series A Preferred at $10 per share. The Series A Preferred
provides for an annual dividend of 7%, payable in arrears quarterly in cash or
in kind. Cumulative unpaid dividends in arrears were $542,538 and $839,493 at
June 30, 1998 and 1999, respectively.
The Company is required to redeem, for $10 per share, all of the issued and
outstanding shares of Series A Preferred if any of the following occurs: (a) six
months after the Senior Notes are paid in full, (b) upon the receipt of proceeds
of an initial public offering of not less than $20 million, net of underwriting
expenses ("Qualifying Offer"), (c) in the event the Company consolidates or
merges with or into another entity, or (d) upon sale of the Company's assets.
The Company has the option to redeem shares of Series A Preferred at any time
for $10 per share plus all accrued dividends thereon.
If the Company fails to redeem the Series A Preferred as required, the
stockholders of the Series A Preferred shall be entitled to vote as a separate
class only in respect to any merger, consolidation, sale of assets or creation
of any class or series, other than Series B Preferred and Series C Preferred,
equal to or superior to its Series A Preferred. The stockholders of at least
66.6% of the outstanding Series A Preferred voting as a separate class shall be
entitled to elect two members of the Board of Directors.
F-13
<PAGE> 110
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Series B 7% Cumulative Convertible Preferred Stock. In connection with the 1996
Offering, the Company authorized and issued 1,372,370 shares of Series B
Preferred, par value of $.01 for $10.93 per share and a total offering amount of
$15,000,000.
Commencing on January 31, 1997, the stockholders of the Series B Preferred are
entitled to receive dividends payable in cash at 7% per annum (9% per annum upon
an event of default). An "Event of Default" includes any of the following: (a)
failure by the Company to declare and pay a dividend on the payment due date for
two consecutive quarterly periods, (b) failure by the Company to satisfy its
redemption obligations, (c) default by the Company in the performance or
observance of any obligation or condition with respect to the indebtedness of
the Company, (d) failure to comply with covenants in the governing agreement,
(e) failure by the Company to comply with its obligations upon liquidation,
dissolution or winding up, or (f) insolvency. Cumulative unpaid dividends
accrued were $1,712,083 and $2,762,083 at June 30, 1998 and 1999, respectively.
The Company is required to redeem for $10.93 per share all of the issued and
outstanding shares of Series B Preferred if any of the following occurs: (a) six
months after the Senior Notes are paid in full, (b) upon receipt of a Qualifying
Offer, (c) in the event the Company consolidates or merges with or into another
entity, or (d) upon sale of the Company's assets.
The stockholders of Series B Preferred can convert their shares at any time at
the option of the holder into common stock at a conversion rate of one Series B
Preferred share for 1.37 shares of common stock. Under antidilution provisions,
the conversion price of Series B Preferred will be adjusted upon the Company's
issuance of additional shares of common stock, warrants or rights to purchase
common stock or securities convertible into common stock.
Series B Preferred stockholders are entitled to the number of votes equal to the
number of full shares of common stock into which such shares of Series B
Preferred is then convertible. Stockholders of Series B Preferred and common
stock shall vote together on each matter submitted to stockholders and not by
class or series. Prior to the consummation of a Qualifying Offer, the
stockholders of the Series B Preferred, voting together as a class, shall be
entitled to elect one director. Subsequent to a Qualifying Offer and only so
long as at least 66.6% of the shares of Series B Preferred originally issued
remain outstanding, the holders of a majority of the shares of common stock
issuable upon conversion of the Series B Preferred shall be entitled to nominate
one director. Upon the occurrence of an event of default, the stockholders of
the Series B Preferred, together with the stockholders of Series C Preferred,
have the exclusive right to elect a majority of the board of directors.
Series C 7% Cumulative Convertible Preferred Stock. In August 1997, the Company
entered into a private placement offering (the "1997 Offering") with certain
investors to raise additional working capital through the sale of 2,328,543
shares of Series C 7% Cumulative Convertible Preferred Stock (the "Series C
Preferred") for a purchase price of $8.00 per share and a total offering amount
of $18,628,344. Also, as part of the 1997 Offering, the Company issued a warrant
to the underwriting agent for the purchase of 100,399 shares of common stock
exercisable at $8.00 per share at any time within five years from the date of
this offering.
Commencing on August 22, 1997, the stockholders of the Series C Preferred are
entitled to receive dividends payable in cash at 7% per annum (9% per annum upon
an event of default). An "Event of Default" includes any of the following: (a)
failure by the Company to declare and pay a dividend on the payment due date for
two consecutive quarterly periods, (b) failure by the Company to satisfy its
redemption obligations, (c) default by the Company in the performance or
observance of any obligation or condition with respect to the indebtedness of
the Company, (d) failure to comply with covenants in the governing agreement,
(e) failure by the Company to comply with its obligations upon liquidation,
dissolution or winding up, or (f) insolvency. Cumulative unpaid dividends
accrued were $1,115,631 and $2,423,904 at June 30, 1998 and 1999, respectively.
F-14
<PAGE> 111
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company is required to redeem for $8.00 per share all of the issued and
outstanding shares of Series C Preferred if any of the following occurs: (a) six
months after the Senior Notes are paid in full, (b) upon receipt of a Qualifying
Offer, (c) in the event the Company consolidates or merges with or into another
entity, or (d) upon sale of the Company's assets.
The stockholders of Series C Preferred can convert their shares at any time at
the option of the holder into common stock at an initial conversion rate of one
Series C Preferred share for one share of common stock. Under antidilution
provisions, the conversion price of Series C Preferred will be adjusted upon the
Company's issuance of additional shares of common stock, warrants or rights to
purchase common stock or securities convertible into common stock.
Series C Preferred stockholders are entitled to the number of votes equal to the
number of full shares of common stock into which such shares of Series C
Preferred is then convertible. Stockholders of Series C Preferred and common
stock shall vote together on each matter submitted to stockholders and not by
class or series. Prior to the consummation of a Qualifying Offer, the
stockholders of the Series C Preferred, voting together as a class, shall be
entitled to elect one director. Subsequent to a Qualifying Offer and only so
long as at least 66.6% of the shares of Series C Preferred originally issued
remain outstanding, the holders of a majority of the shares of common stock
issuable upon conversion of the Series C Preferred shall be entitled to nominate
one director. Upon the occurrence of an event of default, the stockholders of
the Series C Preferred, together with the stockholders of Series B Preferred, as
a class have the exclusive right to elect a majority of the board of directors.
In August 1999, the Company amended its Series B and C Preferred stock
agreements such that upon the completion of the Company's initial public
offering, the Company will issue shares of common stock to the Series B and C
preferred stockholders, valued at the initial public offering price, in payment
of all accrued dividends.
7. RELATED PARTY TRANSACTIONS
A common stockholder of the Company is also a partner in a law firm that
provides legal services to the Company. Fees and expenses paid to the law firm
were $293,647 and $351,970 for the years ended June 30, 1998 and 1999,
respectively. Fees and expenses paid to the law firm for the year ended June 30,
1997 were not significant.
8. STOCK OPTIONS AND WARRANTS
The Company has incentive and non-qualified stock option plans for directors and
key employees and has 1,934,166 shares of common stock reserved for issuance
under the plans. The incentive and non-qualified options become exercisable as
determined by the Board of Directors and have a term of ten years. Generally,
options become exercisable over three to four years.
F-15
<PAGE> 112
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Option activity for the years ended June 30, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE RANGE OF
NUMBER PRICE EXERCISE
OF SHARES PER SHARE PRICE
--------- --------- -----------
<S> <C> <C> <C>
Granted options:
Granted during the year ended June 30, 1997 and
outstanding at June 30, 1997........................ 409,846 $1.42 $1.00--$3.00
Forfeited.............................................. (500) 1.00 1.00
---------
Outstanding at June 30, 1998........................... 409,346 1.42 1.00--3.00
Granted................................................ 1,345,969 4.68 .001--5.00
Exercised.............................................. (10,432) .07 .001--5.00
Forfeited.............................................. (5,487) 2.96 1.00--5.00
---------
Outstanding at June 30, 1999........................... 1,739,396 3.95 1.00--5.00
=========
Vested options:
Exercisable at June 30, 1997........................... 81,969 $1.42 $ 1.00--3.00
Vested................................................. 81,869 1.42 1.00--3.00
Forfeited.............................................. (100) 1.00 1.00
---------
Exercisable at June 30, 1998........................... 163,738 1.42 1.00--3.00
Vested................................................. 355,639 3.38 .001--5.00
Exercised.............................................. (10,432) .07 .001--5.00
Forfeited.............................................. (2,000) 3.00 3.00
---------
Exercisable at June 30, 1999........................... 506,945 2.81 1.00--5.00
=========
</TABLE>
The following table summarizes information concerning options outstanding as of
June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
----------------------------------------------- ---------------------------------
WEIGHTED AVERAGE
NUMBER OF REMAINING WEIGHTED WEIGHTED
RANGE OF OPTIONS CONTRACTUAL LIFE AVERAGE NUMBER OF AVERAGE EXERCISE
EXERCISE PRICE OUTSTANDING (YEARS) EXERCISE PRICE OPTIONS VESTED PRICE
- -------------- ----------- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$1.00--$1.50 333,646 7.3 $1.07 200,188 $1.07
3.00--4.00 262,000 9.2 3.02 160,982 3.01
5.00 1,143,750 9.7 5.00 145,775 5.00
--------- -------
1.00--5.00 1,739,396 9.2 3.95 506,945 2.81
========= =======
</TABLE>
SFAS No. 123 requires entities that account for awards for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", to present pro forma disclosure as
if compensation cost was measured at the date of grant based on the fair value
of the award. No options were granted during the year ended June 30, 1998. The
fair value of the options granted during the years ended June 30, 1997 and 1999
were estimated at the date of grant using the minimum value method with the
following weighted-average assumptions: a risk free interest rate of 6.8% and
5.9%, respectively, no dividend yield and an expected life of six years. The
weighted average grant date fair value per option granted during 1997 and 1999
was $.46 and $3.95, respectively.
The minimum value option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective
F-16
<PAGE> 113
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosure, the estimated fair value of the options is
amortized to expense over the option vesting periods. The Company's net loss
determined in accordance with SFAS No. 123 on a pro forma basis for the years
ended June 30, 1997, 1998 and 1999 would have been as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net Loss:
As reported................................... $(6,045,020) $(13,733,747) $(39,771,977)
Pro forma..................................... (6,082,726) (13,771,453) (40,404,258)
Loss per share:
As reported................................... (1.61) (3.83) (9.89)
Pro forma..................................... (1.62) (3.84) (10.03)
</TABLE>
The pro forma amount may not be representative of the future effects on reported
net income that will result from the future granting of stock options, since the
pro forma compensation expense is allocated over the periods in which options
become exercisable and new option awards are granted each year.
The Company has granted options to non-employees for consulting services. The
vesting period for these options was immediate. Stock options issued to
non-employees are accounted for in accordance with provisions of SFAS No. 123
and EITF No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." The fair value of stock options issued to non-employees was
calculated at the anticipated common stock offering range contemplated by this
Prospectus.
At June 30, 1999, the Company had outstanding warrants which allow the holders
to purchase 280,399 and 100,000 shares of common stock at $8 and $9.20 per
share, respectively, and units that include warrants which allow the holders to
purchase 505,375 shares of common stock at $.01 per share.
In connection with options granted to purchase common stock, the Company
recorded deferred stock-based compensation of $13,380,690 for the year ended
June 30, 1999. Such amounts represent, for employee stock options, the
difference between the exercise price and the fair value of the Company's common
stock at the date of grant, and, for non-employees, the deemed fair value of the
option at the date of vesting. The deferred charges for employee options are
being amortized to expense through the Company's fiscal year ending 2003 and the
deferred charges for non-employee options were amortized to expense through the
year ended June 30, 1999. Stock-based compensation expense for employee and non-
employee options of $5,035,315 was recognized for the year ended June 30, 1999
and is a non-cash charge.
9. NET LOSS PER SHARE
The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net loss (numerator), basic and diluted:......... $(6,962,402) $(16,526,284) $(42,703,000)
=========== ============ ============
Shares (denominator):
Weighted average common shares outstanding,
basic and diluted............................ 4,318,182 4,318,182 4,318,456
=========== ============ ============
Net loss per share, basic and diluted............ $ (1.61) $ (3.83) $ (9.89)
=========== ============ ============
</TABLE>
F-17
<PAGE> 114
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the above mentioned periods, the Company had securities outstanding which
could potentially dilute basic earnings per share in the future, but were
excluded in the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Convertible preferred stock............................... 1,372,370 4,203,543 4,226,543
Outstanding options....................................... 409,846 409,346 1,739,615
Warrants.................................................. -- 785,774 885,774
--------- --------- ---------
Total.................................................. 1,782,216 5,398,663 6,851,932
========= ========= =========
</TABLE>
10. INCOME TAXES
No current income taxes have been provided for any periods presented as the
Company has had net operating losses since inception. The Company had
approximately $52.7 million in net operating loss carryforwards at June 30, 1999
for income tax purposes, with approximately $2 million expiring in 2011, $5.4
million expiring in 2012, $13.2 million expiring in 2013 and $32.1 million
expiring in 2019. Utilization of the net operating loss carryforwards may be
subject to a substantial annual limitation due to the "change in ownership"
provisions of the Internal Revenue Code of 1986. The annual limitation may
result in the expiration of net operating losses before utilization.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. The Company has not recognized any benefit for its
net deferred tax asset and has offset the net deferred tax asset by a valuation
allowance, as it is more likely than not that this asset will not be realized
prior to its expiration. The tax effects of significant items comprising the
Company's net deferred tax asset as of June 30, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Net deferred tax assets (liabilities):
Net operating loss carryforward............................ $ 6,876,586 $ 17,785,634
Nondeductible lease accrual................................ 88,932 10,057
Bad debt reserve........................................... 2,164 10,584
Vacation accrual........................................... 45,981 94,979
Differences between book and tax basis of property......... (45,771) 39,969
Amortization............................................... (8,821) (25,027)
----------- ------------
6,959,071 17,916,196
----------- ------------
Valuation allowance......................................... (6,959,071) (17,916,196)
----------- ------------
Net deferred taxes......................................... $ -- $ --
=========== ============
</TABLE>
11. LEGAL MATTERS
In July 1998, Lorenzo Ortiz filed a lawsuit against a truckstop chain at which
the Company's network is deployed, as well as a contractor utilized by the
Company in connection with the installation of the Company's network at a
truckstop owned by the chain, in the 11th Judicial District, Webb County, Texas,
seeking unspecified actual and punitive damages allegedly resulting from an
injury suffered by Mr. Ortiz at the truckstop in connection with the
installation. On July 6, 1999, defendant Red Line Contracting, Inc.
F-18
<PAGE> 115
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
filed a third party complaint against the Company seeking indemnity and/or
contribution for the plaintiff's claims. Pursuant to the Company's contract with
the truckstop chain defendant, the Company agreed, among other things, to
indemnify the truckstop chain for claims relating to the installation of the
Company's network. Further, pursuant to the contract, the Company maintains
$1,000,000 of liability insurance on each truckstop at which the Company's
network is deployed and the Company agreed to name the truckstop chain as an
additional insured on the Company's insurance policy. The Company inadvertently
failed to timely name the truckstop chain with respect to this lawsuit and the
insurance carrier is defending the Company under a reservation of its rights.
The truckstop chain has agreed to the Company's assumption of the defense of
this lawsuit. The Company has agreed to indemnify the truckstop chain from any
losses relating to this lawsuit and has secured this obligation with a letter of
credit in the amount of $200,000.
In March 1999, Daniel Ray Claybaugh filed a lawsuit against the Company and a
truckstop chain at which the Company's network is deployed that seeks
unspecified actual damages resulting from an injury suffered by Mr. Claybaugh at
a truckstop in Arizona in the Circuit Court for Knox County, Tennessee. Although
the Company's insurance carrier is providing a defense and indemnification
pursuant to the terms of its policy, it has refused to recognize the truckstop
chain as an additional insured on the policy. In accordance with the Company's
contract with the truckstop owner, the Company has agreed to assume the costs of
defense for the truckstop owner.
In August 1999, Robert T. and Julie McCurry filed a lawsuit against the Company
in Superior Court of Shasta County, California and a truckstop chain at which
the Company's network is deployed that seeks a total of $2,000,000 in actual
damages resulting from an injury suffered by Mr. McCurry. The amount sought
exceeds the limit of the Company's insurance policy. The Company has notified
its insurance carrier of this lawsuit and are unaware of any issues which would
result in the denial of insurance coverage.
The Company has received 20 to 25 additional claims arising from slip and fall
incidents relating to its network. The Company has advised its insurance carrier
of these incidents and the carrier has denied coverage or is reserving its
rights to deny coverage on several of these incidents due to the Company's
alleged failure to provide timely notice of such incidents. The Company's
present understanding of these claims is preliminary. Based upon its
understanding, however, management does not believe that the outcome of any of
these lawsuits or claims will have a material adverse effect on its financial
condition or results of operations.
The Company anticipates that it will be, from time to time, subject to claims
and suits for personal injury arising in the ordinary course of its business.
The Company anticipates that these claims and suits, to the extent for actual
damages, will generally be covered by insurance.
12. BENEFIT PLAN
During fiscal year ended 1999, the Company adopted a 401(k) plan that is
available to substantially all its employees. Participants may contribute, on a
pre-tax basis, between 1% and 15% of their annual compensation. The Company is
not required to contribute to the plan, but has made a discretionary
contribution of $59,430 for the year ended June 30, 1999.
13. EVENTS SUBSEQUENT TO BALANCE SHEET DATE
On August 27, 1999, the Company entered into a definitive purchase agreement for
a private placement offering with certain investors to raise additional working
capital through the sale of 3,000,000 shares of Series D Preferred for a
purchase price of $10.50 per share and a total offering amount of $31,500,000.
The Series D Preferred would automatically convert into 3,000,000 shares of
common stock upon the
F-19
<PAGE> 116
PNV.NET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
completion of the initial public offering. Dividends will accrue from the
issuance of the Series D Preferred until conversion at the rate of 7% per annum.
The Company will pay accrued dividends by issuing shares of its common stock
valued at the initial public offering price. Upon closing of the transaction,
the Company will issue to the placement agent a warrant to purchase 60,000
shares of common stock at $10.50 per share which is exercisable for a five year
period and pay to the placement agent 6% of the gross proceeds of the sale of
the Series D Preferred which will be $1.9 million. In accordance with Mr. May's
employment agreement, the Company anticipates that it will grant an option to
purchase 130,097 shares of common stock having an exercise price of $5.00 upon
the closing of the sale of the Company's Series D Preferred Stock.
On August 27, 1999, the Board of Directors, subject to stockholder approval,
approved an additional 250,000 shares of common stock for issuance under the
stock option plan. An aggregate of 2,184,166 shares of common stock is reserved
for issuance under this plan.
The Company anticipates that it will increase its authorized shares of common
stock and preferred stock to 50,000,000 and 8,750,000, respectively, in
contemplation of its initial public offering.
F-20
<PAGE> 117
- --------------------------------------------------------------------------------
(PNV.net LOGO)
PNV.NET, INC.
_______ SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
________ , 1999
CIBC WORLD MARKETS
ALLEN & COMPANY INCORPORATED
VOLPE BROWN WHELAN & COMPANY
WILLIAM BLAIR & COMPANY
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
UNTIL _______ , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 118
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses, other than underwriting
discounts and commissions, in connection with the issuance and distribution of
the shares of common stock being registered, all of which will be paid by
PNV.net, Inc.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 16,680
NASD filing fee............................................. 6,500
NASDAQ National Market listing fee.......................... *
Blue Sky fees and expenses.................................. *
Printing and mailing expenses............................... *
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... *
Transfer agent and registrar fees........................... *
Miscellaneous............................................... *
--------
*
--------
Total.................................................... $ *
========
</TABLE>
- ---------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Paragraph Eleventh of PNV.net, Inc.'s certificate of
incorporation, which provides as follows:
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that to the extent required by the provisions
of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of
Delaware, this provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director
of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the
amended General Corporation Law of the State of Delaware. Any repeal or
modification of this paragraph ELEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation
existing at the time of such repeal or modification.
Reference is made to Section 8.1 of PNV.net, Inc.'s Amended and Restated Bylaws,
which provides as follows:
To the extent permitted by law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) the Corporation shall indemnify any person against any and all
judgments, fines, and amounts paid in settling or otherwise disposing of
actions or threatened actions, and expenses in connection therewith,
incurred by reason of the fact that he, his testator or intestate is or was
a director or officer of the Corporation or of any other corporation of any
type or kind, domestic or
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<PAGE> 119
foreign, which he served in any capacity at the request of the Corporation.
To the extent permitted by law, expenses so incurred by any such person in
defending a civil or criminal action or proceeding shall at his request be
paid by the Corporation in advance of the final disposition of such action
or proceeding.
Reference also is made to Section 145 of Title 8 of the Delaware General
Corporation Law, which provides as follows:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or
II-2
<PAGE> 120
(3) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person in any such capacity or arising out of such
person's status as such whether or not the corporation would have the power
to indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
PNV.net currently intends to obtain liability insurance covering its executive
officers and directors against claims arising from certain acts or decisions by
them in their capacities as officers and directors of the
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<PAGE> 121
company, subject to certain exclusions and deductible and maximum amounts, which
may extend to, among other things, liabilities arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since July 1, 1995, PNV.net has sold and issued the following securities on the
date and for the consideration referenced below:
(1) In November 1995, PNV.net, which was organized by Patricof, Ian
Williams and the then-partners of Park 'N View, Ltd. (Sam Hashman, Monte
Nathanson and Nelgo Investments, of which Daniel O'Connell is a general
partner), acquired the business and assets, and assumed the liabilities, of
Park 'N View, Ltd. In connection with such purchase, PNV.net issued
2,300,000 million shares of common stock to Park 'N View, Ltd. Park 'N
View, Ltd. subsequently distributed such shares to its partners. The amount
of the net liabilities assumed by PNV.net was $84,446, including a
promissory note of Park 'N View, Ltd., to Sam Hashman in the principal
amount of $150,000, which was subsequently paid in full by PNV.net.
(2) During the 12-month period commencing in November 1995, certain
investment limited partnerships managed by Patricof & Co. Ventures, Inc.
(the "Patricof Managed Funds") invested $3,800,000 in PNV.net in exchange
for which PNV.net issued to the funds managed by Patricof 2,000,000 shares
of common stock, 70,010 shares of Series A Preferred Stock and $3,000,000
aggregate principal amount of PNV.net's 8% Subordinated Notes.
(3) In August 1996, the funds managed by Patricof invested $1,500,000 in
PNV.net in exchange for which PNV.net issued to the funds managed by
Patricof $1,500,000 aggregate principal amount of PNV.net's 8% Subordinated
Notes and warrants to purchase 239,250 shares of common stock at an
exercise price of $0.01 per share.
(4) In November 1996, PNV.net issued an aggregate of 1,235,133 shares of
Series B Preferred Stock to seven investors for an aggregate consideration
of $13,500,000.
(5) In November 1996, in connection with the sale of the Series B Preferred
Stock described above, (i) the funds managed by Patricof (a) converted
$3,000,000 aggregate principal amount of PNV.net's 8% Subordinated Notes
plus $180,000 in interest accrued thereon into 318,065 shares of the Series
A Preferred Stock, and (b) converted $1,500,000 aggregate principal amount
of such notes, and warrants to purchase 239,250 shares of common stock at
an exercise price of $0.01 per share, into 137,237 shares of the Series B
Preferred Stock.
(6) In August 1997, PNV.net issued an aggregate of 2,328,543 shares of
Series C Preferred Stock to thirty-five investors for an aggregate
consideration of $18,628,344.
(7) In August 1997, PNV.net issued to BT Alex. Brown Incorporated warrants
to purchase an aggregate of 100,399 shares of common stock at an exercise
price of $8.00 per share in consideration for services provided by BT Alex.
Brown Incorporated in connection with the sale of the Series C Preferred
Stock described above.
(8) In March 1998, PNV.net issued a warrant to purchase an aggregate of up
to 180,000 shares of common stock at an exercise price of $8.00 per share
in connection with PNV.net entering into a contractual arrangement with the
warrantholder.
(9) In May 1998, PNV.net sold to Donaldson, Lufkin & Jenrette Securities
Corporation, as the initial purchaser, 75,000 Units for an aggregate
consideration of $71.5 million (net of discounts and commissions) pursuant
to a Securities Purchase Agreement, dated May 27, 1998.
(10) In March 1999, PNV.net issued a warrant to purchase an aggregate of up
to 100,000 shares of common stock at an exercise price of $9.20 per share
in connection with PNV.net entering into a contractual arrangement with the
warrantholder.
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<PAGE> 122
(11) In March 1999, PNV.net issued an aggregate of 23,000 shares of Series
C Preferred Stock to Robert P. May, for an aggregate consideration of
$184,000. In partial payment of the purchase price, Mr. May issued to
PNV.net his promissory note, dated March 1999, in the original principal
amount of $92,000, which amount accrues interest at the rate of 6% per
annum. The principal balance of this note, together with accrued interest,
is due in March 2003. Mr. May also has agreed to pay the remaining $92,000
of the purchase price over an eight month period that began in March 1999.
(12) In August 1999, PNV.net issued warrants to purchase an aggregate of up
to 4,000 shares of common stock at an exercise price of $10.50 per share in
connection with PNV.net entering into contractual arrangements with the
warrantholder.
(13) In September 1999, PNV.net issued an aggregate of 3,000,000 shares of
Series D Preferred Stock to three investors for an aggregate consideration
of $31,500,000.
(14) In September 1999, PNV.net issued to Volpe Brown Whelan & Company,
LLC, warrants to purchase 60,000 shares of common stock at an exercise
price of $10.50 per share in consideration for services provided by Volpe
Brown Whelan & Company, LLC, in connection with the sale of Series D
Preferred Stock described above.
The sales and issuances of securities in the above transactions were made in
reliance on the exemptions from registration under the Securities Act of 1933,
as amended (the "Securities Act"), provided by Section 4(2) thereof and/or
Regulation D thereunder. The purchasers in each case represented their intention
to acquire the securities for investment only and not with a view to the
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. Similar representations of investment intent were
obtained and similar legends imposed in connection with any subsequent transfers
of such securities. PNV.net believes that all recipients had adequate access,
through employment or other relationships, to information about PNV.net to make
an informed investment decision.
In addition, from August 1996 to August 1999, PNV.net issued an aggregate of
1,970,312 options to employees and consultants to purchase common stock with
exercise prices ranging from $0.01 to $8.50 per share under the Stock Option
Plan in reliance on the exemption from registration under the Securities Act
provided by Rule 701 and Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following exhibits are filed as part of this registration
statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1** -- Amended and Restated Certificate of Incorporation, dated
October 30, 1995 (as currently in effect, as amended in
Exhibits 3.2, 3.3, 3.4, 3.5 and 3.5.1).
3.2** -- Certificate of Amendment of the Certificate of
Incorporation, dated November 12, 1996.
3.3** -- Certificate of Amendment of the Certificate of
Incorporation, dated August 22, 1997.
3.4 -- Certificate of Amendment to Certificate of Incorporation,
dated June 4, 1999.
3.5 -- Certificate of Amendment to Certificate of Incorporation,
dated July 29, 1999.
3.5.1 -- Certificate of Amendment to Certificate of Incorporation,
dated September 15, 1999.
3.6 -- Certificate of Amendment Relating to the Series A Preferred
Stock, dated September 15, 1999.
3.7 -- Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series B 7% Cumulative Convertible
Preferred Stock, dated September 15, 1999.
</TABLE>
II-5
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
3.8 -- Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series C 7% Cumulative Convertible
Preferred Stock, dated September 15, 1999.
3.8.1 -- Certificate of Designations, Preferences and Rights of
Series D 7% Cumulative Convertible Preferred Stock, dated
September 15, 1999.
3.9* -- Form of Amended and Restated Certificate of Incorporation
(to take effect as of the effectiveness of this registration
statement).
3.10 -- Amended and Restated By-laws (as currently in effect).
3.11* -- Form of Amended and Restated By-laws (to take effect as of
the effectiveness of this registration statement).
4.1* -- Specimen common stock certificate.
4.2** -- Indenture, dated as of May 27, 1998, by and between the
registrant and State Street Bank and Trust Company, as
trustee.
4.3*** -- Warrant Agreement, dated as of May 27, 1998, by and between
the registrant and State Street Bank and Trust Company, as
warrant agent.
4.4*** -- Warrant Registration Rights Agreement, dated as of May 27,
1998, by and between the registrant and Donaldson, Lufkin &
Jenrette Securities Corporation.
5.1* -- Opinion of Kilpatrick Stockton LLP.
10.1 -- Fleet Service Agreement, dated as of February 1, 1999, by
and between the registrant and Trucks For You.
10.2** -- Fleet Service Agreement, dated as of February 1, 1998, by
and between the registrant and Carroll Fulmer & Co., Inc.
10.3** -- Fleet Service Agreement, dated as of March 1, 1998, by and
between the registrant and Contract Freighters, Inc.
10.4** -- Fleet Service Agreement, dated as of March 11, 1998, by and
between the registrant and Lake City Express.
10.5** -- Fleet Service Agreement, dated as of April 1, 1998, by and
between the registrant and Top Gun Transport, Inc.
10.6** -- Cable Television and Telephone Service Agreement, dated as
of August 14, 1995, by and between the registrant and
AMBEST.
10.7** -- Cable Television and Telephone Service Agreement, dated as
of July 11, 1996, by and between the registrant and
Professional Transportation Partners, LLC.
10.8** -- Cable Television and Telephone Service Agreement, dated as
of March 18, 1997, by and between the registrant and North
America Truck Stop Network.
10.9** -- Cable Television and Telephone Service Agreement, dated as
of October 28, 1995, by and between the registrant and
Travel Ports of America, Inc.
10.10** -- Cable Television and Telephone Service Agreement, dated as
of February 15, 1996, by and between the registrant and
Pilot Corporation.
10.11** -- Cable Television and Telephone Service Agreement, dated as
of February 7, 1997, by and between the registrant and All
American Plazas, Inc.
10.12** -- Cable Television and Telephone Service Agreement, dated as
of September 12, 1997, by and between the registrant and
Petro Stopping Centers, L.P.
10.13**+ -- Cable Television and Telephone Service Agreement, dated
March 12, 1998 by and between the registrant and TA
Operating Corporation d/b/a Travel Centers of America.
</TABLE>
II-6
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
10.14 -- Lease, dated as of July 20, 1992, by and between CB
Institutional Fund VI and Arden Technologies, Inc., as
amended March 29, 1996 and April 5, 1996, as assigned to the
registrant pursuant to Assignment of Lease, dated October
16, 1995, by and between the registrant and Arden
Technologies, Inc.
10.15 -- Sublease Agreement and Consent to Sublease, dated as of June
1, 1998, by and between the registrant and Security World
International, Inc.
10.16** -- Lease, dated August 11, 1997, between Unipower Corporation
and the registrant.
10.17** -- Software Development Agreement, dated November 22, 1995,
between the registrant and GreenLight Technologies, Inc.
10.18** -- Technology Transfer and Development Agreement, dated as of
November 4, 1996, by and among GreenLight, Inc., Jody Green,
Lewis Tatham and the registrant.
10.19** -- Customer Agreement, dated December 17, 1997, by and between
the registrant and Echostar Satellite Corporation.
10.20** -- Compensation Plan.
10.21** -- Stock Option Plan.
10.21.1 -- Severance Program.
10.22** -- Registration Rights Agreement, dated as of November 13,
1996, by and among the registrant and the Investors named
therein.
10.23** -- Amendment to Registration Rights Agreement, dated as of
August 22, 1997, by and among the registrant and the
Investors named therein.
10.24** -- Letter Agreement, dated as of May 20, 1998, by and among the
registrant and certain parties to the Registration Rights
Agreement, dated as of November 13, 1996, as amended.
10.25** -- Pledge, Escrow and Disbursement Agreement, dated as of May
27, 1998, by and between the registrant and State Street
Bank and Trust Company, as trustee and escrow agent.
10.26** -- Warrant, dated as of August 22, 1997, granted to Alex. Brown
& Sons Incorporated.
10.27** -- Warrant, dated as of August 22, 1997, granted to Alex. Brown
& Sons Incorporated.
10.28**+ -- Warrant, dated March 12, 1998.
10.29**+ -- Letter Agreement, dated as of May 18, 1998, by and between
the registrant and a holder of warrants to purchase shares
of the registrant's common stock.
10.30** -- Form of AT&T Contract Tariff Order Form, by and between the
registrant and AT&T.
10.31 -- Master Agreement to Lease Equipment, dated as of August 21,
1998, by and between the registrant and Cisco Systems
Capital Corporation.
10.32****+ -- Telecom Service Agreement, dated as of January 27, 1999, by
and between the registrant and TA Operating Corporation.
10.33 -- Amendment to AT&T Contract Tariff Order Form, dated as of
February 19, 1999, by and between the registrant and AT&T.
10.34 -- Pay Telephone Telecommunications Service Agreement, dated as
of February 24, 1999 by and between the registrant and CfL,
LLC, as amended by Letter Agreement, dated as of February
24, 1999.
10.35**** -- Employment Agreement, dated as of March 1, 1999, by and
between the registrant and Robert P. May.
10.36**** -- Joinder to Stock Purchase Agreement and Related Documents,
dated as of March 1, 1999 by Robert P May.
10.37**** -- Nonqualified Stock Option Award Agreement, dated as of March
3, 1999, by and between the registrant and Robert P. May.
</TABLE>
II-7
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
10.38**** -- Letter Agreement, dated as of March 3, 1999 by and between
the registrant and Robert P. May.
10.39****+ -- Warrant, dated as of March 12, 1999.
10.40 -- Marketing and Advertising Agreement, dated as of April 28,
1999, by and between the registrant and Volvo Trucks North
America, Inc.
10.41 -- Letter Agreement, dated May 12, 1999 by and between the
registrant and Volpe Brown Whelan & Company, LLC.
10.42 -- Employment Agreement, dated as of May 24, 1999, by and
between the registrant and Steven Yevoli.
10.43 -- Nonqualified Stock Option Award Agreement, dated as of May
24, 1999, by and between the registrant and Steven Yevoli.
10.44 -- Agreement of Lease, dated as of July 26, 1999, by and
between the registrant and Eleven Penn Plaza LLC.
10.45 -- Employment Agreement, dated as of June 21, 1999, by and
between the registrant and Mark Cleveland.
10.46 -- Nonqualified Stock Option Award Agreement, dated as of June
23, 1999, by and between the registrant and Mark Cleveland.
10.47++ -- Second Amendment to Cable Television and Telephone Service
Agreement, dated as of June 28, 1999, by and between the
registrant and Pilot Corporation.
10.48++ -- Pre-Paid Phone Card Agreement, dated as of July 16, 1999, by
and between the registrant and Transcommunications
Incorporated.
10.49 -- Fleet Services Agreement, dated as of August 19, 1999, by
and between the registrant and US Xpress, Inc.
10.50++ -- Warrant, dated as of August 30, 1999.
10.51 -- Series D 7% Cumulative Convertible Preferred Stock Purchase
Agreement, dated as of August 27, 1999, by and among the
registrant and the Investors named therein.
10.52 -- Amendment to Registration Rights Agreement, dated as of
September 16, 1999, by and among the registrant and the
investors named therein.
10.53 -- Warrant, dated as of September 16, 1999, granted to Volpe
Brown Whelan & Company, LLC.
23.1* -- Consent of Kilpatrick Stockton LLP (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------------------
* To be supplied by amendment.
** Incorporated by reference to the registrant's Registration Statement on
Form S-4 (Registration No. 333-59889) filed with the Securities and
Exchange Commission on July 24, 1998, as amended.
*** Incorporated by reference to the registrant's Registration Statement on
Form S-1 (Registration No. 333-59903) filed with the Securities and
Exchange Commission on July 24, 1998, as amended.
**** Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on May 17, 1999.
+ Portions of this Exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to an order for confidential
treatment granted by the Securities and Exchange Commission.
++ Portions of this Exhibit are omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
II-8
<PAGE> 126
(b) Financial Statement Schedules. Financial statement schedules have been
omitted since the required information is not present, or not present in amounts
sufficient to require submission of the schedule, or because the information is
included in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the underwriters, at the closing
specified in the underwriting agreements, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the Delaware General Corporations Law, Registrant's Amended and
Restated Certificate of Incorporation, the Registrant's Amended and Restated
Bylaws, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement for the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-9
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Coral Springs, State of
Florida, on September 17, 1999.
PNV.net, Inc.
By: /s/ ROBERT P. MAY
------------------------------------
Robert P. May
Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints Robert
P. May and R. Michael Brewer and either of them his true and lawful
attorney-in-fact with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
as well as any new registration statement filed to register additional
securities pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to cause the same to be filed, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting to said attorneys-in-fact and agent, full power and authority to do and
perform each and every act and thing whatsoever requisite or desirable to be
done in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things that said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on the 17th day of September,
1999, in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ ROBERT P. MAY Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
Robert P. May
/s/ R. MICHAEL BREWER Vice President Finance and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial and Accounting
R. Michael Brewer Officer)
/s/ IAN WILLIAMS Chairman of the Board and Director
- -----------------------------------------------------
Ian Williams
/s/ ROBERT M. CHEFITZ Director
- -----------------------------------------------------
Robert M. Chefitz
/s/ THOMAS P. HIRSCHFELD Director
- -----------------------------------------------------
Thomas P. Hirschfeld
/s/ RICHARD M. JOHNSTON Director
- -----------------------------------------------------
Richard M. Johnston
/s/ DANIEL K. O'CONNELL Director
- -----------------------------------------------------
Daniel K. O'Connell
</TABLE>
II-10
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1** -- Amended and Restated Certificate of Incorporation, dated
October 30, 1995 (as currently in effect, as amended in
Exhibits 3.2, 3.3, 3.4, 3.5 and 3.5.1).
3.2** -- Certificate of Amendment of the Certificate of
Incorporation, dated November 12, 1996.
3.3** -- Certificate of Amendment of the Certificate of
Incorporation, dated August 22, 1997.
3.4 -- Certificate of Amendment to Certificate of Incorporation,
dated June 4, 1999.
3.5 -- Certificate of Amendment to Certificate of Incorporation,
dated July 29, 1999.
3.5.1 -- Certificate of Amendment to Certificate of Incorporation,
dated September 15, 1999.
3.6 -- Certificate of Amendment Relating to the Series A Preferred
Stock, dated September 15, 1999.
3.7 -- Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series B 7% Cumulative Convertible
Preferred Stock, dated September 15, 1999.
3.8 -- Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series C 7% Cumulative Convertible
Preferred Stock, dated September 15, 1999.
3.8.1 -- Certificate of Designations, Preferences and Rights of
Series D 7% Cumulative Convertible Preferred Stock, dated
September 15, 1999.
3.9* -- Form of Amended and Restated Certificate of Incorporation
(to take effect as of the effectiveness of this registration
statement).
3.10 -- Amended and Restated By-laws (as currently in effect).
3.11* -- Form of Amended and Restated By-laws (to take effect as of
the effectiveness of this registration statement).
4.1 * -- Specimen common stock certificate.
4.2** -- Indenture, dated as of May 27, 1998, by and between the
registrant and State Street Bank and Trust Company, as
trustee.
4.3*** -- Warrant Agreement, dated as of May 27, 1998, by and between
the registrant and State Street Bank and Trust Company, as
warrant agent.
4.4*** -- Warrant Registration Rights Agreement, dated as of May 27,
1998, by and between the registrant and Donaldson, Lufkin &
Jenrette Securities Corporation.
5.1 * -- Opinion of Kilpatrick Stockton LLP.
10.1 -- Fleet Service Agreement, dated as of February 1, 1999, by
and between the registrant and Trucks For You.
10.2** -- Fleet Service Agreement, dated as of February 1, 1998, by
and between the registrant and Carroll Fulmer & Co., Inc.
10.3** -- Fleet Service Agreement, dated as of March 1, 1998, by and
between the registrant and Contract Freighters, Inc.
10.4** -- Fleet Service Agreement, dated as of March 11, 1998, by and
between the registrant and Lake City Express.
10.5** -- Fleet Service Agreement, dated as of April 1, 1998, by and
between the registrant and Top Gun Transport, Inc.
10.6** -- Cable Television and Telephone Service Agreement, dated as
of August 14, 1995, by and between the registrant and
AMBEST.
10.7** -- Cable Television and Telephone Service Agreement, dated as
of July 11, 1996, by and between the registrant and
Professional Transportation Partners, LLC.
10.8** -- Cable Television and Telephone Service Agreement, dated as
of March 18, 1997, by and between the registrant and North
America Truck Stop Network.
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <C> <S>
10.9** -- Cable Television and Telephone Service Agreement, dated as
of October 28, 1995, by and between the registrant and
Travel Ports of America, Inc.
10.10** -- Cable Television and Telephone Service Agreement, dated as
of February 15, 1996, by and between the registrant and
Pilot Corporation.
10.11** -- Cable Television and Telephone Service Agreement, dated as
of February 7, 1997, by and between the registrant and All
American Plazas, Inc.
10.12** -- Cable Television and Telephone Service Agreement, dated as
of September 12, 1997, by and between the registrant and
Petro Stopping Centers, L.P.
10.13**+ -- Cable Television and Telephone Service Agreement, dated
March 12, 1998 by and between the registrant and TA
Operating Corporation d/b/a Travel Centers of America.
10.14 -- Lease, dated as of July 20, 1992, by and between CB
Institutional Fund VI and Arden Technologies, Inc., as
amended March 29, 1996 and April 5, 1996, as assigned to the
registrant pursuant to Assignment of Lease, dated October
16, 1995, by and between the registrant and Arden
Technologies, Inc.
10.15 -- Sublease Agreement and Consent to Sublease, dated as of June
1, 1998 and between the registrant and Security
10.16** -- Lease, dated August 11, 1997, between Unipower Corporation
and the registrant.
10.17** -- Software Development Agreement, dated November 22, 1995,
between the registrant and GreenLight Technologies, Inc.
10.18** -- Technology Transfer and Development Agreement, dated as of
November 4, 1996, by and among GreenLight, Inc., Jody Green,
Lewis Tatham and the registrant.
10.19** -- Customer Agreement, dated December 17, 1997, by and between
the registrant and Echostar Satellite Corporation.
10.20** -- Compensation Plan.
10.21** -- Stock Option Plan.
10.21.1 -- Severance Program.
10.22** -- Registration Rights Agreement, dated as of November 13,
1996, by and among the registrant and the Investors named
therein.
10.23** -- Amendment to Registration Rights Agreement, dated as of
August 22, 1997, by and among the registrant and the
Investors named therein.
10.24** -- Letter Agreement, dated as of May 20, 1998, by and among the
registrant and certain parties to the Registration Rights
Agreement, dated as of November 13, 1996, as amended.
10.25** -- Pledge, Escrow and Disbursement Agreement, dated as of May
27, 1998, by and between the registrant and State Street
Bank and Trust Company, as trustee and escrow agent.
10.26** -- Warrant, dated as of August 22, 1997, granted to Alex. Brown
& Sons Incorporated.
10.27** -- Warrant, dated as of August 22, 1997, granted to Alex. Brown
& Sons Incorporated.
10.28**+ -- Warrant, dated March 12, 1998.
10.29**+ -- Letter Agreement, dated as of May 18, 1998, by and between
the registrant and a holder of warrants to purchase shares
of the registrant's common stock.
10.30** -- Form of AT&T Contract Tariff Order Form, by and between the
registrant and AT&T.
10.31 -- Master Agreement to Lease Equipment, dated as of August 21,
1998, by and between the registrant and Cisco Systems
Capital Corporation
10.32****+ -- Telecom Service Agreement, dated as of January 27, 1999, by
TA Operating Corporation.
</TABLE>
<PAGE> 130
<TABLE>
<C> <C> <S>
10.33 -- Amendment to AT&T Contract Tariff Order Form, dated as of
February 19, 1999, by and between the registrant and AT&T.
10.34 -- Pay Telephone Telecommunications Service Agreement, dated as
of February 24, 1999 by and between the registrant and CfL,
LLC, as amended by Letter Agreement, dated as of February
24, 1999.
10.35**** -- Employment Agreement, dated as of March 1, 1999, by and
between the registrant and Robert P. May.
10.36**** -- Joinder to Stock Purchase Agreement and Related Documents,
dated as of March 1, 1999 by Robert P May.
10.37**** -- Nonqualified Stock Option Award Agreement, dated as of March
3, 1999, by and between the registrant and Robert P. May.
10.38**** -- Letter Agreement, dated as of March 3, 1999 by and between
the registrant and Robert P. May.
10.39****+ -- Warrant, dated as of March 12, 1999.
10.40 -- Marketing and Advertising Agreement, dated as of April 28,
1999, by and between the registrant and Volvo Trucks North
America, Inc.
10.41 -- Letter Agreement, dated May 12, 1999, by and between the
registrant and Volpe Brown Whelan & Company, LLC.
10.42 -- Employment Agreement, dated as of May 24, 1999, by and
between the registrant and Steven Yevoli.
10.43 -- Nonqualified Stock Option Award Agreement, dated as of May
24, 1999, by and between the registrant and Steven Yevoli.
10.44 -- Agreement of Lease, dated as of July 26, 1999, by and
between the registrant and Eleven Penn Plaza LLC.
10.45 -- Employment Agreement, dated as of June 21, 1999, by and
between the registrant and Mark Cleveland.
10.46 -- Nonqualified Stock Option Award Agreement, dated as of June
23, 1999, by and between the registrant and Mark Cleveland.
10.47++ -- Second Amendment to Cable Television and Telephone Service
Agreement, dated as of June 28, 1999, by and between the
registrant and Pilot Corporation.
10.48++ -- Pre-Paid Phone Card Agreement, dated as of July 16, 1999, by
and between the registrant and Transcommunications
Incorporated.
10.49 -- Fleet Services Agreement, dated as of August 19, 1999, by
and between the registrant and US Xpress, Inc.
10.50++ -- Warrant, dated as of August 30, 1999.
10.51 -- Series D 7% Cumulative Convertible Preferred Stock Purchase
Agreement, dated as of August 27, 1999, by and among the
registrant and the Investors named therein.
10.52 -- Amendment to Registration Rights Agreement, dated as of
September 16, 1999, by and among the registrant and the
Investors named therein.
10.53 -- Warrant, dated as of September 16, 1999, granted to Volpe
Brown Whelan & Company, LLC.
23.1* -- Consent of Kilpatrick Stockton LLP (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
</TABLE>
<PAGE> 131
<TABLE>
<C> <C> <S>
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------------------
* To be supplied by amendment.
** Incorporated by reference to the registrant's Registration Statement on
Form S-4 (Registration No. 333-59889) filed with the Securities and
Exchange Commission on July 24, 1998, as amended.
*** Incorporated by reference to the registrant's Registration Statement on
Form S-1 (Registration No. 333-59903) filed with the Securities and
Exchange Commission on July 24, 1998, as amended.
**** Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on May 17, 1999.
+ Portions of this Exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to an order for confidential
treatment granted by the Securities and Exchange Commission.
++ Portions of this Exhibit are omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE> 1
EXHIBIT 1.1
____________ SHARES
PNV. NET, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
__________________ ____, 1999
CIBC World Markets Corp.
Allen & Company Incorporated
Volpe Brown Whelan & Company
William Blair & Company
c/o CIBC World Markets Corp.
World Financial Center
200 Liberty Street
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
PNV.Net, Inc., a Delaware corporation (the "Company") proposes, subject
to the terms and conditions contained herein, to sell to you and the other
underwriters named on Schedule I to this Agreement (the "Underwriters"), for
whom you are acting as Representatives (the "Representatives"), an aggregate of
_______ shares (the "Firm Shares") of the Company's Common Stock, $0.001 par
value (the "Common Stock"). The respective amounts of the Firm Shares to be
purchased by each of the several Underwriters are set forth opposite their names
on Schedule I hereto. In addition, the Company proposes to grant to the
Underwriters an option to purchase up to an additional _________ shares (the
"Option Shares") of Common Stock from it for the purpose of covering
over-allotments in connection with the sale of the Firm Shares. The Firm Shares
and the Option Shares are together called the "Shares."
1. SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
a) The Company agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a price of
<PAGE> 2
$_____ per share (the "Initial Price"), the number of Firm Shares set forth
opposite the name of such Underwriter under the column "Number of Firm Shares to
be Purchased from the Company" on Schedule I to this Agreement, subject to
adjustment in accordance with Section 10 hereof.
b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares at the
Initial Price. The maximum number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the Representatives to
eliminate fractions) of the total number of Option Shares to be purchased by the
Underwriters as such Underwriter is purchasing of the Firm Shares. Such option
may be exercised only to cover over-allotments in the sales of the Firm Shares
by the Underwriters and may be exercised in whole or in part at any time on or
before 2:00 p.m. New York City time, on the business day before the Firm Shares
Closing Date (as defined below), and from time to time thereafter within 30 days
after the date of this Agreement, in each case upon written or facsimile notice,
or verbal or telephonic notice confirmed by written or facsimile notice, by the
Representatives to the Company no later than 2:00 p.m. New York City time, on
the business day before the Firm Shares Closing Date or at least two business
days before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the time and
date (if other than the Firm Shares Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares to
the Representatives for the respective accounts of the Underwriters, and payment
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (next day) funds drawn to the order of, or by wire
transfer to the account designated by, the Company for the shares purchased from
the Company against delivery of the respective certificates therefor to the
Representatives, shall take place at the offices of CIBC World Markets Corp. at
World Financial Center, 200 Liberty Street, New York, New York 10281, at 10:00
a.m., New York City time, (a) on the third (3rd) full business day following the
date of this Agreement, (b) if this Agreement is executed and delivered after
4:30 p.m., New York City time, the fourth (4th) full business day following the
day that this Agreement is executed and delivered or (c) at such time on such
other date, not later than 10 business days after the date of this Agreement, as
shall be agreed upon by the Company and the Representatives (such time and date
of delivery and payment are called the "Firm Shares Closing Date"); provided,
however, that if the Company has not made available to the Representatives
copies of the Prospectus within the time provided in Section 6 hereof, the
Representatives may in their sole discretion, postpone the Firm Shares Closing
Date until no later than two (2) full business days following delivery of copies
of the Prospectus to the Representatives. If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at the Depository Trust Company designated by the Representative.
In the event the option with respect to the Option Shares is exercised, delivery
by the Company of the Option Shares to the Representatives for the respective
accounts of the Underwriters and payment of the purchase price by certified or
official bank check or checks payable in New York Clearing House (next day)
funds or by wire transfer to the Company shall take place at the
<PAGE> 3
offices of CIBC World Markets Corp. specified above at the time and on the date
(which may be the same date as, but in no event shall be earlier than, the Firm
Shares Closing Date) specified in the notice referred to in Section 1(b) (such
time and date of delivery and payment are called the "Option Shares Closing
Date"). The Firm Shares Closing Date and the Option Shares Closing Date are
called, individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names and shall
be in such denominations as the Representatives shall request at least two full
business days before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as described in Section
l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The Company
has prepared in conformity with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the published rules and regulations
thereunder (the "Rules") adopted by the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. _____________),
including a preliminary prospectus relating to the Shares, and has filed with
the Commission the Registration Statement (as hereinafter defined) and such
amendments thereof as may have been required to the date of this Agreement.
Copies of such Registration Statement (including all amendments thereof) and of
the related preliminary prospectus have heretofore been delivered by the Company
to you. The term "preliminary prospectus" means any preliminary prospectus (as
described in Rule 430 of the Rules) included at any time as a part of the
Registration Statement. The Registration Statement as amended at the time and on
the date it becomes effective (the "Effective Date"), including all exhibits and
information, if any, deemed to be part of the Registration Statement pursuant to
Rule 424(b) and Rule 430A of the Rules, is called the "Registration Statement."
The term "Prospectus" means the prospectus in the form first used to confirm
sales of the Shares (whether such prospectus was included in the Registration
Statement at the time of effectiveness or was subsequently filed with the
Commission pursuant to Rule 424(b) of the Rules).
The Company understands that the Underwriters propose to make a public offering
of the Shares, as set forth in and pursuant to the Prospectus, as soon after the
Effective Date and the date of this Agreement as the Representatives deem
advisable. The Company hereby confirms that the Underwriters and dealers have
been authorized to distribute or cause to be distributed each preliminary
prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Underwriter as follows:
a) On the Effective Date, the Registration Statement complied,
and on the date of the Prospectus, on the date any post-effective amendment to
the Registration Statement
<PAGE> 4
becomes effective, on the date any supplement or amendment to the Prospectus is
filed with the Commission and on each Closing Date, the Registration Statement
and the Prospectus (and any amendment thereof or supplement thereto) will
comply, in all material respects, with the applicable provisions of the
Securities Act and the Rules and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder. The Registration Statement did not, as of the Effective Date,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and on the other dates referred to above neither the
Registration Statement nor the Prospectus, nor any amendment thereof or
supplement thereto, will contain any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement thereto was
first filed with the Commission, such preliminary prospectus as amended or
supplemented complied in all material respects with the applicable provisions of
the Securities Act and the Rules and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
as to the statements contained under the caption "Underwriting" in the
Prospectus. The Company acknowledges that the only information furnished in
writing by the Representatives on behalf of the several Underwriters for use in
the Registration Statement or the Prospectus is the statements contained under
the caption "Underwriting" in the Prospectus.
b) All contracts and other documents required to be filed as
exhibits to the Registration Statement have been filed with the Commission as
exhibits to the Registration Statement.
c) The financial statements of the Company (including all
notes and schedules thereto) included in the Registration Statement and
Prospectus present fairly the financial position, the results of operations,
cash flows and the stockholders' equity and the other information purported to
be shown therein of the Company at the respective dates and for the respective
periods to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made. The summary and
selected financial data included in the Prospectus present fairly the
information shown therein as at the respective dates and for the respective
periods specified and the summary and selected financial data have been
presented on a basis consistent with the financial statements so set forth in
the Prospectus and other financial information.
d) Deloitte & Touche LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and, during the periods
covered by their reports, were independent public accountants as required by the
Securities Act and the Rules.
<PAGE> 5
e) The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Prospectus
has been issued and no proceedings for that purpose have been instituted or are
threatened under the Securities Act; any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) of the Rules has been or will be
made in the manner and within the time period required by such Rule 424(b).
f) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware. The
Company has no subsidiary or subsidiaries and does not control, directly or
indirectly, any corporation, partnership, joint venture, association or other
business organization. The Company is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the
character or location of its assets or properties (owned, leased or licensed) or
the nature of its business makes such qualification necessary. The Company has
all requisite corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and from all
governmental or regulatory bodies or any other person or entity (collectively,
the "Permits"), to own, lease and license its assets and properties and conduct
its business as now being conducted and as described in the Registration
Statement and the Prospectus, all of which are valid and in full force and
effect; no such Permit contains a materially burdensome restriction other than
as disclosed in the Registration Statement and the Prospectus; the Company has
fulfilled and performed in all material respects all its material obligations
with respect to such Permits and no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the Company
thereunder. Except as may be required under the Securities Act and state and
foreign Blue Sky laws, the Company has all such corporate power and authority,
and all such Permits as are required to enter into, deliver and perform this
Agreement and to issue and sell the Shares.
g) Except as disclosed in the Prospectus, the Company owns or
is licensed, or otherwise possesses adequate and enforceable rights to use all
patents, patent applications, copyrights, copyright applications, licenses,
know-how and other similar rights and proprietary knowledge (collectively,
"Intangibles") and all trademarks, trademark applications, trade names and
service marks (collectively, the "Trademarks") necessary for the conduct of its
business as currently conducted and as described in the Registration Statement
and the Prospectus. Other than as described in the Registration Statement and
the Prospectus, the Company has not received any notice of, and is not aware of,
any infringement of or conflict with asserted rights of others with respect to
any Intangibles or Trademarks.
h) The Company has good title to each of the items of personal
property which are reflected in the financial statements referred to in Section
4(c) or are referred to in the Registration Statement and the Prospectus as
being owned by it and valid and enforceable leasehold interests in each of the
items of real and personal property which are referred to in the Registration
Statement and the Prospectus as being leased by it, in each case free and clear
of all liens, encumbrances, claims, security interests and defects, other than
those described in the Registration Statement and the Prospectus and those which
do not and will not have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition
<PAGE> 6
(financial or otherwise) of the Company (a "Material Adverse Effect"). Nothing
in this Section 4(h) shall be interpreted as limiting the Company's
representation in Section 4(f) above.
i) Other than as described in the Registration Statement and
the Prospectus, there is no litigation or governmental or other proceeding or
investigation before any court or before any public body or board pending or, to
the Company's knowledge, threatened (and the Company does not know of any basis
therefore) against, or involving the Company or its assets, properties or
business, which might have a Material Adverse Effect, affect the consummation of
this Agreement or which is required to be disclosed in the Registration
Statement and the Prospectus that is not so disclosed.
j) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as described
therein, (a) there has not been any material adverse change with regard to the
assets or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company, whether or not arising from
transactions in the ordinary course of business; (b) the Company has not
sustained any material loss or interference with its assets, businesses or
properties (whether owned or leased) from fire, explosion, earthquake, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree; and
(c) since the date of the latest balance sheet included in the Registration
Statement and the Prospectus, except as reflected therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations incurred
in the ordinary course of business and securities issued or issuable to
employees, directors, consultants and other service providers in the ordinary
course of business, (ii) entered into any transaction not in the ordinary course
of business or (iii) declared or paid any dividend or made any distribution on
any shares of its stock or redeemed, purchased or otherwise acquired or agreed
to redeem, purchase or otherwise acquire any shares of its stock.
k) There is no document, contract or other agreement of a
character required to be described in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement which is not
described or filed as required by the Securities Act or Rules. Each description
of a contract, document or other agreement in the Registration Statement and the
Prospectus accurately reflects in all respects the terms of the underlying
document, contract or agreement. Each agreement described in the Registration
Statement and Prospectus or listed in the Exhibits to the Registration Statement
is in full force and effect and, to its knowledge, is valid and enforceable by
and against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles. Neither the Company, nor to the
Company's knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or both
would constitute such a default.
<PAGE> 7
l) The Company is not in violation of any term or provision of
its charter or by-laws or of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation.
m) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require any
consent or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company pursuant to
the terms of, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or violate
any provision of the charter or by-laws of the Company, except for such consents
or waivers which have already been obtained and are in full force and effect.
n) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of Common Stock and preferred stock of the Company have been
duly and validly issued and are fully paid and nonassessable and none were
issued in violation of any preemptive or other similar right. There are no
statutory preemptive or other similar rights to subscribe for or to purchase or
acquire any shares of Common Stock of the Company or any such rights pursuant to
its Certificate of Incorporation or by-laws or any agreement or instrument to or
by which the Company is a party or bound. The Shares, when issued and sold
pursuant to this Agreement, will be duly and validly issued, fully paid and
nonassessable and none of them will be issued in violation of any preemptive or
other similar right. Except as disclosed in the Registration Statement and the
Prospectus, there is no outstanding option, warrant or other right calling for
the issuance of, and there is no commitment, plan or arrangement to issue, any
share of stock of the Company or any security convertible into, or exercisable
or exchangeable for, such stock. The Common Stock, the preferred stock of the
Company, the 13% notes of the Company and the Shares conform in all material
respects to all statements in relation thereto contained in the Registration
Statement and the Prospectus.
o) Except as disclosed in the Registration Statement and the
Prospectus, no holder of any security of the Company has the right to have any
security owned by such holder included in the Registration Statement or to
demand registration of any security owned by such holder during the period
ending 180 days after the date of this Agreement. Each director, executive
officer and each beneficial owner of one percent (1%) or more of the shares of
Common Stock of the Company has delivered to the Representatives his or her
enforceable written lock-up agreement in the form attached to this Agreement
("Lock-Up Agreement").
p) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and performance of
this Agreement and the
<PAGE> 8
issuance and sale of the Shares by the Company. This Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes and
will constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except (i) as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles and (ii) to the extent that rights
to indemnity or contribution under this Agreement may be limited by Federal and
state securities laws or the public policy underlying such laws.
q) All of the Employee Benefit Plans are in substantial
compliance with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations issued thereunder, as well as
with all applicable laws, and have been administered, operated and managed in
substantial accordance with their terms and the applicable governing documents.
All Employee Benefit Plans that are intended to qualify under Section 401(a) of
the Code are so qualified. All returns, reports, notices and other documents
required to be filed with the Internal Revenue Service, the Department of Labor
or any other governmental agency or entity (a "Governmental Entity") or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, or tax returns) with respect to each
Employee Benefit Plan have been timely filed or distributed. Neither the
Company, nor any other person, has incurred any material excise tax, fine or
penalty with respect to any Employee Benefit Plan under the Code or ERISA, or
has engaged in any "prohibited transaction", within the meaning of Section 4975
of the Code or Section 406 of ERISA, with respect to any Employee Benefit Plan.
No Governmental Entity has initiated any examination or audit, or to the best
knowledge of the Company, any investigation of any Employee Benefit Plan which
has not been completed. There are no claims, suits or actions pending or, to the
knowledge of the Company, threatened which relate to or arise out of any
Employee Benefit Plan. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, will not cause any payment
(whether of severance pay or otherwise) not otherwise due from becoming due from
any Employee Benefit Plan, or from the Company with respect to any Employee
Benefit Plan, to any individual, or cause the vesting, acceleration of payment,
or increase in the amount of benefit payable under any Employee Benefit Plan to
any individual. No Employee Benefit Plan is a defined benefit or money purchase
pension plan, a "multiemployer plan", within the meaning of Section 3(37) of
ERISA, a "multiple employer plan", as described in Section 413(c) of the Code,
or a "multiple employer welfare arrangement", within the meaning of Section
3(40) of ERISA. Any health or medical, life insurance, death benefit or similar
benefit coverage provided under any Employee Benefit Plan is provided solely
through insurance policies. No Employee Benefit Plan provides for health or
medical, life insurance, death or any other welfare benefit for retired or
former employees, officers or directors of the Company, except as required by
Section 4980B of the Code or Sections 601 to 608 of ERISA. For purposes of this
subsection, the term "Employee Benefit Plan" means any "employee benefit plan",
within the meaning Section 3(3) or ERISA, which has ever been sponsored,
maintained or contributed to by the Company, or with respect to which the
Company has ever had an obligation to make any contribution to.
<PAGE> 9
r) The Company is not involved in any labor dispute nor, to
the knowledge of the Company, is any such dispute threatened. The Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its principal suppliers or contractors which would have a Material Adverse
Effect. The Company is not aware of any threatened or pending litigation between
the Company and any of its executive officers and has no reason to believe that
such officers will not remain in the employment of the Company.
s) No transaction has occurred between or among the Company
and any of its officers or directors or five percent shareholders or any
affiliate or affiliates of any such officer or director or five percent
shareholders that is required to be described in and is not described in the
Registration Statement and the Prospectus.
t) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of any of the Shares.
u) The Company has filed all Federal, state, local and foreign
tax returns which are required to be filed through the date hereof, or has
received extensions therefor, and has paid, or is contesting in good faith, all
taxes shown on such returns and all assessments received by it to the extent
that the same are material and have become due, and there are no tax audits or
investigations pending; nor are there any material proposed additional tax
assessments against the Company.
v) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market System, and a registration statement has been filed on Form 8-A
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which registration statement complies in all material respects
with the Exchange Act.
w) The Company has complied with all of the provisions of
Florida Statutes Section 517.075.
x) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in, and dispositions
of, the assets of, and the results of operations of, the Company. The Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
<PAGE> 10
y) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which it is engaged or propose to engage after
giving effect to the transactions described in the Prospectus; and the Company
has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost not materially in excess of current costs. The Company has not been denied
any insurance coverage which it has sought or for which it has applied.
z) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated required to be obtained or performed by the Company (except such
additional steps as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") or may be necessary to qualify the Shares for public
offering by the Underwriters under the state securities or Blue Sky laws) has
been obtained or made and is in full force and effect.
aa) There are no affiliations with the NASD among the
Company's officers, directors or, to the best of the knowledge of the Company,
any five percent or greater stockholder of the Company.
bb) (i) The Company is in compliance in all respects with all
rules, laws and regulation relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Law") which are applicable to its business; (ii) the Company has not received
any notice from any governmental authority or third party of an asserted claim
under Environmental Laws; (iii) the Company has received all permits, licenses
or other approvals required of it under applicable Environmental Laws to conduct
its business and is in compliance with all terms and conditions of any such
permit, license or approval; (iv) to the Company's knowledge, no facts currently
exist that will require the Company to make future material capital expenditures
to comply with Environmental Laws; and (v) no property which is or has been
owned, leased or occupied by the Company has been designated as a Superfund site
pursuant to the Comprehensive Environmental Response, Compensation of Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) or otherwise
designated as a contaminated site under applicable state or local law.
cc) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of proceeds thereof as
described in the Prospectus, will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act").
dd) The Company is in compliance in all respects with all
rules, laws and regulations relating to the provision of telecommunications
services, including the Communications Act of 1934 (the "1934 Act"), the
Telecommunications Act of 1996 (the "1996 Act"), the Cable Communications Policy
Act of 1984 (the "1984 Act"), the Cable Television
<PAGE> 11
Consumer Protection Act of 1992 (the "1992 Act"), and the Telephone Operator
Consumer Services Improvement Act of 1990 ("TOCSIA") and with the rules,
regulations, and court decisions promulgated thereunder (the "Federal
Communications Law"), and any state law, rule, or regulation of any state
governmental or regulatory agency ("State Communications Law"), or body or
arbitrator dealing with telecommunications carriers having jurisdiction over the
Company or any of its respective properties or assets (the "Communications
Authorities")(all together, "Communications Laws").
ee) Except as disclosed in the Registration Statement and
Prospectus, the issuance, sale and delivery of the Securities and the
consummation of the transactions herein and therein contemplated, do not, as of
the date hereof, constitute or result in a breach or violation by the Company of
any Communications Laws.
ff) The Company or any other person associated with or acting
on behalf of the Company, including, without limitation, any director, officer,
agent or employee of the Company has not, directly or indirectly, while acting
on behalf of the Company (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
a) Notification that the Registration Statement has become
effective shall have been received by the Representatives and the Prospectus
shall have been timely filed with the Commission in accordance with Section 6(a)
of this Agreement.
b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in effect
and no order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before or
threatened by the Commission, and any requests for additional information on the
part of the Commission (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Commission and the Representatives.
c) The representations and warranties of the Company contained
in this Agreement and in the certificates delivered pursuant to Section 5(d)
shall be true and correct when made and on and as of each Closing Date as if
made on such date and the Company shall have performed all covenants and
agreements and satisfied all the conditions contained in this Agreement required
to be performed or satisfied by it at or before such Closing Date.
<PAGE> 12
d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such Closing
Date, of the chief executive or chief operating officer and the chief financial
officer or chief accounting officer of the Company to the effect that (i) the
signatories of such certificate have carefully examined the Registration
Statement, the Prospectus and this Agreement and that the representations and
warranties of the Company in this Agreement are true and correct on and as of
such Closing Date with the same effect as if made on such Closing Date and the
Company has performed all covenants and agreements and satisfied all conditions
contained in this Agreement required to be performed or satisfied by it at or
prior to such Closing Date, and (ii) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending under the Securities Act.
e) The Representatives shall have received on the Effective
Date, at the time this Agreement is executed and on each Closing Date a signed
letter from Deloitte & Touche LLP addressed to the Representatives and dated,
respectively, the Effective Date, the date of this Agreement and each such
Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants within the
meaning of the Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and stating in
effect that:
i) in their opinion the audited financial statements
and financial statement schedules included in the Registration Statement and the
Prospectus and reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the Rules;
ii) on the basis of a reading of the amounts included
in the Registration Statement and the Prospectus under the headings "Summary
Financial and Operating Data" and "Selected Financial and Operating Data,"
carrying out certain procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such letter, a
reading of the minutes of the meetings of the stockholders and directors of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company as to
transactions and events subsequent to the date of the latest audited financial
statements, except as disclosed in the Registration Statement and the
Prospectus, nothing came to their attention which caused them to believe that:
A) the amounts in "Summary Financial and Operating Data," and
"Selected Financial and Operating Data" included in the
Registration Statement and the Prospectus do not agree with
the corresponding amounts in the audited and unaudited
financial statements from which such amounts were derived; or
B) with respect to the Company, there were, at a specified date
not more than five business days prior to the date of the
letter, any increases in the current liabilities and long-term
liabilities of the Company or any decreases in net
<PAGE> 13
income or in working capital or the stockholders' equity in
the Company, as compared with the amounts shown on the
Company's audited balance sheet for the fiscal year ended
____________ and the ___ months ended included in the
Registration Statement; and
iii) they have performed certain other procedures as
may be permitted under Generally Acceptable Auditing Standards as a result of
which they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company) set
forth in the Registration Statement and the Prospectus and reasonably specified
by the Representatives agrees with the accounting records of the Company.
iv) based upon the procedures set forth in clauses
(ii) and (iii) above and a reading of the amounts included in the Registration
Statement under the headings "Summary Financial and Operating Data" and
"Selected Financial and Operating Data" included in the Registration Statement
and Prospectus and a reading of the financial statements from which certain of
such data were derived, nothing has come to their attention that gives them
reason to believe that the "Summary Financial and Operating Data" and "Selected
Financial and Operating Data" included in the Registration Statement and
Prospectus do not comply as to the form in all material respects with the
applicable accounting requirements of the Securities Act and the Rules or that
the information set forth therein is not fairly stated in relation to the
financial statements included in the Registration Statement or Prospectus from
which certain of such data were derived are not in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements included in the Registration Statement
and Prospectus.
References to the Registration Statement and the Prospectus in this paragraph
(e) are to such documents as amended and supplemented at the date of the letter.
f) The Representatives shall have received on each Closing
Date from Kilpatrick Stockton LLP, counsel for the Company, an opinion,
addressed to the Representatives and dated such Closing Date, and stating in
effect that:
i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company has no subsidiaries and does not control, directly or
indirectly, any corporation, partnership, joint venture, association or other
business organization. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location of
its
<PAGE> 14
assets or properties (owned, leased or licensed) or the nature of its businesses
makes such qualification necessary.
ii) The Company has all requisite corporate power and
authority to own, lease and license its assets and properties and conduct its
business as described in the Registration Statement and the Prospectus; and the
Company has all requisite corporate power and authority and all necessary
authorizations, approvals, consents, orders, licenses, certificates and permits
to enter into, deliver and perform this Agreement and to issue and sell the
Shares other than those required under the Securities Act and state and foreign
Blue Sky laws.
iii) The Company has authorized and issued capital
stock as set forth in the Registration Statement and the Prospectus; the
certificates evidencing the Shares are in due and proper legal form and have
been duly authorized for issuance by the Company; all of the outstanding shares
of Common Stock and preferred stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable and none of them was
issued in violation of any preemptive or other similar right. The Shares when
issued and sold pursuant to this Agreement will be duly and validly issued,
outstanding, fully paid and nonassessable and none of them will have been issued
in violation of any preemptive or other similar right. Except as disclosed in
the Registration Statement and the Prospectus, there are no preemptive rights or
any restriction upon the voting or transfer of any securities of the Company
pursuant to the Company's Certificate of Incorporation or by-laws or other
governing documents or any other instrument to which the Company is a party or
by which it may be bound. Except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other right calling
for the issuance of, and no commitment, plan or arrangement to issue, any share
of stock of the Company or any security convertible into, exercisable for, or
exchangeable for stock of the Company. The Common Stock, the preferred stock of
the Company, the 13% notes of the Company and the Shares conform in all material
respects to the descriptions thereof contained in the Registration Statement and
the Prospectus. The form of certificate for the Shares conforms to the
requirements of Delaware law.
iv) Each of the Lock-Up Agreements executed by the
Company's stockholders, directors and officers has been duly and validly
delivered by such persons.
v) All necessary corporate action has been duly and
validly taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the Shares. This
Agreement has been duly and validly authorized, executed and delivered by the
<PAGE> 15
Company and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
vi) Neither the execution, delivery and performance
of this Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or any event which with
notice or lapse of time, or both, would constitute a default) under, or require
consent or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company pursuant to
the terms of any indenture, mortgage, deed trust, note or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation or violate any provision of the
charter or by-laws of the Company.
vii) No default exists, and no event has occurred
which with notice or lapse of time, or both, would constitute a default, in the
due performance and observance of any term, covenant or condition by the Company
of any indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company is a party or by which it or any of its assets
or properties or businesses may be bound or affected.
viii) The Company is not in violation of any term or
provision of its charter or by-laws or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation.
ix) No consent, approval, authorization or order of
any court or governmental agency or regulatory body is required for the
performance of this Agreement by the Company or the consummation of the
transactions contemplated thereby, except such as have been obtained under the
Securities Act and such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by the
several Underwriters.
x) Other than as stated in the Prospectus, to such
counsel's knowledge, there is no litigation or governmental or other proceeding
or investigation, before any court or before or by any public body or board
pending or threatened against, or involving the assets, properties or businesses
of, the Company.
xi) The statements in the Prospectus under the
captions "Description of our Capital Stock - Anti-take over Effects of Various
<PAGE> 16
Provisions of Delaware Law and our Certificate of Incorporation and By-laws,"
"Shares Eligible for Future Sale," "Management -Employment Severance and Other
Arrangements, "Management-Bonus Plan," "Management-Stock Option Plan,"
"Management-401(k) Plan," "Management-Stock Incentive Plan," and "Certain
Transactions," insofar as such statements constitute a summary of documents
referred to therein or matters of law, are fair summaries in all material
respects and accurately present the information called for with respect to such
documents and matters and all contracts and other documents known to such
counsel which are required to be filed as exhibits to, or described in, the
Registration Statement have been so filed with the Commission or are fairly
described in the Registration Statement, as the case may be.
xii) The Registration Statement is effective under
the Securities Act, and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are threatened, pending or contemplated. Any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period required
by such Rule 424(b).
xiii) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for financial statements and
notes thereto) comply as to form in all material respects with the requirements
of the Securities Act and the Rules.
To the extent deemed advisable by such counsel, they may rely as to matters of
fact on certificates of responsible officers of the Company and public officials
and on the opinions of other counsel satisfactory to the Representatives as to
matters which are governed by laws other than the laws of the State of Florida,
the General Corporation Law of the State of Delaware and the Federal laws of the
United States; provided that such counsel shall state that in their opinion the
Underwriters and they are justified in relying on such other opinions. Copies of
such certificates and other opinions shall be furnished to the Representatives
and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the Representatives and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing, no facts have come to
the attention of such counsel which lead such counsel to believe that the
Registration
<PAGE> 17
Statement at the time it became effective (except with respect to the financial
statements and notes and schedules thereto and other financial data, as to which
such counsel need express no belief) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus as amended or supplemented (except with respect to the financial
statements, notes and schedules thereto and other financial data, as to which
such counsel need make no statement) on the date thereof contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
xiv) The Representatives shall have received on each
Closing Date from Lance J.M. Steinhart, telecommunications regulatory counsel
for the Company, an opinion, addressed to the Representatives and dated such
Closing Date, substantially in the form attached hereto as Exhibit A.
xv) All proceedings taken in connection with the sale
of the Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representatives, and their
counsel and the Underwriters shall have received from Swidler Berlin Shereff
Friedman, LLP a favorable opinion, addressed to the Representatives and dated
such Closing Date, with respect to the Shares, the Registration Statement and
the Prospectus, and such other related matters, as the Representatives may
reasonably request, and the Company shall have furnished to Swidler Berlin
Shereff Friedman, LLP such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
xvi) The Representatives shall have received on each
Closing Date a certificate, addressed to the Representatives, and dated such
Closing Date, of an executive officer of the Company, to the effect that the
signatory of such certificate has reviewed and understands the provisions of
Section 517.075 of the Florida Statutes, and represents that the Company has
complied, and at all times will comply, with all provisions of Section 517.075
and further, that as of such Closing Date, neither the Company nor any of its
affiliates does business with the government of Cuba or with any person or
affiliate located in Cuba.
xvii) The Representatives shall have received copies
of the Lock-up Agreements executed by each entity or person described in Section
4(o).
xviii) The Company shall have furnished or caused to
be furnished to the Representatives such further certificates or documents as
the Representatives shall have reasonably requested.
6. COVENANTS OF THE COMPANY.
<PAGE> 18
a) The Company covenants and agrees as follows:
i) The Company shall prepare the Prospectus in a form
approved by the Representatives and file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of business on
the second business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Securities Act.
ii) The Company shall promptly advise the
Representatives in writing (1) when any amendment to the Registration Statement
shall have become effective, (2) of any request by the Commission for any
amendment of the Registration Statement or the Prospectus or for any additional
information, (3) of the prevention or suspension of the use of any preliminary
prospectus or the Prospectus or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (4) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company shall not file any
amendment of the Registration Statement or supplement to the Prospectus unless
the Company has furnished the Representatives a copy for its review prior to
filing and shall not file any such proposed amendment or supplement to which the
Representatives reasonably object. The Company shall use its reasonable efforts
to prevent the issuance of any such stop order and, if issued, to use its best
efforts to obtain as soon as possible the withdrawal thereof.
iii) If, at any time when a prospectus relating to
the Shares is required to be delivered under the Securities Act and the Rules,
any event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the Securities
Act or the Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (ii) of this Section
6(a), an amendment or supplement which shall correct such statement or omission
or an amendment which shall effect such compliance.
iv) The Company shall make generally available to its
security holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at the end of
the fiscal quarter of the Company during which the Effective Date occurs (or 90
days if such 12-month period coincides with the Company's fiscal year), an
earning statement (which need not be audited) of the Company, covering such
12-month
<PAGE> 19
period, which shall satisfy the provisions of Section 10(a) of the Securities
Act or Rule 158 of the Rules.
v) The Company shall furnish to the Representatives
and counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments thereof)
and to each other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Securities Act or
the Rules, as many copies of any preliminary prospectus and the Prospectus and
any amendments thereof and supplements thereto as the Representatives may
reasonably request.
vi) The Company shall cooperate with the
Representatives and their counsel to qualify the Shares for offer and sale in
connection with the offering under the laws of such jurisdictions as the
Representatives may designate and shall maintain such qualifications in effect
so long as required for the distribution of the Shares.
vii) For a period of five years after the date of
this Agreement, the Company shall supply to the Representatives, and to each
other Underwriter who may so request in writing, copies of such financial
statements and other periodic and special reports as the Company may from time
to time distribute generally to the holders of any class of its capital stock
and to furnish to the Representatives a copy of each annual or other report it
shall be required to file with the Commission.
viii) Without the prior written consent of CIBC World
Markets Corp., for a period of 180 days after the date of this Agreement, the
Company and each of its individual directors and executive officers shall not
issue, sell or register with the Commission (other than on Form S-8 or on any
successor form), or otherwise dispose of, directly or indirectly, any equity
securities of the Company (or any securities convertible into, exercisable for
or exchangeable for equity securities of the Company), except for the issuance
of the Shares pursuant to the Registration Statement and the issuance of shares
pursuant to the Company's existing stock option plan or purchase plan as
described in the Registration Statement and the Prospectus. In the event that
during this period, (i) any shares are issued pursuant to the Company's existing
stock option plan or purchase plan or (ii) any registration is effected on Form
S-8 or on any successor form, the Company shall obtain the written agreement of
such grantee or purchaser or holder of such registered securities that, for a
period of 180 days after the date of this Agreement, such person will not,
without the prior written consent of CIBC World Markets Corp., offer for sale,
sell, distribute, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, or exercise any registration rights with respect to, any
shares of Common Stock (or any securities
<PAGE> 20
convertible into, exercisable for, or exchangeable for any shares of Common
Stock) owned by such person.
ix) Notwithstanding any agreement between any holder
of the Company's securities and the Company, the Company agrees that it will not
allow any holder of the Company's securities who has entered into a "Lock-up"
agreement to transfer such securities prior to 180 days after the date of this
Agreement without CIBC World Market Corp.'s prior written consent.
x) On or before completion of this offering, the
Company shall make all filings required under applicable securities laws and by
the Nasdaq National Market (including any required registration under the
Exchange Act).
xi) The Company will apply the net proceeds from the
offering of the Shares in the manner set forth under "Use of Proceeds" in the
Prospectus.
xii) The Company shall cause to be prepared and
delivered, at its expense, within one business day from the effective date of
this Agreement, to the Representatives an "electronic Prospectus" to be used by
the Underwriters in connection with the offering and sale of the Shares. As used
herein, the term "electronic Prospectus" means a form of Prospectus, and any
amendment or supplement thereto, that meets each of the following conditions:
(i) it shall be encoded in an electronic format, satisfactory to the
Representatives, that may be transmitted electronically by the Representatives
to offerees and purchasers of the Common Shares for at least the Prospectus
delivery period; (ii) it shall disclose the same information as the paper
Prospectus and Prospectus filed pursuant to EDGAR, except to the extent that
graphic and image material cannot be disseminated electronically, in which case
such graphic and image material shall be replaced in the electronic Prospectus
with a fair and accurate narrative description or tabular representation of such
material, as appropriate; and (iii) it shall be in or convertible into a paper
format or an electronic format, satisfactory to the Representatives, that will
allow investors to store and have continuously ready access to the Prospectus at
any future time, without charge to investors (other than any fee charged for
subscription to the system as a whole and for on-line time). Such electronic
Prospectus may consist of a Rule 434 preliminary prospectus, together with the
applicable term sheet, provided that it otherwise satisfies the format and
conditions described in the immediately preceding sentence. The Company hereby
confirms that it has included or will include in the Prospectus filed pursuant
to EDGAR or otherwise with the Commission and in the Registration Statement at
the time it was declared effective an undertaking that, upon receipt of a
request by an investor or his or her representative within the Prospectus
delivery period, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
<PAGE> 21
xiii) The Company will maintain a transfer agent and,
if necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
xiv) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on their respective parts to be performed
hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Underwriters shall terminate this Agreement pursuant to
Section 9, the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to market or
marketing the Shares.
xv) If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses relating to:
(i) the preparation, printing, filing and distribution of the Registration
Statement including all exhibits thereto, each preliminary prospectus, the
electronic Prospectus, the Prospectus, all amendments and supplements to the
Registration Statement and the Prospectus, and the printing, filing and
distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the various jurisdictions referred to in Section 6(a)(vi), including the
fees and disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing, distribution and
shipment of preliminary and supplementary Blue Sky memoranda; (iv) the
furnishing (including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold; (v) the filing fees of the NASD in
connection with its review of the terms of
<PAGE> 22
the public offering and fees and disbursements of counsel for the Underwriters
in connection with such review; (vi) the furnishing (including costs of a
shipping and mailing) to the Representatives and to the Underwriters of copies
of all reports and information required by Section 6(a)(vii); (vii) inclusion of
the Shares for quotation on the Nasdaq National Market; and (viii) all transfer
taxes, if any, with respect to the sale and delivery of the Shares by the
Company to the Underwriters. Subject to the provisions of Section 6(a)(xiv) and
Section 9, the Underwriters agree to pay, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, all costs
and expenses incident to the performance of the obligations of the Underwriters
under this Agreement not payable by the Company pursuant to the preceding
sentence, including, without limitation, the fees and disbursements of counsel
for the Underwriters.
7. INDEMNIFICATION.
a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses 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 under the Securities Act, the Exchange Act or other Federal or state law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement, the electronic Prospectus or the
Prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) in whole or in part upon any breach of the representations and
warranties set forth in Section 4 hereof, or (iii) in whole or in part upon any
failure of the Company to perform any of its obligations hereunder or under law;
provided, however, that such indemnity shall not inure to the benefit of any
Underwriter (or any person controlling such Underwriter) on account of any
losses, claims, damages or liabilities arising from the sale of the Shares to
any person by such Underwriter if such untrue statement or omission or alleged
untrue statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing to the
Company by the Representatives on behalf of any Underwriter specifically for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company and each person, if any, who controls
<PAGE> 23
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each director of the Company, and each officer of the
Company who signs the Registration Statement, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only insofar as
such losses, claims, damages or liabilities arise out of or are based upon any
untrue statement or omission or alleged untrue statement or omission which was
made in any preliminary prospectus, electronic Prospectus, the Registration
Statement or the Prospectus, or any amendment thereof or supplement thereto,
contained in the last paragraph of the cover page, in the paragraph relating to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the Prospectus;
provided, however, that the obligation of each Underwriter to indemnify the
Company (including any controlling person, director or officer thereof)d shall
be limited to the net proceeds received by the Company from such Underwriter.
c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 7(a) or 7(b) shall be available to any party who shall
fail to give notice as provided in this Section 7(c) if the party to whom notice
was not given was unaware of the proceeding to which such notice would have
related and was prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or proceeding
shall not relieve it from any liability that it may have to any indemnified
party for contribution or otherwise than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified party
in the conduct of the defense of such action (in which case the indemnifying
parties
<PAGE> 24
shall not have the right to direct the defense of such action on behalf of the
indemnified party) or (iii) the indemnifying parties shall not have employed
counsel to assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the fees and expenses
of counsel shall be at the expense of the indemnifying parties. An indemnifying
party shall not be liable for any settlement of any action, suit, proceeding or
claim effected without its written consent, which consent shall not be
unreasonably withheld or delayed.
8. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(a) or 7(b) is due in accordance with its terms but for any reason is
held to be unavailable to or insufficient to hold harmless an indemnified party
under Section 7(a) or 7(b), then each indemnifying party shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting any contribution received by any person entitled hereunder
to contribution from any person who may be liable for contribution) to which the
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares or, if such allocation
is not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in
Section 7 hereof, in such proportion as is appropriate to reflect not only the
relative benefits referred to above but also the relative fault of the Company
on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus, bear to
(y) the underwriting discounts received by the Underwriters, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company or
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact related to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this Section 8, (i) in no case shall any Underwriter (except
as may be provided in the Agreement Among Underwriters)
<PAGE> 25
be liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder; and (ii) the
Company shall be liable and responsible for any amount in excess of such
underwriting discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) in the immediately preceding sentence of this Section 8. Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriter's
obligations to contribute pursuant to this Section 8 are several in proportion
to their respective underwriting commitments and not joint.
9. TERMINATION. This Agreement may be terminated with respect to the
Shares to be purchased on a Closing Date by the Representatives by notifying the
Company at any time:
a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in the
opinion of the Representatives will in the future materially disrupt, the
securities markets; (ii) if there has occurred any new outbreak or material
escalation of hostilities or other calamity or crisis the effect of which on the
financial markets of the United States is such as to make it, in the judgment of
the Representatives, inadvisable to proceed with the offering; (iii) if there
shall be such a material adverse change in general financial, political or
economic conditions or the effect of international conditions on the financial
markets in the United States is such as to make it, in the judgment of the
Representatives, inadvisable or impracticable to market the Shares; (iv) if
trading in the Shares has been suspended by the Commission or trading generally
on the New York Stock Exchange, Inc., on the American Stock Exchange, Inc. or
the Nasdaq National Market has been suspended or limited, or
<PAGE> 26
minimum or maximum ranges for prices for securities shall have been fixed, or
maximum ranges for prices for securities have been required, by said exchanges
or by order of the Commission, the National Association of Securities Dealers,
Inc., or any other governmental or regulatory authority; or (v) if a banking
moratorium has been declared by any state or Federal authority; or (vi) if, in
the judgment of the Representatives, there has occurred a Material Adverse
Effect, or
b) at or before any Closing Date, that any of the conditions
specified in Section 6 shall not have been fulfilled when and as required by
this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the Company
shall not be under any liability to any Underwriter, and no Underwriter shall be
under any liability to the Company, except that (y) if this Agreement is
terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 9) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:
a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then each of
the nondefaulting Underwriters shall be obligated to purchase such Shares on the
terms herein set forth in proportion to their respective obligations hereunder;
provided, that in no event shall the maximum number of Shares that any
Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant
to
<PAGE> 27
this Section 10 by more than one-ninth of such number of Shares without the
written consent of such Underwriter; or
b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, then the Company
shall be entitled to one additional business day within which it may, but is not
obligated to, find one or more substitute underwriters reasonably satisfactory
to the Representatives to purchase such Shares upon the terms set forth in this
Agreement.
In any such case, either the Representatives or the Company shall have the right
to postpone the applicable Closing Date for a period of not more than five
business days in order that necessary changes and arrangements (including any
necessary amendments or supplements to the Registration Statement or Prospectus)
may be effected by the Representatives and the Company. If the number of Shares
to be purchased on such Closing Date by such defaulting Underwriter or
Underwriters shall exceed 10% of the Shares that all the Underwriters are
obligated to purchase on such Closing Date, and none of the nondefaulting
Underwriters or the Company shall make arrangements pursuant to this Section
within the period stated for the purchase of the Shares that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company and without liability on the part
of the Company, except in both cases as provided in Sections 6(b), 7, 8 and 9.
The provisions of this Section shall not in any way affect the liability of any
defaulting Underwriter to the Company or the nondefaulting Underwriters arising
out of such default. A substitute underwriter hereunder shall become an
Underwriter for all purposes of this Agreement.
11. MISCELLANEOUS. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(b), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the Underwriters, the
Company and their respective successors and assigns, and, to the extent
expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not
<PAGE> 28
include any purchaser of Shares from any Underwriter merely because of such
purchase.
All notices and communications hereunder shall be in writing and mailed or
delivered or by telephone or telegraph if subsequently confirmed in writing, (a)
if to the Representatives, c/o CIBC World Markets Corp., CIBC Oppenheimer Tower,
World Financial Center, New York, New York 10281 Attention: __________, with a
copy to __________ and (b) if to the Company, to its agent for service as such
agent's address appears on the cover page of the Registration Statement with a
copy to __________.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to principles of conflict of laws.
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among us.
Very truly yours,
PNV. NET, INC.
By ______________________________
Title: __________________________
Confirmed:
CIBC WORLD MARKETS CORP.
ALLEN & COMPANY INCORPORATED
VOLPE BROWN WHELAN & COMPANY LLC
WILLIAM BLAIR & COMPANY
Acting severally on behalf of itself and as representative of
the several Underwriters named in Schedule I annexed hereto.
<PAGE> 29
By CIBC WORLD MARKETS CORP.
By __________________________________
Title: ______________________________
<PAGE> 30
SCHEDULE I
Number of Firm Shares
Name to be Purchased from the Company
- ----------------------------------------------------------------------------
CIBC World Markets Corp.
Allen & Company Incorporated
Volpe Brown Whelan & Company LLC
William Blair & Company ________________________
Total
========================
<PAGE> 31
SCHEDULE B
STATE COMMISSION LICENSES, PERMITS AND AUTHORIZATIONS OF
PNV.NET, INC.
STATE AUTHORIZATIONS
================================= ============= ==========================
STATE DATE DOCKET NO.
GRANTED
================================= ============= ==========================
================================= ============= ==========================
================================= ============= ==========================
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
PARK `N VIEW, INC.
It is hereby certified that:
1. The name of the corporation (the "Corporation") is Park `N View,
Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article FIRST:
"The name of the corporation is PNV.Net, Inc."
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on June 2, 1999.
PARK `N VIEW, INC.
By: /s/ Stephen Conkling
----------------------------
Stephen Conkling, President
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
PNV.NET, INC.
It is hereby certified that:
1. The name of the corporation (the "Corporation") is PNV.Net, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article FIRST:
"The name of the corporation is PNV.net, Inc."
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on July 29, 1999.
PNV.NET, INC.
By: /s/ Stephen Conkling
----------------------------------
Stephen Conkling, President
<PAGE> 1
EXHIBIT 3.5.1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PNV.NET, INC.
(Pursuant to Section 242 of the General Corporation Law of the State of
Delaware)
It is hereby certified that:
1. The name of the corporation is PNV.net, Inc. (the
"Corporation"). The Certificate of Incorporation of the Corporation was
originally filed with the Secretary of State of the State of Delaware on
September 18, 1995.
2. The Board of Directors of the Corporation duly adopted a
resolution proposing and declaring it advisable that Section 1 of Article FOURTH
of the Certificate of Incorporation of the Corporation be amended in its
entirety to read as follows:
"Section 1. Authorized Capitalization. The aggregate number of
shares of stock which the Corporation shall have authority to issue is
Fifty-eight Million Seven Hundred Fifty Thousand (58,750,000), of which
Fifty Million (50,000,000) shares shall be common stock, par value
$.001 per share ("Common Stock"), and Eight Million Seven Hundred Fifty
Thousand (8,750,000) shares shall be preferred stock, par value $.01
per share ("Preferred Stock")."
3. This amendment to the Certificate of Incorporation was duly
adopted in accordance with the applicable provisions of Section 242 of the
General Corporation Law of Delaware.
<PAGE> 2
4. This amendment to the Certificate of Incorporation shall be
effective on and as of the date of filing of this Certificate of Amendment with
the office of the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by its President and attested to by its Secretary this 15th
day of September, 1999 and the statements contained herein are affirmed as true
under penalties of perjury.
PNV.net, Inc.
By /s/ Robert P. May
------------------------------------------
Robert P. May, Chief Executive Officer
ATTEST:
By: /s/ Anthony Allen
----------------------------
Anthony Allen, Secretary
2
<PAGE> 1
EXHIBIT 3.6
PNV.NET, INC.
CERTIFICATE OF AMENDMENT
RELATING TO THE SERIES A PREFERRED STOCK
WITH A PAR VALUE OF $.01 PER SHARE
OF PNV.NET, INC.
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
PNV.net, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that pursuant to the authority contained in Article Fourth of the
Corporation's Certificate of Incorporation, and in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware (the "DGCL"), the following resolution was duly adopted by the Board of
Directors of the Corporation, amending a series of its Preferred Stock
designated as Series A Preferred Stock:
WHEREAS, the amendment of the designations herein certified has been
duly adopted by the Corporation's Board of Directors and Holders of the Series A
Preferred Stock in accordance with Section 242 of the DGCL;
RESOLVED, that there is hereby created and the Corporation be, and it
hereby is, authorized to issue 627,630 shares of a series of its Preferred Stock
designated Series A Preferred Stock (the "Series A Stock") to have the powers,
preferences and rights and the qualifications, limitations or restrictions
thereof hereinafter set forth in this resolution:
1. Preference. The preferences of each share of Series A Stock with
respect to distributions of the Corporation's assets upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation shall be
equal to the preferences of every other share of: (i) Series A Stock; (ii)
Series B 7% Cumulative Convertible Preferred Stock of the Corporation (the
"Series B Stock"); (iii) Series C 7% Cumulative Convertible Preferred Stock of
the Corporation (the "Series C Stock"); and (iv) Series D 7% Cumulative
Convertible Preferred Stock of the Corporation (the "Series D Stock") from time
to time outstanding in every respect and prior in right to such preferences of
all other equity Securities of the Corporation, whether now or hereafter
authorized.
2. Voting Rights. Upon the failure of the Corporation to redeem the
Series A Stock in accordance with Section 5(a) hereof, except as otherwise
expressly provided herein, in the Certificate of Incorporation or the By-laws of
the Corporation or by law, the Holders of Series A Stock, by virtue of their
ownership thereof, shall be entitled to one vote for each share of Series A
Stock and shall be entitled to vote as a separate class only in respect of any
merger, consolidation, sale of assets or creation of any class or series,
<PAGE> 2
other than Series B Stock, Series C Stock or Series D Stock, equal to or
superior to the Series A Stock. The Holders of at least 66.6% of the shares of
the then outstanding Series A Stock voting as a separate class shall be entitled
to elect two members of the Board of Directors.
3. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time when any Series A
Stock shall be outstanding, each then outstanding share of Series A Stock shall
entitle the Holder thereof to a preference against the Assets of the corporation
available for distribution to the Holders of the Corporation's equity securities
equal to the Series A Stock Value plus an amount equal to all unpaid dividends
(including, without limitation, all accrued and unpaid interest thereon and the
Deferred Dividends, calculated in accordance with Section 4(B) hereof) accrued
on such share to the date of payment. If, upon any such liquidation, dissolution
or winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributed among the Holders of Series A Stock shall be insufficient
to pay in full the aggregate preferential amounts on all of the then outstanding
shares of the Series A Stock, then such assets, or the proceeds thereof, shall
be distributed among such Holders equally and ratably in proportion to the full
liquidation preferences to which each such Holder is entitled. After such
payment shall have been made in full to the Holders of the outstanding Series A
Stock, or funds necessary for such payment shall have been set aside in trust
for the account of the Holders of Series A Stock so as to be, and continue to
be, available therefor, the Holders of Series A Stock shall be entitled to no
further participation in such distribution of assets of the Corporation.
All of the preferential amounts to be paid to the Holders of Series A
Stock as provided in this Section 3 shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any Assets of the Corporation to, the Holders of any other
equity securities of the Corporation (other than the Series B Stock, Series C
Stock and Series D Stock which shall rank pari passu with the Series A Stock),
whether now or hereafter authorized, in connection with such liquidation,
dissolution or winding up.
4. Dividends.
(a) Accrual of Dividends. Commencing with the first anniversary of the
Initial Closing pursuant to and as defined in the Purchase Agreements, the
Holders of Series A Stock shall be entitled to receive, when and as declared by
the Board of Directors out of funds legally available therefor, cumulative
dividends payable quarterly on March 15, June 15, September 15 and December 15
of each year (each of such date being a "Dividend Payment Date") in cash or in
kind at a rate of 7% per annum, computed on the basis of the Series A Stock
Value. Such dividends shall be Series A Stock with respect to each share of
Series A Stock, from the later of the first anniversary of the Initial Closing
pursuant to and as defined in the Purchase Agreements and the date of issuance
of such share, and shall accrue until paid, whether or not earned, whether or
not declared by the Board and whether or not there are funds legally available
therefor on the date such dividends are payable. Dividends not declared and paid
in cash or paid in
2
<PAGE> 3
kind on any Dividend Payment Date shall accrue dividends thereon at the rate of
7% per annum until such dividends are declared and paid in full in cash.
(b) Payment of Dividends. Dividends shall be payable at the
Corporation's option in cash or in kind to each Holder of Series A Stock in
quarterly installments on March 31, June 30, September 30, and December 31, in
each year commencing on March 31, 1996 (each a "Regular Dividend Payment Date"),
as declared by the Board out of funds legally available therefor. Dividends paid
in cash on the shares of Series A Stock (or Series B Stock, Series C Stock or
Series D Stock which shall rank pari passu with the Series A Stock) in an amount
less than the total amount of such dividends shall be allocated pro rata so that
the total value of dividends paid on the Series A Stock, Series B Stock, Series
C Stock and Series D Stock shall in all cases bear to each other the same ratio
that the total value of accrued and unpaid dividends on the Series A Stock,
Series B Stock, Series C Stock and Series D Stock bear to each other. The Board
may fix a record date for the determination of a dividend or distribution
declared thereon, which record date shall not be more than 30 days prior to the
date fixed for the payment thereof.
(c) Limitation on Certain Distributions. Without the written consent of
the Holders of at least 66.6% of the then outstanding Series A Stock, the
Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities of the Corporation, unless at the time of such declaration, payment
or distribution the Corporation shall have paid all dividends on the Series A
Stock accrued through the most recent Regular Dividend Payment Date preceding
the date of such payment or distribution.
5. Redemption.
(a) Mandatory Redemption. On the date six (6) months immediately after
the payment in full and satisfaction of all of the obligations of the
Corporation to the lenders who provide financing to the Corporation in the
aggregate principal amount of Seventy-five Million Dollars ($75,000,000.00)
(referred to herein as the "Mandatory Redemption Date"), the Corporation shall
redeem all the shares of Series A Stock originally issued hereunder (or such
lesser amount as shall then be outstanding) at the "Redemption Price" per share
defined in paragraph (e) below, payable in cash on the Mandatory Redemption
Date.
(b) Redemption Upon an Initial Public Offering. Upon the consummation
of a Qualifying Offering (as defined below) (the date of such consummation being
referred to herein as a "Qualifying Offering Redemption Date"), upon not less
than ten (10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series A Stock shall be redeemed
for cash at the Redemption Price. A "Qualifying Offering" means (i) the
Corporation shall have consummated a firm commitment underwritten public
offering of its Common Stock by a nationally recognized investment banking firm
pursuant to an effective registration under the Securities Act covering the
offering and sale of Common Stock which results in gross
3
<PAGE> 4
proceeds of at least $20,000,000, (ii) the Common Stock is listed on either the
Nasdaq Stock Market (National Market) ("Nasdaq"), the New York Stock Exchange or
the American Stock Exchange, and (iii) the price at which the Common Stock is
sold in such offering is at least equal to an amount which (x) is 200% of the
Redemption Price (as adjusted for stock splits and other subdivisions and
combinations of the Common Stock after the date of the Purchase Agreements) or
(y) would represent a compound annual rate of return of 35% based upon the
original issuance price of the Series A Stock.
(c) Redemption on Change of Control. Upon a "Change of Control" of the
Corporation, each holder of the then outstanding shares of Series A Stock may
elect to have the Corporation redeem all (but not less than all) outstanding
shares of Series A Stock owned by such holder at the Redemption Price per share,
payable in cash on any date within 100 days of the effective date of the Change
of Control (such date being herein referred to as the "Change of Control
Redemption Date"). The election shall be made by delivering written notice to
the Corporation at least thirty (30) but no more than sixty (60) days prior to
the Change of Control Redemption Date. The Corporation will then be required to
redeem all the shares of Series A Stock owned by such holder on the Change of
Control Redemption Date. For purposes of this Section, "Change of Control" means
any one or more of the following events:
(i) The Corporation shall consolidate with or merge into any
other person or any person shall consolidate with or merge into the
Corporation (other than a consolidation or merger of the Corporation
and a wholly-owned subsidiary of the Corporation in which all shares of
the Corporation's Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same
consideration), in either event pursuant to a transaction in which any
of the Corporation's common stock outstanding immediately prior to the
effectiveness thereof is changed into or exchanged for cash, securities
or other property; or
(ii) the Corporation shall directly or indirectly convey,
transfer or lease, in one transaction or a series of transactions, all
or substantially all of its assets to any person or "group" (within the
meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934 (the "1934 Act") (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share exchange, or
reclassification, other than a change in par value, or from par value
to no par value, or from no par value to par value; or
(iv) any person (other than the Corporation, any subsidiary of
the Corporation or an Existing Investor, including a "group" (within
the meaning of Section 13(d) and 14(D)(2) of the 1934 Act) that
includes such person), shall purchase or otherwise acquire, directly or
indirectly, beneficial ownership of securities of the Corporation and,
as a result of
4
<PAGE> 5
such purchase or acquisition, such person (together with its associates
and affiliates) shall directly or indirectly beneficially own in the
aggregate (1) more than 50% of the Common Stock, or (2) securities
representing more than 50% of the combined voting power of the
Corporation's voting securities, in each case under subclause (1) or
(2), outstanding on the date immediately prior to the date of such
purchase or acquisition (or, if there be more than one, the last such
purchase or acquisition).
(d) Optional Redemption.
(i) Intentionally omitted.
(ii) Subject to the rights of the holders of the Series B
Stock, the Series C Stock and the Series D Stock, the Corporation shall
have the option of redeeming shares of Series A Stock at any time after
the date of issuance of such Series A Stock at a redemption price per
share equal to the Series A Stock Value plus an amount equal to all
unpaid dividends (and interest thereon) accrued thereon to the date of
redemption.
(e) Redemption Price. The Redemption Price per share of Series A Stock
shall equal $10.00 plus all accrued and unpaid dividends (and interest thereon)
on such share of Series A Stock to the Mandatory Redemption Date, Qualifying
Offering Redemption Date or Change of Control Redemption Date, as the case may
be.
(f) Procedure. The term "Redemption Date" as used in this paragraph (f)
shall refer to whichever of the Mandatory Redemption Date, Qualifying Offering
Redemption Date or Change of Control Redemption Date is applicable in a
particular circumstance. On or prior to the Redemption Date, the Corporation
shall deposit the Redemption Price of all outstanding shares of Series A Stock
to be redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of the holders
of the shares of Series A Stock, with irrevocable instructions and authority to
the bank or trust corporation to pay the Redemption Price for such shares to
their respective holders on or after the Redemption Date upon receipt of the
certificate or certificates of the shares of Series A Stock to be redeemed. From
and after the Redemption Date, unless there shall have been a default in payment
of the Redemption Price, all rights of the holders of shares of Series A Stock
as holders of Series A Stock (except the right to receive the Redemption Price
upon surrender of their certificate or certificates) shall cease as to those
shares of Series A Stock redeemed, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If on the Redemption Date the funds of the Corporation
legally available for redemption of shares of Series A Stock redeemed, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If on the Redemption Date
the funds of the Corporation legally available for redemption of shares of
Series A Stock (or Series B Stock, Series C Stock or Series D Stock which shall
rank pari passu with the Series A Stock) are insufficient to redeem the total
number of shares
5
<PAGE> 6
of Series A Stock, Series B Stock, Series C Stock and Series D Stock to be
redeemed on such date, the Corporation will use those funds which are legally
available therefor to redeem the maximum possible number of shares of Series A
Stock, Series B Stock, Series C Stock and Series D Stock ratably among the
holders of such shares to be redeemed based upon the total amount payable by the
Corporation pursuant to the redemption of the Series A Stock, Series B Stock,
Series C Stock and Series D Stock if the Corporation had sufficient funds
legally available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption Price.
The shares of Series A Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
shares of Series A Stock such funds will immediately be used to redeem the
balance of the shares of Series A Stock to be redeemed. No dividends or other
distributions shall be declared or paid on, nor shall the Corporation redeem,
purchase or acquire any shares of, the Common Stock or any other class or series
of stock of the Corporation (other than the Series B Stock, Series C Stock and
Series D Stock which shall rank pari passu with the Series A Stock) unless the
Redemption Price of all shares elected to be redeemed shall have been paid in
full. Until the Redemption Price for a share of Series A Stock elected to be
redeemed shall have been paid in full, such shares of Series A Stock shall
remain outstanding for all purposes and entitle the holder thereof to all the
rights and privileges provided herein, including, without limitation, that
dividends (and interest thereon) shall continue to accrue and, if unpaid prior
to the date such shares are redeemed, shall be included as part of the
Redemption Price as provided in paragraph (e) above.
(g) Prohibition on Redemption. Notwithstanding any other term of this
Certificate of Designation, the Corporation shall not redeem (or have any
obligation to redeem) any shares of Series A Stock under any circumstances,
whether upon a Qualifying Offering, Change of Control or otherwise, prior to the
payment in full and satisfaction of all of the obligations of the Corporation to
the lenders who provide financing to the Corporation in the aggregate principal
amount of up to $75,000,000.00. If the Corporation shall not have paid in full
or satisfied all of its obligations to such lenders on or before any Redemption
Date, upon such payment and satisfaction the Corporation will immediately use
any funds legally available therefor to redeem the shares of Series A Stock to
be redeemed.
6. Protective Provisions. So long as any shares of Series A Stock shall
be outstanding, the Corporation shall not, without the approval by the vote or
written consent of the Holders of at least 66.6% (or more if required by law) of
the then outstanding shares of Series A Stock:
(a) Amend, waive or repeal any provisions of, or add any provision to,
(i) this Certificate of Designation or (ii) any provision of the Corporation's
Certificate of Incorporation or any other certificate of designation filed with
the Secretary of State of Delaware by the Corporation with respect to its
preferred stock;
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<PAGE> 7
(b) Amend, waive or repeal any provisions of, or add any provision to,
the Corporations By-Laws;
(c) Authorize, create, issue or sell any shares of Equivalent Stock or
Superior Stock (other than Series B Stock, Series C Stock and Series D Stock);
except as authorized in this Certificate of Designation;
(d) Issue any shares of Series A Stock other than pursuant to the
Purchase Agreements or upon transfers of outstanding shares of Series A Stock;
(e) Enter into any agreement, indenture or other instrument which
contains any provisions restricting the Corporation's obligation to pay
dividends on or make redemptions of the Series A Stock in accordance with
Sections 4 and 5 hereof;
(f) Dissolve the Corporation.
7. Definitions. As used in this Certificate of Designation, the
following terms have the following meanings:
"Affiliate" shall mean any entity controlling, controlled by or under
common control with another entity. For the purposes of this definition,
"control" shall have the meaning presently specified for that word in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act.
"Assets" shall mean an interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Board" shall mean the Board of Directors of the Corporation.
"Common Stock" shall mean the Corporation's Common Stock, par value
$.001 per share, and any stock into which such stock may hereafter be changed.
"Equivalent Stock" shall mean any shares of any class or series of
Stock of the Corporation having any preference or priority as to dividends or
Assets on a parity with any such preference or priority of the Series A Stock
and no preference or priority as to dividends or Assets superior to any such
preference or priority of the Series A Stock and any instrument or Security
convertible into or exchangeable for Equivalent Stock. Without limiting the
generality of the foregoing, a dividend rate, mandatory or optional sinking fund
payment amounts or schedules or optional redemption provisions, the existence of
a conversion right or the existence of a liquidation preference of up to 100% of
the original issue price plus unpaid accrued dividends plus a premium of up to
the dividend rate or up to the percentage of the equity of the Corporation
represented by such Stock, with respect to any class or series of Stock,
differing from that of the Series A Stock, shall not prevent such class of Stock
from being Equivalent Stock.
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<PAGE> 8
"Existing Investors" shall mean Ian Williams, Nelgo Investments, Samuel
Hashman, MPN Partners, Ltd., Park `N View General Partner, Inc. and the
Investors (as defined in the Purchase Agreements).
"Holders" shall mean the Persons who shall, from time to time, own of
record, or beneficially, any Security. The term "Holder" shall mean one of the
Holders.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government organization or an agency
or political subdivision thereof.
"Purchase Agreements" shall mean those certain purchase agreements,
dated as of October 31, 1995, between the Corporation and each of the Investors,
as defined therein, providing for the purchase and sale of Subordinated Notes,
Series A Stock and Common Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument convertible
into or exchangeable for Securities or a Security. The term "Security" shall
mean one of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended
prior to or after the date hereof, or any federal statutes or statutes which
shall be enacted to take the place of such Act together with all rules and
regulations promulgated thereunder.
"Securities and Exchange Commission" shall mean the United States
Securities and Exchange Commission or any successor to the functions of such
agency.
"Series A Stock Value" shall mean $10.00 per share of Series A Stock.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, corporate stock.
"Subordinated Notes" shall mean the $1,000 subordinated promissory with
an 8% coupon purchasable pursuer to the Purchase Agreements.
"Superior Stock" shall mean any shares of any class or series of Stock
of the Corporation having any preference or priority as to dividends or Asset
superior to any such preference or priority of the Series A Stock and any
instrument or security convertible into or exchangeable for Superior Stock.
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<PAGE> 9
IN WITNESS WHEREOF, PNV.net, Inc. has caused this Amended Certificate
to be duly executed this 15th day of September, 1999.
PNV.NET, INC.
By: /s/ Robert P. May
------------------------------------
Name: Robert P. May
Title: Chief Executive Officer
Attest:
/s/ Anthony Allen
- ----------------------------
Anthony Allen, Secretary
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EXHIBIT 3.7
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF PNV.NET, INC.
PNV.net, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that pursuant to the authority contained in Article Seventh of the
Corporation's Certificate of Incorporation, and in accordance with Section 242
of the General Corporation Law of the State of Delaware (the "DGCL"), the
following resolution was duly adopted by the Board of Directors of the
Corporation, amending a series of its Preferred Stock designated as Series B 7%
Cumulative Convertible Preferred Stock:
WHEREAS, the amendment of the designations herein certified has been
duly adopted by the Corporation's Board of Directors and Holders of the Series A
Preferred Stock (the "Series A Stock"), the Holders of the Series B 7%
Cumulative Convertible Preferred Stock (the "Series B Stock"), and the Holders
of the Series C 7% Cumulative Convertible Preferred Stock (the "Series C
Stock"); and
WHEREAS, the Certificate of Incorporation of the Corporation provides
for two classes of shares known as common stock, $.001 par value per share (the
"Common Stock"), and preferred stock, $.01 par value per share ("Preferred
Stock"); and
WHEREAS, the Corporation has created: (i) a series of Preferred Stock
designated as Series A Preferred Stock; (ii) a series of Preferred Stock
designated as Series B 7% Cumulative Convertible Preferred Stock; and (iii) a
series of Preferred Stock designated as Series C 7% Cumulative Convertible
Preferred Stock; and (iii) a series of Preferred Stock designated as Series D 7%
Cumulative Convertible Preferred Stock ("Series D Stock"); and
WHEREAS, the Board of Directors of the Corporation is authorized by the
Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series B 7% Cumulative Convertible
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series B 7%
Cumulative Convertible Preferred Stock as follows:
<PAGE> 2
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series B 7% Cumulative Convertible Preferred Stock" (referred to
herein as the "Series B Stock").
2. Authorized Number. The number of shares constituting the Series B
Stock shall be 1,372,370.
3. Dividends. The holders of shares of Series B Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of assets legally available for such purpose, dividends at the rate of
$0.7651 (i.e., 7%) (as adjusted for stock splits, and other subdivisions and
combinations of Common Stock after the date of the Purchase Agreements
("Recapitalization Events")) per share per annum, which shall be payable when
and if declared by the Board of Directors or shall accrue quarterly on the last
day of January, April, July and October in each year, commencing on January 31,
1997; provided, however, that upon an Event of Default (as hereinafter defined)
and so long as it shall continue, such dividend rate shall be $0.9837 (i.e., 9%)
(as adjusted for Recapitalization Events) per share per annum. Dividends on the
Series B Stock shall be cumulative so that if, for any dividend accrual period,
cash dividends at the rate hereinabove specified are not declared and paid or
set aside for payment, the amount of accrued but unpaid dividends shall
accumulate and shall be added to the dividends payable for subsequent dividend
accrual periods and upon any redemption or conversion of shares of Series B
Stock. If any shares of Series B Stock are issued on a date which does not
coincide with a dividend payment date, then the initial dividend accrual period
applicable to such shares shall be the period from the date of issuance thereof
through whichever of January 31, April 30, July 31, or October 31 next occurs
after the date of issuance. If the date fixed for payment of a final liquidating
distribution on any shares of Series B Stock, or the date on which any shares of
Series B Stock are redeemed or converted into Common Stock does not coincide
with a dividend payment date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend accrual period
applicable to such shares shall be the period from whichever of February 1, May
1, August 1 or November 1 most recently precedes the date of such payment,
conversion or redemption through the effective date of such payment, conversion
or redemption. Dividends paid in cash on the shares of Series B Stock (or Series
A Stock, Series C Stock or Series D Stock, which shall rank pari passu with the
Series B Stock) in an amount less than the total amount of such dividends shall
be allocated pro rata so that the total value of dividends paid on the Preferred
Stock shall in all cases bear to each other the same ratio that the total value
of accrued and unpaid dividends on the Series A Stock, Series B Stock, Series C
Stock and Series D Stock bear to each other. Without the written consent of the
holders of at least 66 2/3% of the then outstanding Series B Stock, the
Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities (as defined herein) of the Corporation unless at the time of such
declaration, payment or distribution all dividends on the Series B Stock accrued
for all past dividend accrual periods shall have been paid and the full
dividends thereon for the current dividend period shall be paid or declared and
set aside for payment. Notwithstanding any other term or condition of this
Section 3 to the contrary, upon the consummation of a Qualifying Offering (as
defined below) and in connection with the conversion of the Series B Stock
pursuant to Section 5 hereof, the Company may pay any and all accrued but unpaid
dividends on the Series
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<PAGE> 3
B Stock with shares of Common Stock, each share of which shall, for the purposes
of determining the number of shares of Common Stock issuable in satisfaction of
such accrued but unpaid dividends pursuant to this Section 3, be deemed to have
a value equal to the price at which the Common Stock is sold in such Qualifying
Offering.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series B Stock shall be entitled, before any distribution or
payment is made upon any Common Stock or any other class or series of
stock ranking junior to the Series B Stock as to distribution of assets
upon liquidation (other than the Series A Stock, the Series C Stock and
the Series D Stock of the Corporation which shall rank pari passu with
the Series B Stock), to be paid an amount equal to $10.93 per share (as
adjusted for Recapitalization Events) plus all accrued and unpaid
dividends to such date (collectively, the "Liquidation Payments"). If
upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the assets to be distributed among
the holders of Series B Stock shall be insufficient to permit payment
in full to the holders of Series B Stock of the Liquidation Payments,
then the entire assets of the Corporation shall be distributed ratably
among such holders and the holders of any class of preferred stock
ranking on a parity with the Series B Stock in proportion to the full
respective distributive amounts to which they are entitled.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after the holders of Series B Stock shall have been paid
in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference
to the holders of Common Stock and any other class or series of stock
ranking junior to the Series B Stock as to distribution of assets upon
liquidation.
(c) Written notice of a liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Payments, the
amounts to be paid to the holders of Common Stock (both per share and
in the aggregate) upon such a liquidation, dissolution or winding up,
and the place where said Liquidation Payments shall be payable, shall
be given by mail, postage prepaid, not less than 30 days prior to the
payment date stated therein, to each holder of record of Series B Stock
at its post office address as shown by the records of the Corporation.
5. Conversion.
The holders of the Series B Stock shall have the following conversion
rights:
(a) Optional Conversion. Each share of Series B Stock shall be
convertible at any time, at the option of the holder of record thereof,
into fully paid and nonassessable shares of Common Stock at the
"conversion rate" (as defined in paragraph (c) below) then in effect
upon surrender to the Corporation or its transfer agent of the
certificate or
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<PAGE> 4
certificates representing the Series B Stock to be converted, as
provided below, or if the holder notifies the Corporation or its
transfer agent that such certificate or certificates have been lost,
stolen or destroyed, upon the execution and delivery of an agreement
satisfactory to the Corporation to indemnify the Corporation from any
losses incurred by it in connection therewith.
(b) Conversion on Qualifying Offering. Upon the consummation
of a Qualifying Offering (as defined below), upon not less than ten
(10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series B Stock shall be
converted into fully paid and nonassessable shares of Common Stock at
the conversion rate then in effect. A "Qualifying Offering" means (i)
the Corporation shall have consummated a firm commitment underwritten
public offering of its Common Stock by a nationally recognized
investment banking firm pursuant to an effective registration under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock which results in gross proceeds of at least $20,000,000,
(ii) the Common Stock is quoted or listed by either The Nasdaq Stock
Market (National Market) ("Nasdaq"), the New York Stock Exchange or the
American Stock Exchange, and (iii) the price at which the Common Stock
is sold in such offering is at least equal to an amount which (x) is
200% of the then effective conversion price or (y) would represent, on
an as converted basis, a compound annual rate of return of 35% based
upon the original issuance price of the Series B Stock. Upon the
achievement of (i), (ii) and (iii) above and the giving of the
mandatory conversion notice by the Corporation, the outstanding shares
of Series B Stock to be converted shall be converted automatically
without any further action by the holders of such shares and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of
Series B Stock surrendered for conversion under this Section 5.
Initially, the conversion rate shall be 1.0, i.e., 1.0 share of Common
Stock for each share of Series B Stock being converted. Such conversion
rate shall be subject to adjustment as provided in Section 7 below. As
used herein, the term "conversion price" shall be an amount computed by
dividing $10.93 by the conversion rate then in effect. Initially, the
conversion price shall be $8.00 per share of Common Stock. If any
fractional interest in a share of Common Stock would be deliverable
upon conversion of Series B Stock (taking into account all shares of
Series B Stock being converted by each holder), the Corporation shall
pay in lieu of such fractional share an amount in cash equal to the
conversion price of such fractional share (computed to the nearest one
hundredth of a share) in effect at the close of business on the date of
conversion. Any shares of Series B Stock which have been converted
shall be canceled and all dividends on converted shares shall cease to
accrue and the certificates representing shares of Series B Stock so
converted shall represent the right to receive (i) such number of
shares of Common Stock into which such shares of Series B Stock are
convertible, plus (ii) cash payable for any fractional share plus (iii)
all accrued but unpaid dividends relating to such shares through the
immediately
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<PAGE> 5
preceding dividend payment date. Upon the conversion of shares of
Series B Stock as provided in this Section 5, the Corporation shall
promptly pay all then accrued but unpaid dividends to the holder of the
Series B Stock being converted. The Board of Directors of the
Corporation shall at all times reserve a sufficient number of
authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of an optional
conversion, before any holder of Series B Stock shall be entitled to
convert the same into shares of Common Stock, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or its transfer agent for the Series B Stock, and shall
give written notice to the Corporation of the election to convert the
same and shall state therein the name or names in which the certificate
of certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series B Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series B Stock in any case in which fewer than all
of the shares of Series B Stock represented by a certificate are
converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies
that the shares of Common Stock to be issued on conversion are to be
issued in a name or names other than the name or names in which such
surrendered shares stand, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series B Stock at the time of surrender of the
shares involved, the shares of Common Stock issued upon conversion
thereof may be registered in the name or names in which the surrendered
shares were registered, despite the instructions to the contrary.
6. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series B Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (including the
sale and issuance of any shares of Common Stock at any time
directly or indirectly owned or held by or for the account of
the Corporation), or deemed to be issued by the Corporation
pursuant to paragraph (g) of this Section 6, after the
Original Issue Date except:
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<PAGE> 6
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to, the
Series B Stock, the Series C Stock or the Series D
Stock now or hereafter issued by the Corporation;
(B) up to 2,184,166 shares of Common Stock
(as reduced by previously exercised options to
purchase 10,432 shares of Common Stock) issuable upon
the exercise of options issued to officers, directors
employees, and consultants of the Corporation under
stock option plans maintained from time to time by
the Corporation and approved by the Board of
Directors, subject to adjustment for all subdivisions
and combinations;
(C) up to 186,750 shares of Common Stock
issuable upon the exercise of the Warrant held by
Alex. Brown & Sons Incorporated;
(D) up to 505,375 shares of Common Stock
issuable upon the exercise of warrants to be granted
to lenders in connection with loans to the
Corporation or to guarantors or purchasers of such
loans;
(E) up to 75,000 shares of Common Stock
issuable upon the exercise of the Warrant held by
Volpe Brown Whelan & Company, LLC;
(F) up to 12,000 shares of Common Stock
issuable upon the exercise of warrants to be issued
to customers in connection with contracts between the
Corporation and such customers; and
(G) shares of Common Stock issued with
respect to adjustments of the conversion price
hereunder.
(ii) The term "Common Stock" shall be deemed to mean
(i) the Common Stock, $.001 par value, and (ii) the stock of
the Corporation of any class, or series within a class,
whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets
of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than Series B
Stock, Series C Stock and Series D Stock issued prior to the
Original Issue Date) or other securities directly or
indirectly convertible into or exercisable or exchangeable for
Common Stock.
(iv) The term "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire
directly or indirectly Common Stock or Convertible Securities.
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<PAGE> 7
(v) The term "Original Issue Date" shall mean the
date of the initial issuance of the Series B Stock.
(vi) The term "Fair Market Price" shall mean with
respect to a share of Common Stock (i) prior to the first
anniversary of the Original Issue Date, $10.93, and (ii)
subsequent to the first anniversary of the Original Issue
Date, the average closing bid price of the Common Stock as
reported by Nasdaq (or the last sale price if the Common Stock
is traded on an exchange) for a period of thirty (30)
consecutive trading days ending on the third day prior to the
date of determination, or, if the Common Stock is not listed
on Nasdaq or an exchange, the fair market value as determined
by the vote of 66 2/3% of the Corporation's Board of Directors
or if the Board of Directors cannot reach such agreement, as
determined by a qualified independent investment banker
appointed by the vote of 66 2/3% of the Corporation's Board of
Directors.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from no par
value to par value or a transaction described in subsection (c) or (d)
below, each share of Series B Stock shall, after such reorganization,
share exchange or reclassification (a "Reclassification Event"), be
convertible at the option of the holder into the kind and number of
shares of stock or other securities or other property of the
Corporation which the holder of Series B Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon
conversion of his Series B Stock immediately prior to such
reorganization, share exchange, or reclassification (subject to
adjustment as provided in this Section 6)
(c) Consolidation, Merger. In the event of a merger or
consolidation to which the Corporation is a party each share of Series
B Stock shall, after such merger or consolidation, be convertible at
the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of
such share of Series B Stock would have been entitled to receive if the
holder had held the Common Stock issuable upon conversion of such share
of Series B Stock immediately prior to such consolidation or merger
(subject to adjustment as provided in this Section 6).
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is earlier.
In case outstanding shares of Common Stock shall be combined, the
conversion price shall be proportionately increased as of the effective
date of such combination, or as of the date a record is taken of the
holders of Common Stock for the purpose of so combining, whichever is
earlier.
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<PAGE> 8
(e) Stock Dividends. In case shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such
dividend is declared), then the conversion price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the earliest of the date of such declaration,
payment or other distribution), to that price determined by multiplying
the conversion price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the declaration of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding as of the time of the declaration and giving
effect to such dividend or other distribution as if paid. In the event
that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (g) below) after the Original Issue Date (other
than as provided in the foregoing subsections (b) through (e)), for no
consideration or for a consideration per share less than the greater of
(i) the Fair Market Price in effect on the date of and immediately
prior to such issue or (ii) the conversion price in effect on the date
of and immediately prior to such issue, then in such event, the
conversion price shall be reduced (but not increased) as follows:
(i) For issuances of Additional Shares of Common
Stock on or before 12 months after the Original Issue Date,
the conversion price shall be reduced (but not increased)
concurrently with any such issuance as follows: the conversion
price will equal the issuance or sales price of the Additional
Shares of Common Stock.
(ii) For issuances of Additional Shares of Common
Stock at any time after 12 months after the Original Issue
Date, the conversion price shall be reduced (but not
increased) concurrently with any such issuance to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number
of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the
conversion price in effect immediately prior to such
issuance or sale, plus (y) the aggregate
consideration received or deemed to be received by
the Corporation upon such issuance or sale, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or
sale.
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<PAGE> 9
For purposes of the formulas expressed in paragraph 6(e) and
6(f), all shares of Common Stock issuable upon the exercise of
outstanding Options or issuable upon the conversion of the Series B
Stock, the Series C Stock and the Series D Stock or outstanding
Convertible Securities (including Convertible Securities issued upon
the exercise of outstanding Options), shall be deemed outstanding
shares of Common Stock both immediately before and after such issuance
or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options, or, in the case of
Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue of Options or
Convertible Securities or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided that
in any such case in which Additional Shares of Common Stock are deemed
to be issued:
(i) except as provided in Section 6(g)(ii) below, no
further adjustments in the conversion price shall be made upon
the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the issue of
Common Stock upon the conversion or exchange of such
Convertible Securities, in accordance with their terms;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise (or
the terms of such Options or Convertible Securities are
amended or modified to provide), for any increase or decrease
in the consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such
Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the
conversion price shall affect Common Stock previously issued
upon conversion of the Series B Stock);
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the conversion
price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect
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<PAGE> 10
thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor
was the consideration actually received by the
Corporation (x) for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon exercise of
the Options or (y) for the issue of all such
Convertible Securities which were actually converted
or exchanged plus the additional consideration, if
any, actually received by the Corporation upon the
conversion or exchange of the Convertible Securities;
and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the conversion price
to an amount which exceeds the lower of (x) the conversion
price on the original adjustment date or (y) the conversion
price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date
and such readjustment date.
(v) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the conversion price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(iii) above.
(h) Determination of Consideration. For purposes of this
Section 6, the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the Corporation;
and
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(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of the issue, as determined by the vote of
66 2/3% of the Corporation's Board of Directors or if
the Board of Directors cannot reach such agreement,
by a qualified independent public accounting firm,
other than the accounting firm then engaged as the
Corporation's independent auditors, agreed upon by
the Corporation on the one hand and the holders of 66
2/3% of the outstanding shares of Series B Stock on
the other hand.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to paragraph (g) above, relating to Options and
Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(i) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 6, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect on the Original Issue Date, by (y) the
adjusted conversion price.
(j) Other Provisions Applicable to Adjustment Under this
Section. The following provisions will be applicable to the adjustments
in conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for
the account of the Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding
number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable effect on
the holders of
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<PAGE> 12
Series B Stock, the conversion price shall be adjusted in such
manner and at such time as the Board of Directors of the
Corporation on the advice of the Corporation's independent
public accountants may in good faith determine to be equitable
in the circumstances.
(iii) Minimum Adjustment. No adjustment of the
conversion price shall be made if the amount of any such
adjustment would be an amount less than one percent (1%) of
the conversion price then in effect, but any such amount shall
be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall
not be adjusted upward except in the event of a combination of
the outstanding shares of Common Stock into a smaller number
of shares of Common Stock or in the event of a readjustment of
the conversion price pursuant to Section 6(g)(ii) or (iii).
(k) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series B Stock.
7. Redemption.
(a) Mandatory Redemption. On the date six (6) months
immediately after the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate principal amount of Seventy-five
Million Dollars ($75,000,000.00) (referred to herein as the "Mandatory
Redemption Date") the Corporation shall redeem all the shares of Series
B Stock originally issued hereunder (or such lesser amount as shall
then be outstanding) at the "Redemption Price" per share defined in
paragraph (c) below, payable in each case in cash on the Mandatory
Redemption Date. The Corporation shall deliver notice of the pending
redemption to the holders of the Series B Stock at least thirty (30)
but no more than sixty (60) days prior to the Mandatory Redemption
Date.
(b) Redemption on Change of Control. Upon a "Change of
Control" of the Corporation, each holder of the then outstanding shares
of Series B Stock may elect to have the Corporation redeem all (but not
less than all) outstanding shares of Series B Stock owned by such
holder at the "Redemption Price" per share defined in paragraph (c)
below, payable in cash on any date within 100 days of the effective
date of the Change of Control (such date being herein referred to as
the "Change of Control Redemption Date").
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<PAGE> 13
The election shall be made by delivering written notice to the
Corporation at least thirty (30) but no more than sixty (60) days prior
to the Change of Control Redemption Date. The Corporation will then be
required to redeem all the shares of Series B Stock owned by such
holder on the Change of Control Redemption Date. For purposes of this
Section 7, "Change of Control" means any one or more of the following
events:
(i) The Corporation shall consolidate with or merge
into any another person or any person shall consolidate with
or merge into the Corporation (other than a consolidation or
merger of the Corporation and a wholly-owned subsidiary of the
Corporation in which all shares of the Corporation's Common
Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration), in either event pursuant to a transaction in
which any of the Corporation's common stock outstanding
immediately prior to the effectiveness thereof is changed into
or exchanged for cash, securities or other property; or
(ii) the Corporation shall directly or indirectly
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any
person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act") (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share
exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value
to par value; or
(iv) any person (other than the Corporation, any
subsidiary of the Corporation or an Existing Investor (as
defined in the Purchase Agreement (as hereinafter defined))),
including a "group" (within the meaning of Section 13(d) and
14(D)(2) of the 1934 Act) that includes such person, shall
purchase or otherwise acquire, directly or indirectly,
beneficial ownership of securities of the Corporation and, as
a result of such purchase or acquisition, such person
(together with its associates and affiliates) shall directly
or indirectly beneficially own in the aggregate (1) more than
50% of the Common Stock, or (2) securities representing more
than 50% of the combined voting power of the Corporation's
voting securities, in each case under subclause (1) or (2),
outstanding on the date immediately prior to the date of such
purchase or acquisition (or, if there be more than one, the
last such purchase or acquisition).
(c) The Redemption Price per share of Series B Stock shall
equal the sum of (x) $10.93 (as adjusted for Recapitalization Events)
plus (y) all accrued and unpaid dividends on such share of Series B
Stock to the Mandatory Redemption Date or Change of Control Redemption
Date, as the case may be.
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<PAGE> 14
(d) The term "Redemption Date" as used in this paragraph (d)
shall refer to whichever of the Mandatory Redemption Date or the Change
of Control Redemption Date is applicable in a particular circumstance.
On or prior to the Redemption Date, the Corporation shall deposit the
Redemption Price of all outstanding shares of Series B Stock to be
redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of
the holders of the shares of Series B Stock, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or
after the Redemption Date upon receipt of the certificate or
certificates of the shares of Series B Stock to be redeemed. From and
after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Series B Stock to be redeemed as holders of Series B Stock (except the
right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series B
Stock redeemed, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series B
Stock (or Series A Stock, Series C Stock and Series D Stock, which
shall rank pari passu with the Series B Stock) are insufficient to
redeem the total number of shares of Preferred Stock to be redeemed on
such date, the Corporation will use those funds which are legally
available therefor to redeem the maximum possible number of shares of
Preferred Stock ratably among the holders of such shares to be redeemed
based upon the total amount payable by the Corporation pursuant to the
redemption of the Series A Stock, Series B Stock, Series C Stock and
Series D Stock if the Corporation had sufficient funds legally
available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series B Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of shares of Series B Stock
such funds will immediately be used to redeem the balance of the shares
of Series B Stock to be redeemed. No dividends or other distributions
shall be declared or paid on, nor shall the Corporation redeem,
purchase or acquire any shares of, the Common Stock or any other class
or series of stock of the Corporation unless the Redemption Price of
all shares elected to be redeemed shall have been paid in full. Until
the Redemption Price for a share of Series B Stock elected to be
redeemed shall have been paid in full, such share of Series B Stock
shall remain outstanding for all purposes and entitle the holder
thereof to all the rights and privileges provided herein, including,
without limitation, that dividends and interest thereon shall continue
to accrue and, if unpaid prior to the date such shares are redeemed,
shall be included as part of the Redemption Price as provided in
paragraph (c) above. Notwithstanding anything in this Section 7 to the
contrary, even if a notice of redemption was delivered under paragraph
(a) or (b) of this Section 7, all shares of Series B Stock shall be
convertible pursuant to Section 5 at all times prior to the Redemption
Date.
(e) Notwithstanding any other term of this Certificate of
Designation, the Corporation shall not redeem (or have any obligation
to redeem) any shares of Series B
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<PAGE> 15
Stock under any circumstances, whether upon a Change of Control or
otherwise, prior to the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate principal amount of up to
$75,000,000.00. If the Corporation shall not have paid in full or
satisfied all of its obligations to such lenders on or before any
Redemption Date, upon such payment and satisfaction the Corporation
will immediately use any funds legally available therefor to redeem the
shares of Series B Stock to be redeemed.
8. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or (e) of
a Change of Control, then the Corporation shall cause to be mailed to the
recordholders of the Series B Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation, winding up or Change of Control is
expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation, liquidation,
merger, sale, lease, exchange, dissolution, liquidation, winding up or Change of
Control.
9. Voting Rights.
(a) Holders of Series B Stock shall be entitled to notice of
any stockholder's meeting. Except as otherwise required by law or
provided herein, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any
such meeting, each outstanding share of Series B Stock shall be
entitled to the number of votes equal to the number of full shares of
Common Stock into which such share of Series B Stock is then
convertible. Except as otherwise required by law or provided herein,
the Series B Stock, the Series C Stock, the Series D Stock and the
Common Stock shall vote together on each matter submitted to
stockholders, and not by class or series.
(b) Prior to the consummation of a Qualifying Offering by the
Corporation of its Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended, the holders of
the Series B Stock, voting together as a class, shall be
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<PAGE> 16
entitled to elect one (1) director to the Corporation's Board of
Directors. Subsequent to such Qualifying Offering, the holders of a
majority of the Common Stock issuable upon conversion of the Series B
Stock shall be entitled to nominate one (1) director for election to
the Corporation's Board of Directors which the Corporation shall
nominate to management's slate for election; provided, however, that
the right provided for in this last sentence of subsection 9(b) shall
be effective only for so long as at least 66 2/3% of the shares of
Common Stock issuable upon conversion of the Series B Stock are held of
record by the original Purchasers (as defined in the Purchase
Agreement) of the Series B Stock.
Notwithstanding the foregoing, upon an Event of Default and so
long as it shall continue, the holders of the Series B Stock, the
Series C Stock and the Series D Stock, voting together as a class,
shall be entitled at any annual meeting of the stockholders or special
meeting held in place thereof, or at a special meeting of the holders
of the Series B Stock, the Series C Stock and the Series D Stock called
as hereinafter provided, to elect a majority of the Board of Directors
and such right to elect a majority of the Board of Directors shall be
in lieu of the right of the holders of Series B Stock and the Series C
Stock (and, as may be provided pursuant to the terms of the Certificate
of Designations, Preferences and Rights of the Series D Stock, the
Series D Stock) to each elect one director. Such right of the holders
of the Series B Stock, the Series C Stock and the Series D Stock to
elect a majority of the Board of Directors may be exercised until an
Event of Default shall be cured, if curable, or waived, and when so
cured or waived, the right of the holders of the Series B Stock, the
Series C Stock and the Series D Stock to elect a majority of the Board
of Directors shall cease and the right of the holders of the Series B
Stock and the Series C Stock (and, as may be provided pursuant to the
terms of the Certificate of Designations, Preferences and Rights of the
Series D Stock, the Series D Stock) to each elect one director shall
resume, but subject always to the same provisions for the vesting of
such special voting rights in the case of any such future Event of
Default. At any time when such special voting rights shall have so
vested in the holders of the Series B Stock, the Series C Stock and the
Series D Stock, the Secretary of the Corporation may, and upon the
written request of the holders of 10% or more of the number of shares
of the Series B Stock, the Series C Stock and the Series D Stock then
outstanding addressed to him at the principal office of the
Corporation, shall, call a special meeting of the holders of the Series
B Stock, the Series C Stock and the Series D Stock for the election of
a majority of the Board of Directors to be elected by them as provided
herein, to be held in the case of such written request as soon as
practicable after delivery of such request, and in either case to be
held at the place and upon the notice provided by law and in the
by-laws for the holding of meetings of stockholders. If at any such
annual or special meeting or adjournment thereof the holders of at
least a majority of the Series B Stock, the Series C Stock and the
Series D Stock then outstanding shall be present or represented at such
meeting, the then authorized number of directors of the Corporation
shall be increased to the extent necessary to provide a majority of new
directors to be elected and the holders of the Series B Stock, the
Series C Stock and the Series D Stock shall be entitled to elect the
additional directors so provided for. The directors so elected shall
serve until the next annual meeting or until their successors shall
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<PAGE> 17
be elected and qualified, provided, however, that whenever the holders
of the Preferred Stock shall be divested of the special rights to elect
a majority of the Board of Directors as above provided, the term of
office of the persons so elected as directors by the holders of the
Series B Stock, the Series C Stock and the Series D Stock as a class,
or elected to fill any vacancies resulting from the death, resignation
or removal of the directors so elected by the holders of the Series B
Stock, the Series C Stock and the Series D Stock, shall forthwith
terminate and the authorized number of directors shall be reduced
accordingly.
If during any interval between any special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock for the election of directors to be elected by them as provided
above and the next ensuing annual meeting of stockholders, or between
annual meetings of stockholders for the election of directors, and
while the holders of the Series B Stock, the Series C Stock and the
Series D Stock shall be entitled to elect a majority of the Board of
Directors, any of the directors who have been elected by the holders of
the Series B Stock, the Series C Stock and the Series D Stock shall, by
reason of resignation, death or removal, have departed from the Board,
the Secretary of the Corporation shall call a special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock and such vacancy or vacancies shall be filled at such special
meeting.
No director elected by the holders of Series B Stock as a
class, or elected by other directors to fill a vacancy resulting from
the death, resignation or removal of a director elected by such class
vote, may be removed from office by the vote or written consent of
stockholders unless such vote or written consent includes that of the
holders of a majority of the outstanding shares of Series B Stock.
(c) In addition to any other vote or consent of stockholders
provided by law or by the Corporation's Certificate of Incorporation,
the Corporation shall not, without the approval by vote or written
consent of the holders of not less than 66 2/3% of the then outstanding
shares of Series B Stock:
(i) amend, waive or repeal any provisions of, or add
any provision to, (i) this Certificate of Designation or (ii)
any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation filed
with the Secretary of State of Delaware by the Corporation
with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add
any provision to, the Corporation's By-Laws;
(iii) authorize, create, issue or sell any shares of
Equivalent Stock or Superior Stock (other than Series A Stock,
Series C Stock and Series D Stock); except as authorized in
this Certificate of Designation;
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(iv) issue any shares of Series B Stock other than
pursuant to the Purchase Agreement or upon transfers of
outstanding shares of Series B Stock;
(v) enter into any agreement, indenture or other
instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on or make
redemptions of the Series B Stock in accordance herewith; or
(vi) dissolve the Corporation.
"Assets" shall mean an interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Equivalent Stock" shall mean any shares of any class or
series of Stock of the Corporation having any preference or priority as
to dividends or Assets on a parity with any such preference or priority
of the Series B Stock and no preference or priority as to dividends or
Assets superior to any such preference or priority of the Series B
Stock and any instrument or Security directly or indirectly convertible
into or exercisable or exchangeable for Equivalent Stock. Without
limiting the generality of the foregoing, a dividend rate, mandatory or
optional sinking fund payment amounts or schedules or optional
redemption provisions, the existence of a conversion right or the
existence of a liquidation preference of up to 100% of the original
issue price plus unpaid accrued dividends plus a premium of up to the
dividend rate or up to the percentage of the equity of the Corporation
represented by such Stock, with respect to any class or series of
Stock, differing from that of the Series B Stock, shall not prevent
such class of Stock from being Equivalent Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument
directly or indirectly convertible into or exercisable or exchangeable
for Securities or Security. The term "Security" shall mean one of the
Securities.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate
stock.
"Superior Stock" shall mean any shares of any class or series
of Stock of the Corporation having any preference or priority as to
dividends or Assets superior to any such preference or priority of the
Series B Stock and any instrument or security directly or indirectly
convertible into or exercisable or exchangeable for Superior Stock.
(d) Notwithstanding anything else contained herein, the
affirmative vote or written consent of the holders of not less than 90%
of the then outstanding shares of Series B Stock shall be necessary to
amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or the Certificate of Designation creating
this Series B Stock which would alter or change (i) the dividend rate,
(ii) redemption provisions, (iii) anti-dilution provisions, (iv) the
place or currency of payments hereunder, (v) the right to institute
suit for the enforcement of any payment hereunder, (vi) the
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conversion provisions, or (vii) provisions of this Section 9, so as to
affect any of the foregoing adversely.
10. Preemptive Rights.
(a) The Corporation shall not issue or sell any shares of
Common Stock, Preferred Stock or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares
of Common Stock, other than any such issuance or sale (i) pursuant to a
Qualifying Offering, (ii) pursuant to a stock option plan approved by
the Board of Directors, (iii) as a form of consideration in connection
with mergers or acquisitions where the Corporation is the surviving
entity or (iv) where the aggregate gross proceeds are less than
$500,000 in any single transaction, provided that the sale price per
share is not less than the then applicable fair market value of such
shares, as determined in good faith by the Corporation's Board of
Directors, and, provided further, that the aggregate gross proceeds of
all such transactions shall not exceed $1,500,000 (the securities
issued in such transactions being referred to as the "Newly Issued
Securities"), unless prior to the issuance or sale of such Newly Issued
Securities each holder of Series B Stock shall have been given the
opportunity (such opportunity being herein referred to as the
"Preemptive Right") to purchase (on the same terms as such Newly Issued
Securities are proposed to be sold) the same proportion of such Newly
Issued Securities being issued or offered for sale by the Corporation
as (x) the number of shares of Common Stock (calculated solely on
account of outstanding shares of Series B Stock on an as converted
basis) held by such holder on the day preceding the date of the
Preemptive Notice (as defined herein), as the case may be, bears to (y)
the total number of shares of Common Stock (calculated on a fully
diluted basis) outstanding on that day.
(b) Prior to the issuance or sale by the Corporation of any
Newly Issued Securities, the Corporation shall give written notice
thereof (the "Preemptive Notice") to each holder of Series B Stock. The
Preemptive Notice shall specify (i) the name and address of the bona
fide investor to whom the Corporation proposes to issue or sell Newly
Issued Securities, (ii) the total amount of capital to be raised by the
Corporation pursuant to the issuance or sale of Newly Issued
Securities, (iii) the number of Securities of such Newly Issued
Securities proposed to be issued or sold, (iv) the price and other
terms of their proposed issuance or sale, (v) the number of such Newly
Issued Securities which such holder is entitled to purchase (determined
as provided in subsection (a) above), and (vi) the period during which
such holder may elect to purchase such Newly Issued Securities, which
period shall extend for at least thirty (30) days following the receipt
by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series B Stock who desires to purchase Newly
Issued Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Newly Issued Securities he wishes to
purchase, as well as the number, if any, of additional Newly Issued
Securities he would be willing to purchase in the event that all of the
Newly Issued Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series B Stock.
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(c) In the event a holder of Series B Stock declines to
subscribe for all or any part of its pro rata portion of any Newly
Issued Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive Acceptance
Period, then the other holders of Series B Stock shall have the right
to subscribe for all (or any declined part) of the Declining Preemptive
Purchaser's pro rata portion of such Newly Issued Securities (to be
divided among the other holders of Series B Stock desiring to exercise
such right on a ratable basis).
(d) Any such Newly Issued Securities which none of the holders
elect to purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of three (3) months
after the expiration of the Preemptive Acceptance Period, to any other
person or persons at not less than the price and upon other terms and
conditions not less favorable to the Corporation than those set forth
in the Preemptive Notice.
(e) The preemptive rights afforded by this Section 10, and any
obligation for the Corporation to offer such shares of Common Stock,
Preferred Stock or other securities convertible into or exchangeable
for shares of Common Stock may be waived by a written instrument signed
by the holders of sixty-six and two-thirds percent (66 2/3 %) of the
Series B Stock.
11. Events of Default. An Event of Default shall mean any of the
following:
(i) Any failure by the Corporation to pay in cash any
dividend, if and when declared by the Board of Directors, on
the payment due dates and in the amounts provided pursuant to
Section 3 hereof, if such failure shall continue for any two
quarterly periods;
(ii) Any failure by the Corporation to satisfy its
redemption obligations pursuant to Section 7 hereof if any
such failure shall continue for a period of five days from the
appropriate redemption date;
(iii) Any failure by the Corporation to comply with
the provisions of Sections 4, 5, 6, 8, 9 or 10 hereof;
(iv) If any representation or warranty made by the
Corporation in the Stock Purchase Agreement dated as of
November 13, 1996 or the exhibits or schedules thereto (the
"Purchase Agreements") is or shall be untrue in any material
respect at the time it was made, if such representation or
warranty remains untrue after 10 days' written notice, with
such notice delivered by hand or by first-class, certified or
overnight mail, postage prepaid, or by telecopier, from any
holder of Series B Stock, unless waived in writing by holders
of not less than 66 2/3% of the outstanding shares of Series B
Stock;
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(v) Any failure by the Corporation to comply with, or
any breach by the Corporation of, any of the covenants,
agreements or obligations of the Corporation contained in the
Purchase Agreements which continues for a period of 10 days
after written notice, with such notice delivered by hand or by
first-class, certified or overnight mail, postage prepaid, or
by telecopier, from any holder of Series B Stock, unless
waived in writing by holders of not less than 66 2/3% of the
outstanding shares of Series B Stock;
(vi) Default by the Corporation in the performance or
observance of any obligation or condition with respect to any
Indebtedness of the Corporation that is not cured or waived
within 90 days or if the effect of such default is to
accelerate the maturity of such Indebtedness or cause such
Indebtedness to be prepaid, purchased or redeemed or to permit
the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed or to
realize upon any collateral or security for such Indebtedness,
unless such default shall have been waived by the appropriate
person. Indebtedness of any corporation shall mean the
principal of (and premium, if any) and unpaid interest on (i)
indebtedness which is for money borrowed from others; (ii)
indebtedness guaranteed, directly or indirectly, in any manner
by such corporation, or in effect guaranteed, directly or
indirectly, by such corporation through an agreement,
contingent or otherwise, to supply funds to or in any manner
invest in the debtor or to purchase indebtedness, or to
purchase assets or services primarily for the purpose of
enabling the debtor to make payment of the indebtedness or of
assuring the owner of the indebtedness against loss; (iii) all
indebtedness secured by any mortgage, lien, pledge, charge or
other encumbrance upon assets owned by such corporation, even
if such corporation has not in any manner become liable for
the payment of such indebtedness; (iv) all indebtedness of
such corporation created or arising under any conditional
sale, lease or other title retention agreement with respect to
assets acquired by such corporation even though the rights and
remedies of the seller, lessor or lender under such agreement
or lease in the event of default are limited to repossession
or sale of such assets and provided that obligations for the
payment of rent under a lease of premises from which the
business of such corporation will be conducted shall not
constitute indebtedness; and (v) renewals, extensions and
refunding of any such indebtedness; or
(vii) If the Corporation shall:
(a) become insolvent or generally fail to
pay, or admit in writing its inability to pay, its
debts as they become due;
(b) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator
or other custodian for the Corporation or any
property
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<PAGE> 22
thereof, or make a general assignment for the benefit
of creditors (any of which shall be referred to
herein as a "Receiver");
(c) in the absence of such application,
consent or acquiescence, permit or suffer to exist
the appointment of a Receiver, and such Receiver
shall not be discharged within 60 calendar days;
(d) commit any act of bankruptcy, permit or
suffer to exist the commencement of any bankruptcy
reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or
any dissolution, winding up or liquidation proceeding
in respect of the Corporation, and, if any such case
or proceeding is not commenced by the Corporation,
such case or proceeding shall be consented to or
acquiesced in by the Corporation, or shall result in
the entry of an order for relief and shall remain for
30 calendar days undismissed; or
(e) take any corporate or other action
authorizing, or in furtherance of, any of the
foregoing.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
(The remainder of this page is intentionally left blank.)
22
<PAGE> 23
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Designations, Preferences and Rights of Series B 7%
Cumulative Convertible Preferred Stock to be executed on its behalf by Robert P.
May, its Chief Executive Officer, and attested by Anthony W. Allen, its
Secretary, this 15th day of September, 1999, each hereby declaring and
certifying that this is the act and deed of the Corporation and that the facts
stated herein are true.
PNV.NET, INC.
By /s/ Robert P. May
------------------------------------------
Robert P. May, Chief Executive Officer
ATTEST:
By: /s/ Anthony Allen
----------------------------
Anthony Allen, Secretary
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<PAGE> 1
EXHIBIT 3.8
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF PNV.NET, INC.
PNV.net, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that pursuant to the authority contained in Article Seventh of the
Corporation's Certificate of Incorporation, and in accordance with Section 242
of the General Corporation Law of the State of Delaware (the "DGCL"), the
following resolution was duly adopted by the Board of Directors of the
Corporation, amending a series of its Preferred Stock designated as Series C 7%
Cumulative Convertible Preferred Stock:
WHEREAS, the amendment of the designations herein certified has been
duly adopted by the Corporation's Board of Directors and Holders of the Series A
Preferred Stock (the "Series A Stock"), the Holders of the Series B 7%
Cumulative Convertible Preferred Stock (the "Series B Stock"), and the Holders
of the Series C 7% Cumulative Convertible Preferred Stock (the "Series C
Stock"); and
WHEREAS, the Certificate of Incorporation of the Corporation provides
for two classes of shares known as common stock, $.001 par value per share (the
"Common Stock"), and preferred stock, $.01 par value per share ("Preferred
Stock"); and
WHEREAS, the Corporation has created: (i) a series of Preferred Stock
designated as Series A Preferred Stock; (ii) a series of Preferred Stock
designated as Series B 7% Cumulative Convertible Preferred Stock; and (iii) a
series of Preferred Stock designated as Series C 7% Cumulative Convertible
Preferred Stock; and (iii) a series of Preferred Stock designated as Series D 7%
Cumulative Convertible Preferred Stock ("Series D Stock"); and
WHEREAS, the Board of Directors of the Corporation is authorized by the
Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series C 7% Cumulative Convertible
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series C 7%
Cumulative Convertible Preferred Stock as follows:
<PAGE> 2
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series C 7% Cumulative Convertible Preferred Stock" (referred to
herein as the "Series C Stock").
2. Authorized Number. The number of shares constituting the Series C
Stock shall be 3,750,000.
3. Dividends. The holders of shares of Series C Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of assets legally available for such purpose, dividends at the rate of $0.56
(i.e., 7%) (as adjusted for stock splits and other subdivisions and combinations
of Common Stock after the date of the Purchase Agreements ("Recapitalization
Events")) per share per annum, which shall be payable when and if declared by
the Board of Directors or shall accrue quarterly on the last day of January,
April, July and October in each year, commencing on August 31, 1997; provided,
however, that upon an Event of Default (as hereinafter defined) and so long as
it shall continue, such dividend rate shall be $.72 (i.e., 9%) (as adjusted for
Recapitalization Events) per share per annum. Dividends on the Series C Stock
shall be cumulative so that if, for any dividend accrual period, cash dividends
at the rate hereinabove specified are not declared and paid or set aside for
payment, the amount of accrued but unpaid dividends shall accumulate and shall
be added to the dividends payable for subsequent dividend accrual periods and
upon any redemption or conversion of shares of Series C Stock. If any shares of
Series C Stock are issued on a date which does not coincide with a dividend
payment date, then the initial dividend accrual period applicable to such shares
shall be the period from the date of issuance thereof through whichever of
January 31, April 30, July 31, or October 31 next occurs after the date of
issuance. If the date fixed for payment of a final liquidating distribution on
any shares of Series C Stock, or the date on which any shares of Series C Stock
are redeemed or converted into Common Stock does not coincide with a dividend
payment date, then subject to the provisions hereof relating to such payment,
redemption or conversion, the final dividend accrual period applicable to such
shares shall be the period from whichever of February 1, May 1, August 1 or
November 1 most recently precedes the date of such payment, conversion or
redemption through the effective date of such payment, conversion or redemption.
Dividends paid in cash on the shares of Series C Stock (or Series A Stock,
Series B Stock or Series D Stock, which shall rank pari passu with the Series C
Stock) in an amount less than the total amount of such dividends shall be
allocated pro rata so that the total value of dividends paid on the Preferred
Stock shall in all cases bear to each other the same ratio that the total value
of accrued and unpaid dividends on the Series A Stock, the Series B Stock, the
Series C and the Series D Stock bear to each other. Without the written consent
of the holders of at least 66 2/3% of the then outstanding Series C Stock, the
Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities (as defined herein) of the Corporation unless at the time of such
declaration, payment or distribution all dividends on the Series C Stock accrued
for all past dividend accrual periods shall have been paid and the full
dividends thereon for the current dividend period shall be paid or declared
2
<PAGE> 3
and set aside for payment. Notwithstanding any other term or condition of this
Section 3 to the contrary, upon the consummation of a Qualifying Offering (as
defined below) and in connection with the conversion of the Series C Stock
pursuant to Section 5 hereof, the Company may pay any and all accrued but unpaid
dividends on the Series C Stock with shares of Common Stock, each share of which
shall, for the purposes of determining the number of shares of Common Stock
issuable in satisfaction of such accrued but unpaid dividends pursuant to this
Section 3, be deemed to have a value equal to the price at which the Common
Stock is sold in such Qualifying Offering.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series C Stock shall be entitled, before any distribution or
payment is made upon any Common Stock or any other class or series of
stock ranking junior to the Series C Stock as to distribution of assets
upon liquidation (other than the Series A Preferred Stock, the Series B
Preferred Stock and the Series D Preferred Stock of the Corporation
which shall rank pari passu with the Series C Stock), to be paid an
amount equal to $8.00 per share (as adjusted for Recapitalization
Events) plus all accrued and unpaid dividends to such date
(collectively, the "Liquidation Payments"). If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series C
Stock shall be insufficient to permit payment in full to the holders of
Series C Stock of the Liquidation Payments, then the entire assets of
the Corporation shall be distributed ratably among such holders and the
holders of any class of preferred stock ranking on a parity with the
Series C Stock in proportion to the full respective distributive
amounts to which they are entitled.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after the holders of Series C Stock shall have been paid
in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference
to the holders of Common Stock and any other class or series of stock
ranking junior to the Series C Stock as to distribution of assets upon
liquidation.
(c) Written notice of a liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Payments, the
amounts to be paid to the holders of the Common Stock (both per share
and in the aggregate) upon such a liquidation, dissolution or winding
up, and the place where said Liquidation Payments shall be payable,
shall be given by mail, postage prepaid, not less than 30 days prior to
the payment date stated therein, to each holder of record of Series C
Stock at its post office address as shown by the records of the
Corporation.
3
<PAGE> 4
5. Conversion.
The holders of the Series C Stock shall have the following conversion
rights:
(a) Optional Conversion. Each share of Series C Stock shall be
convertible at any time, at the option of the holder of record thereof,
into fully paid and nonassessable shares of Common Stock at the
"conversion rate" (as defined in paragraph (c) below) then in effect
upon surrender to the Corporation or its transfer agent of the
certificate or certificates representing the Series C Stock to be
converted, as provided below, or if the holder notifies the Corporation
or its transfer agent that such certificate or certificates have been
lost, stolen or destroyed, upon the execution and delivery of an
agreement satisfactory to the Corporation to indemnify the Corporation
from any losses incurred by it in connection therewith.
(b) Conversion on Qualifying Offering. Upon the consummation
of a Qualifying Offering (as defined below), upon not less than ten
(10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series C Stock shall be
converted into fully paid and nonassessable shares of Common Stock at
the conversion rate then in effect. A "Qualifying Offering" means (i)
the Corporation shall have consummated a firm commitment underwritten
public offering of its Common Stock by a nationally recognized
investment banking firm pursuant to an effective registration under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock which results in gross proceeds of at least $20,000,000,
(ii) the Common Stock is quoted or listed by either The Nasdaq Stock
Market (National Market) ("Nasdaq"), the New York Stock Exchange or the
American Stock Exchange, (iii) the price at which the Common Stock is
sold in such offering is at least equal to an amount which (x) is 200%
of the then effective conversion price or (y) would represent, on an as
converted basis, a compound annual rate of return of 35% based upon the
original issuance price of the Series C Stock, and (iv) all outstanding
shares of the Series B Preferred Stock and the Series D Preferred Stock
shall have been converted into shares of common stock of the Company in
accordance with the Certificate of Designation relating to the Series B
Preferred Stock and the Series D Preferred Stock and all outstanding
shares of the Series A Preferred Stock shall have been redeemed in
accordance with the Certificate of Designation relating to the Series A
Preferred Stock. Upon the achievement of (i), (ii), (iii) and (iv)
above and the giving of the mandatory conversion notice by the
Corporation, the outstanding shares of Series C Stock to be converted
shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of
Series C Stock surrendered for conversion under this Section 5.
Initially, the conversion rate shall be 1.0, i.e., 1.0 share of Common
Stock
4
<PAGE> 5
for each share of Series C Stock being converted. Such conversion rate
shall be subject to adjustment as provided in Section 6 below. As used
herein, the term "conversion price" shall be an amount computed by
dividing $8.00 by the conversion rate then in effect. Initially, the
conversion price shall be $8.00 per share of Common Stock. If any
fractional interest in a share of Common Stock would be deliverable
upon conversion of Series C Stock (taking into account all shares of
Series C Stock being converted by each holder), the Corporation shall
pay in lieu of such fractional share an amount in cash equal to the
conversion price of such fractional share (computed to the nearest one
hundredth of a share) in effect at the close of business on the date of
conversion. Any shares of Series C Stock which have been converted
shall be canceled and all dividends on converted shares shall cease to
accrue and the certificates representing shares of Series C Stock so
converted shall represent the right to receive (i) such number of
shares of Common Stock into which such shares of Series C Stock are
convertible, plus (ii) cash payable for any fractional share plus (iii)
all accrued but unpaid dividends relating to such shares through the
immediately preceding dividend payment date. Upon the conversion of
shares of Series C Stock as provided in this Section 5, the Corporation
shall promptly pay all then accrued but unpaid dividends to the holder
of the Series C Stock being converted. The Board of Directors of the
Corporation shall at all times reserve a sufficient number of
authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of an optional
conversion, before any holder of Series C Stock shall be entitled to
convert the same into shares of Common Stock, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or its transfer agent for the Series C Stock, and shall
give written notice to the Corporation of the election to convert the
same and shall state therein the name or names in which the certificate
of certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series C Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series C Stock in any case in which fewer than all
of the shares of Series C Stock represented by a certificate are
converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies
that the shares of Common Stock to be issued on conversion are to be
issued in a name or names other than the name or names in which such
surrendered shares stand, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series C Stock at the
5
<PAGE> 6
time of surrender of the shares involved, the shares of Common Stock
issued upon conversion thereof may be registered in the name or names
in which the surrendered shares were registered, despite the
instructions to the contrary.
6. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series C Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (including the
sale and issuance of any shares of Common Stock at any time
directly or indirectly owned or held by or for the account of
the Corporation), or deemed to be issued by the Corporation
pursuant to paragraph (g) of this Section 6, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to, the
Series B Stock, the Series C Stock or the Series D
Stock now or hereafter issued by the Corporation;
(B) up to 2,184,166 shares of Common Stock
(as reduced by previously exercised options to
purchase 10,432 shares of Common Stock) issuable upon
the exercise of options issued to officers,
directors, employees, and consultants of the
Corporation under stock option plans maintained from
time to time by the Corporation and approved by the
Board of Directors, subject to adjustment for all
subdivisions and combinations;
(C) up to 186,750 shares of Common Stock
issuable upon the exercise of the Warrant held by
Alex. Brown & Sons Incorporated;
(D) up to 505,375 shares of Common Stock
issuable upon the exercise of warrants to be granted
to lenders in connection with loans to the
Corporation or to guarantors or purchasers of such
loans;
(E) up to 75,000 shares of Common Stock
issuable upon the exercise of the Warrant held by
Volpe Brown Whelan & Company, LLC;
(F) up to 12,000 shares of Common Stock
issuable upon the exercise of warrants to be issued
to customers in connection with contracts between the
Corporation and such customers; and
6
<PAGE> 7
(G) shares of Common Stock issued with
respect to adjustments of the conversion price
hereunder.
(ii) The term "Common Stock" shall be deemed to mean
(i) the Common Stock, $.001 par value, and (ii) the stock of
the Corporation of any class, or series within a class,
whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets
of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than Series B
Stock, Series C Stock and Series D Stock issued prior to the
Original Issue Date (as defined below)) or other securities
directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(iv) The term "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire
directly or indirectly Common Stock or Convertible Securities.
(v) The term "Original Issue Date" shall mean the
date of the initial issuance of the Series C Stock.
(vi) The term "Fair Market Price" shall mean with
respect to a share of Common Stock (i) prior to the first
anniversary of the Original Issue Date, the conversion price
in effect on the Original Issue Date, and (ii) subsequent to
the first anniversary of the Original Issue Date, the average
closing bid price of the Common Stock as reported by Nasdaq
(or the last sale price if the Common Stock is traded on an
exchange) for a period of thirty (30) consecutive trading days
ending on the third day prior to the date of determination,
or, if the Common Stock is not listed on Nasdaq or an
exchange, the fair market value as determined by the vote of
66 2/3% of the Corporation's Board of Directors or if the
Board of Directors cannot reach such agreement, as determined
by a qualified independent investment banker appointed by the
vote of 66 2/3% of the Corporation's Board of Directors.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from no par
value to par value or a transaction described in subsection (c) or (d)
below, each share of Series C Stock shall, after such reorganization,
share exchange or reclassification (a "Reclassification Event"), be
convertible at the option of the holder into the kind and number of
shares of stock or other securities or other property of the
Corporation which the holder of Series C Stock would have been entitled
to receive if the holder had held the Common Stock
7
<PAGE> 8
issuable upon conversion of his Series C Stock immediately prior to
such reorganization, share exchange, or reclassification (subject to
adjustment as provided in this Section 6).
(c) Consolidation, Merger. In the event of a merger or
consolidation to which the Corporation is a party each share of Series
C Stock shall, after such merger or consolidation, be convertible at
the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of
such share of Series C Stock would have been entitled to receive if the
holder had held the Common Stock issuable upon conversion of such share
of Series C Stock immediately prior to such consolidation or merger
(subject to adjustment as provided in this Section 6).
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is earlier.
In case outstanding shares of Common Stock shall be combined, the
conversion price shall be proportionately increased as of the effective
date of such combination, or as of the date a record is taken of the
holders of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such
dividend is declared), then the conversion price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the earliest of the date of such declaration,
payment or other distribution), to that price determined by multiplying
the conversion price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the declaration of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding as of the time of the declaration and giving
effect to such dividend or other distribution as if paid. In the event
that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (g) below) after the Original Issue Date (other
than as provided in the foregoing subsections (b) through
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<PAGE> 9
(e)), for no consideration or for a consideration per share less than
the greater of (i) the Fair Market Price in effect on the date of and
immediately prior to such issue or (ii) the conversion price in effect
on the date of and immediately prior to such issue, then in such event,
the conversion price shall be reduced (but not increased) as follows:
(i) For issuances of Additional Shares of Common
Stock on or before 9 months after the Original Issue Date, if
the issuance or sales price of the Additional Shares of Common
Stock is below $8.00, the conversion price shall be reduced
(but not increased) so as to equal such issuance or sales
price.
(ii) For issuances of Additional Shares of Common
Stock at any time after 9 months after the Original Issue
Date, the conversion price shall be reduced (but not
increased) concurrently with any such issuance to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number
of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the
conversion price in effect immediately prior to such
issuance or sale, plus (y) the aggregate
consideration received or deemed to be received by
the Corporation upon such issuance or sale, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or
sale.
For purposes of the formulas expressed in paragraph 6(e) and
6(f), all shares of Common Stock issuable upon the exercise of
outstanding Options or issuable upon the conversion of the
Series B Stock, the Series C Stock or the Series D Stock or
outstanding Convertible Securities (including Convertible
Securities issued upon the exercise of outstanding Options),
shall be deemed outstanding shares of Common Stock both
immediately before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options, or, in the case of
Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue of Options or
Convertible Securities or, in case such a record date shall have been
fixed, as of the
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<PAGE> 10
close of business on such record date, provided that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(i) except as provided in Section 6(g)(ii) below, no
further adjustments in the conversion price shall be made upon
the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the issue of
Common Stock upon the conversion or exchange of such
Convertible Securities, in accordance with their terms;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise (or
the terms of such Options or Convertible Securities are
amended or modified to provide), for any increase or decrease
in the consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such
Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the
conversion price shall affect Common Stock previously issued
upon conversion of the Series C Stock);
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the conversion
price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as
if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor
was the consideration actually received by the
Corporation (x) for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon exercise of
the Options or (y) for the issue of all such
Convertible Securities which were actually converted
or exchanged plus the additional consideration, if
any, actually received by the Corporation upon the
conversion or exchange of the Convertible Securities;
and
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<PAGE> 11
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the conversion price
to an amount which exceeds the lower of (x) the conversion
price on the original adjustment date or (y) the conversion
price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date
and such readjustment date.
(v) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the conversion price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(iii) above.
(h) Determination of Consideration. For purposes of this
Section 6, the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the Corporation;
and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of the issue, as determined by the vote of
66 2/3% of the Corporation's Board of Directors or if
the Board of Directors cannot reach such agreement,
by a qualified independent public accounting firm,
other than the accounting firm then engaged as the
Corporation's independent auditors, agreed upon by
the Corporation on the one hand and the holders of 66
2/3% of the outstanding shares of Series C Stock on
the other hand.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed
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<PAGE> 12
to have been issued pursuant to paragraph (g) above, relating
to Options and Convertible Securities shall be determined by
dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(i) Adjustments Based Upon EBITDA for Fiscal Year Ending June
30, 2000.
(i) If the Corporation reports earnings before
interest, taxes, depreciation, and amortization, as determined
in accordance with generally accepted accounting principles
("EBITDA") for the fiscal year ending June 30, 2000 (the
"Period"), of greater than or equal to Twenty-seven Million
Six Hundred Fourteen Thousand and Five Hundred Dollars
($27,614,500), then the conversion price of the Series C Stock
will not be adjusted (except as otherwise provided in this
Certificate of Designations).
(ii) If the Corporation reports EBITDA for the Period
of less than or equal to Sixteen Million Five Hundred Sixty
Eight Thousand and Seven Hundred Dollars ($16,568,700), then
the conversion price of the Series C Stock will be reduced to
equal Five Dollars ($5.00); provided, however, that if, prior
to the end of the Period, the conversion price of the Series C
Stock has been reduced as otherwise provided in this
Certificate of Designations to less than Five Dollars ($5.00),
the conversion price of the Series C Stock will not be
adjusted pursuant to this Section 6(i)(ii).
(iii) If the Corporation reports EBITDA for the
Period of less than Twenty Seven Million Six Hundred Fourteen
Thousand and Five Hundred Dollars ($27,614,500), but more than
Sixteen Million Five Hundred Sixty Eight Thousand and Seven
Hundred Dollars ($16,568,700), then the conversion price of
the Series C Stock will be reduced to equal: (i) the
then-current conversion price, less (ii) the product of (A) a
fraction, the numerator
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<PAGE> 13
of which will be Twenty Seven Million Six Hundred Fourteen
Thousand and Five Hundred Dollars ($27,614,500), minus the
EBITDA reported by the Corporation for the Period, and the
denominator of which will be Twenty Seven Million Six Hundred
Fourteen Thousand and Five Hundred Dollars ($27,614,500),
minus Sixteen Million Five Hundred Sixty Eight Thousand and
Seven Hundred Dollars ($16,568,700), multiplied by (B) the
then-current conversion price minus Five Dollars ($5.00);
provided, however, that if, prior to the end of the Period,
the conversion price of the Series C Stock has been reduced as
otherwise provided in this Certificate of Designations to less
than Five Dollars ($5.00), the conversion price of the Series
C Stock will not be adjusted pursuant to this Section
6(i)(iii).
(iv) Notwithstanding the foregoing provisions of this
Section 6(i), if, on or before December 31, 2000, the
Corporation sells all or substantially all of its assets,
merges or consolidates with any other business entity where
the Corporation is not the surviving corporation, or completes
a public offering of the Corporation's Common Stock pursuant
to an effective registration under the Securities Act of 1933,
as amended, then: (A) the provisions described in subsections
(i), (ii) and (iii) of this Section 6(i) (and the adjustments
described therein) will terminate immediately and the
conversion price of the Series C Stock will be immediately
adjusted as if subsections (i), (ii) and (iii) of this Section
6(i) (and the adjustments described therein) were of no force
or effect, and (B) if necessary to cause the holders of the
Series C Stock to obtain an internal rate of return ("IRR")
(as defined below) equal to thirty-five one hundredths
(35/100), calculated as if each such holder purchased such
shares of Series C Stock at the purchase price per share paid
by such holder on the date such holder purchased such shares,
the then-current conversion price will be reduced concurrently
with any such transaction to an amount that results in the
holders of the Series C Stock obtaining such an IRR in
connection with the purchase of the Series C Stock. For the
purposes of this Section 6(i)(iv), "IRR" will equal the number
that satisfies the following expression:
0 = C0 + (C1/1+IRR) + (C2/(1+IRR)2) + . . . + (CT/(1+IRR)T)
where:
C = cash flows, including the purchase of shares of
Series C Stock and all dividends and other distributions paid
by the Corporation; provided, however, that for the purposes
of calculating IRR pursuant to the foregoing expression, the
fair market value of any consideration held or received by the
holders of the Series C Stock, including, without limitation,
shares of Series C Stock, in connection with or at the time of
any transaction(s) that results in adjustment pursuant to this
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<PAGE> 14
Section 6(i)(iv), shall be deemed to constitute a cash flow
and shall be treated as if paid on the date of such
transaction; and
T = the number of years (which may be expressed as a
fraction to the nearest one-twelfth based upon completed
calendar months) since the purchase of shares of Series C
Stock.
(v) The Corporation shall prepare (or shall cause its
accountants to prepare) its financial statement and calculate
EBITDA for the Period on or before September 30, 2000.
(vi) The provisions of this Section 6(i) shall be
adjusted to reflect any prior or concurrent adjustment of the
conversion price and the conversion rate pursuant to any other
provision of Section 6.
(j) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 6, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect on the Original Issue Date, by (y) the
adjusted conversion price.
(k) Other Provisions Applicable to Adjustment Under this
Section. The following provisions will be applicable to the adjustments
in conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for
the account of the Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding
number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable effect on
the holders of Series C Stock, the conversion price shall be
adjusted in such manner and at such time as the Board of
Directors of the Corporation on the advice of the
Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the
conversion price shall be made if the amount of any such
adjustment would be an amount less than one percent (1%) of
the conversion price then in effect, but any such amount shall
be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
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<PAGE> 15
(iv) Certain Adjustments. The conversion price shall
not be adjusted upward except in the event of a combination of
the outstanding shares of Common Stock into a smaller number
of shares of Common Stock or in the event of a readjustment of
the conversion price pursuant to Section 6(g)(ii) or (iii).
(l) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series C Stock.
7. Redemption.
(a) Mandatory Redemption. On the date six (6) months
immediately after the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate principal amount of Seventy-five
Million Dollars ($75,000,000.00) (referred to herein as the "Mandatory
Redemption Date") the Corporation shall redeem all the shares of Series
C Stock originally issued hereunder (or such lesser amount as shall
then be outstanding) at the "Redemption Price" per share defined in
paragraph (c) below, payable in each case in cash on the Mandatory
Redemption Date. The Corporation shall deliver written notice of the
pending redemption to the holders of the Series C Stock at least thirty
(30) but no more than sixty (60) days prior to the Mandatory Redemption
Date.
(b) Redemption on Change of Control. Upon a "Change of
Control" of the Corporation, each holder of the then outstanding shares
of Series C Stock may elect to have the Corporation redeem all (but not
less than all) outstanding shares of Series C Stock owned by such
holder at the "Redemption Price" per share defined in paragraph (c)
below, payable in cash on any date within 100 days of the effective
date of the Change of Control (such date being herein referred to as
the "Change of Control Redemption Date"). The election shall be made by
delivering written notice to the Corporation at least thirty (30) but
no more than sixty (60) days prior to the Change of Control Redemption
Date. The Corporation will then be required to redeem all the shares of
Series C Stock owned by such holder on the Change of Control Redemption
Date. For purposes of this Section 7, "Change of Control" means any one
or more of the following events:
(i) The Corporation shall consolidate with or merge
into any other person or any person shall consolidate with or
merge into the Corporation (other than a consolidation or
merger of the Corporation and a wholly-owned
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<PAGE> 16
subsidiary of the Corporation in which all shares of the
Corporation's Common Stock outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for
the same consideration), in either event pursuant to a
transaction in which any of the Corporation's common stock
outstanding immediately prior to the effectiveness thereof is
changed into or exchanged for cash, securities or other
property; or
(ii) the Corporation shall directly or indirectly
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any
person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act"), (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share
exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value
to par value; or
(iv) any person (other than the Corporation, any
subsidiary of the Corporation or an Existing Investor (as
defined in the Purchase Agreement (as hereinafter defined))),
including a "group" (within the meaning of Section 13(d) and
14(D)(2) of the 1934 Act) that includes such person, shall
purchase or otherwise acquire, directly or indirectly,
beneficial ownership of securities of the Corporation and, as
a result of such purchase or acquisition, such person
(together with its associates and affiliates) shall directly
or indirectly beneficially own in the aggregate (1) more than
50% of the Common Stock, or (2) securities representing more
than 50% of the combined voting power of the Corporation's
voting securities, in each case under subclause (1) or (2),
outstanding on the date immediately prior to the date of such
purchase or acquisition (or, if there be more than one, the
last such purchase or acquisition).
(c) The Redemption Price per share of Series C Stock shall
equal the sum of (x) $8.00 (as adjusted for Recapitalization Events)
plus (y) all accrued and unpaid dividends on such share of Series C
Stock to the Mandatory Redemption Date or Change of Control Redemption
Date, as the case may be.
(d) The term "Redemption Date" as used in this paragraph (d)
shall refer to whichever of the Mandatory Redemption Date or the Change
of Control Redemption Date is applicable in a particular circumstance.
On or prior to the Redemption Date, the Corporation shall deposit the
Redemption Price of all outstanding shares of Series C Stock to be
redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of
the holders of the shares of Series C Stock, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective
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<PAGE> 17
holders on or after the Redemption Date upon receipt of the certificate
or certificates of the shares of Series C Stock to be redeemed. From
and after the Redemption Date, unless there shall have been a default
in payment of the Redemption Price, all rights of the holders of shares
of Series C Stock to be redeemed as holders of Series C Stock (except
the right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series C
Stock redeemed, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series C
Stock (or Series A Stock, Series B Stock and Series D Stock which shall
rank pari passu with the Series C Stock) are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date,
the Corporation will use those funds which are legally available
therefor to redeem the maximum possible number of shares of Preferred
Stock ratably among the holders of such shares to be redeemed based
upon the total amount payable by the Corporation pursuant to the
redemption of the Series D Stock, Series C Stock, Series B Stock and
Series A Stock if the Corporation had sufficient funds legally
available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series C Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of shares of Series C Stock
such funds will immediately be used to redeem the balance of the shares
of Series C Stock to be redeemed. No dividends or other distributions
shall be declared or paid on, nor shall the Corporation redeem,
purchase or acquire any shares of, the Common Stock or any other class
or series of stock of the Corporation unless the Redemption Price of
all shares elected to be redeemed shall have been paid in full. Until
the Redemption Price for a share of Series C Stock elected to be
redeemed shall have been paid in full, such share of Series C Stock
shall remain outstanding for all purposes and entitle the holder
thereof to all the rights and privileges provided herein, including,
without limitation, that dividends and interest thereon shall continue
to accrue and, if unpaid prior to the date such shares are redeemed,
shall be included as part of the Redemption Price as provided in
paragraph (c) above. Notwithstanding anything in this Section 7 to the
contrary, even if a notice of redemption was delivered under paragraph
(a) or (b) of this Section 7, all shares of Series C Stock shall be
convertible pursuant to Section 5 at all times prior to the Redemption
Date.
(e) Notwithstanding any other term of this Certificate of
Designation, the Corporation shall not redeem (or have any obligation
to redeem) any shares of Series C Stock under any circumstances,
whether upon a Change of Control or otherwise, prior to the payment in
full and satisfaction of all of the obligations of the Corporation to
the lenders who provide financing to the Corporation in the aggregate
principal amount of $75,000,000.00. If the Corporation shall not have
paid in full or satisfied all of its obligations to such lenders on or
before any Redemption Date, upon such
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<PAGE> 18
payment and satisfaction the Corporation will immediately use any funds
legally available therefor to redeem the shares of Series C Stock to be
redeemed.
8. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or (e) of
a Change of Control, then the Corporation shall cause to be mailed to the
recordholders of the Series C Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation, winding up or Change of Control is
expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation, liquidation,
merger, sale, lease, exchange, dissolution, liquidation, winding up or Change of
Control.
9. Voting Rights.
(a) Holders of Series C Stock shall be entitled to notice of
any stockholder's meeting. Except as otherwise required by law or
provided herein, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any
such meeting, each outstanding share of Series C Stock shall be
entitled to the number of votes equal to the number of full shares of
Common Stock into which such share of Series C Stock is then
convertible. Except as otherwise required by law or provided herein,
the Series B Stock, the Series C Stock, the Series D Stock and the
Common Stock shall vote together on each matter submitted to
stockholders, and not by class or series.
(b) Prior to the consummation of a Qualifying Offering by the
Corporation of its Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended, the holders of
the Series C Stock, voting together as a class, shall be entitled to
elect one (1) director to the Corporation's Board of Directors.
Subsequent to such Qualifying Offering, the holders of a majority of
the Common Stock issuable upon conversion of the Series C Stock shall
be entitled to
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<PAGE> 19
nominate one (1) director for election to the Corporation's Board of
Directors which the Corporation shall nominate to management's slate
for election; provided, however, that the right provided for in this
last sentence of subsection 9(b) shall be effective only for so long as
at least 66 2/3% of the shares of Common Stock issuable upon conversion
of the Series C Stock are held of record by the original Purchasers (as
defined in the Purchase Agreement) of the Series C Stock.
Notwithstanding the foregoing, upon an Event of Default and so
long as it shall continue, the holders of the Series B Stock, the
Series C Stock and the Series D Stock, voting together as a class,
shall be entitled at any annual meeting of the stockholders or special
meeting held in place thereof, or at a special meeting of the holders
of the Series B Stock, the Series C Stock and the Series D Stock called
as hereinafter provided, to elect a majority of the Board of Directors
and such right to elect a majority of the Board of Directors shall be
in lieu of the right of the holders of the Series B Stock and the
Series C Stock (and, as may be provided pursuant to the terms of the
Certificate of Designations, Preferences and Rights of the Series D
Stock, the Series D Stock) to each elect one director. Such right of
the holders of the Series B Stock, the Series C Stock and the Series D
Stock to elect a majority of the Board of Directors may be exercised
until an Event of Default shall be cured, if curable, or waived, and
when so cured or waived, the right of the holders of Series B Stock,
the Series C Stock and the Series D Stock to elect a majority of the
Board of Directors shall cease and the right of the holders of the
Series B Stock and the Series C Stock (and, as may be provided pursuant
to the terms of the Certificate of Designations, Preferences and Rights
of the Series D Stock, the Series D Stock) to each elect one director
shall resume, but subject always to the same provisions for the vesting
of such special voting rights in the case of any such future Event of
Default. At any time when such special voting rights shall have so
vested in the holders of the Series B Stock, the Series C Stock and the
Series D Stock, the Secretary of the Corporation may, and upon the
written request of the holders of 10% or more of the number of shares
of the Series B Stock, the Series C Stock and the Series D Stock then
outstanding addressed to him at the principal office of the
Corporation, shall, call a special meeting of the holders of the Series
B Stock, the Series C Stock and the Series D Stock for the election of
a majority of the Board of Directors to be elected by them as provided
herein, to be held in the case of such written request as soon as
practicable after delivery of such request, and in either case to be
held at the place and upon the notice provided by law and in the
by-laws for the holding of meetings of stockholders. If at any such
annual or special meeting or adjournment thereof the holders of at
least a majority of the Series B Stock, the Series C Stock and the
Series D Stock then outstanding shall be present or represented at such
meeting, the then authorized number of directors of the Corporation
shall be increased to the extent necessary to provide a majority of new
directors to be elected and the holders of the Series B Stock, the
Series C Stock and the Series D Stock shall be entitled to elect the
additional directors so provided for. The directors so elected shall
serve until the next annual meeting or until their successors shall be
elected and qualified, provided,
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<PAGE> 20
however, that whenever the holders of the Preferred Stock shall be
divested of the special rights to elect a majority of the Board of
Directors as above provided, the term of office of the persons so
elected as directors by the holders of the Series B Stock, the Series C
Stock and the Series D Stock as a class, or elected to fill any
vacancies resulting from the death, resignation or removal of the
directors so elected by the holders of Series B Stock, the Series C
Stock and the Series D Stock, shall forthwith terminate and the
authorized number of directors shall be reduced accordingly.
If during any interval between any special meeting of the
holders of Series B Stock, the Series C Stock and the Series D Stock
for the election of directors to be elected by them as provided above
and the next ensuing annual meeting of stockholders, or between annual
meetings of stockholders for the election of directors, and while the
holders of the Series B Stock, the Series C Stock and the Series D
Stock shall be entitled to elect a majority of the Board of Directors,
any of the directors who have been elected by the holders of the Series
B Stock, the Series C Stock and the Series D Stock shall, by reason of
resignation, death or removal, have departed from the Board, the
Secretary of the Corporation shall call a special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock and such vacancy or vacancies shall be filled at such special
meeting.
No director elected by the holders of Series C Stock as a
class, or elected by other directors to fill a vacancy resulting from
the death, resignation or removal of a director elected by such class
vote, may be removed from office by the vote or written consent of
stockholders unless such vote or written consent includes that of the
holders of a majority of the outstanding shares of Series C Stock.
(c) In addition to any other vote or consent of stockholders
provided by law or by the Corporation's Certificate of Incorporation,
the Corporation shall not, without the approval by vote or written
consent of the holders of not less than 66 2/3% of the then outstanding
shares of Series C Stock:
(i) amend, waive or repeal any provisions of, or add
any provision to, (i) this Certificate of Designation or (ii)
any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation filed
with the Secretary of State of Delaware by the Corporation
with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add
any provision to, the Corporation's By-Laws;
(iii) authorize, create, issue or sell any shares of
Equivalent Stock or Superior Stock, except as authorized in
this Certificate of Designation;
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(iv) issue any shares of Series C Stock other than
pursuant to the Purchase Agreement or upon transfers of
outstanding shares of Series C Stock;
(v) enter into any agreement, indenture or other
instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on or make
redemptions of the Series C Stock in accordance herewith;
(vi) dissolve the Corporation;
(vii) enter into any agreement(s) that would restrict
the Corporation's ability to perform its obligations pursuant
to the Purchase Agreements (as defined in Section 11(iv)
below);
(viii) sell, lease or otherwise dispose of 20% or
more of the assets of the Corporation, other than in the
ordinary course of business, unless the proceeds of such sale,
lease or other disposition are reinvested in assets of the
general type used in the business of the Corporation;
(ix) issue equity securities to employees, officers
or directors of the Corporation, except (a) securities
issuable upon the exercise of outstanding options and warrants
and pursuant to existing contractual commitments and (b)
options to purchase up to 2,184,166 shares of Common Stock,
together with the Common Stock issuable upon exercise thereof;
(x) issue any securities for a price less than fair
market value, other than as may be required by existing
contractual commitments or as permitted by clause (ix) hereof
or pursuant to warrants to purchase shares of Common Stock
granted by the Corporation from time to time where the
exercise price of such warrants equals or exceeds the fair
market price of the Common Stock as of the date of grant of
such warrants;
(xi) enter into any transactions (or series of
transactions), including loans, with any officer or director
of the Corporation or to or with their affiliates and family
members involving $100,000.00 or more per year individually or
$500,000.00 or more per year in the aggregate except (a) as
may be contemplated by existing contractual commitments, (b)
reasonable compensation payable to officers and directors, and
(c) for options and warrants issued in compliance with clause
(ix) hereof; or
(xii) engage in any transaction (or series of
transactions) that would impair or reduce the rights and
preferences of the holders of the Series C Stock as a class
relative to the rights and preferences of the holders of any
other class of the Corporation's capital stock.
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"Assets" shall mean an interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Equivalent Stock" shall mean any shares of any class or series of
Stock of the Corporation having any preference or priority as to dividends or
Assets on a parity with any such preference or priority of the Series C Stock
and no preference or priority as to dividends or Assets superior to any such
preference or priority of the Series C Stock and any instrument or Security
directly or indirectly convertible into or exercisable or exchangeable for
Equivalent Stock. Without limiting the generality of the foregoing, a dividend
rate, mandatory or optional sinking fund payment amounts or schedules or
optional redemption provisions, the existence of a conversion right or the
existence of a liquidation preference of up to 100% of the original issue price
plus unpaid accrued dividends plus a premium of up to the dividend rate or up to
the percentage of the equity of the Corporation represented by such Stock, with
respect to any class or series of Stock, differing from that of the Series C
Stock, shall not prevent such class of Stock from being Equivalent Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument directly or
indirectly convertible into or exercisable or exchangeable for Securities or
Security. The term "Security" shall mean one of the Securities.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate stock.
"Superior Stock" shall mean any shares of any class or series of Stock
of the Corporation having any preference or priority as to dividends or Assets
superior to any such preference or priority of the Series C Stock and any
instrument or security directly or indirectly convertible into or exercisable or
exchangeable for Superior Stock.
(d) Notwithstanding anything else contained herein, the
affirmative vote or written consent of the holders of not less than 90%
of the then outstanding shares of Series C Stock shall be necessary to
amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or the Certificate of Designation creating
this Series C Stock which would alter or change (i) the dividend rate,
(ii) redemption provisions, (iii) anti-dilution provisions, (iv) the
place or currency of payments hereunder, (v) the right to institute
suit for the enforcement of any payment hereunder, (vi) the conversion
provisions, or (vii) provisions of this Section 9, so as to affect any
of the foregoing adversely.
10. Preemptive Rights.
(a) The Corporation shall not issue or sell any shares of
Common Stock, Preferred Stock or other securities directly or
indirectly convertible into or exercisable
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<PAGE> 23
or exchangeable for shares of Common Stock, other than any such
issuance or sale (i) pursuant to a Qualifying Offering, (ii) pursuant
to a stock option plan approved by the Board of Directors, (iii) as a
form of consideration in connection with mergers or acquisitions where
the Corporation is the surviving entity or (iv) where the aggregate
gross proceeds are less than $500,000 in any single transaction,
provided that the sale price per share is not less than the then
applicable fair market value of such shares, as determined in good
faith by the Corporation's Board of Directors, and, provided further,
that the aggregate gross proceeds of all such transactions shall not
exceed $1,500,000 (the securities issued in such transactions being
referred to as the "Newly Issued Securities"), unless prior to the
issuance or sale of such Newly Issued Securities each holder of Series
C Stock shall have been given the opportunity (such opportunity being
herein referred to as the "Preemptive Right") to purchase (on the same
terms as such Newly Issued Securities are proposed to be sold) the same
proportion of such Newly Issued Securities being issued or offered for
sale by the Corporation as (x) the number of shares of Common Stock
(calculated solely on account of outstanding shares of Series C Stock
on an as converted basis) held by such holder on the day preceding the
date of the Preemptive Notice (as defined herein), as the case may be,
bears to (y) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding on that day.
(b) Prior to the issuance or sale by the Corporation of any
Newly Issued Securities, the Corporation shall give written notice
thereof (the "Preemptive Notice") to each holder of Series C Stock. The
Preemptive Notice shall specify (i) the name and address of the bona
fide investor to whom the Corporation proposes to issue or sell Newly
Issued Securities, (ii) the total amount of capital to be raised by the
Corporation pursuant to the issuance or sale of Newly Issued
Securities, (iii) the number of Securities of such Newly Issued
Securities proposed to be issued or sold, (iv) the price and other
terms of their proposed issuance or sale, (v) the number of such Newly
Issued Securities which such holder is entitled to purchase (determined
as provided in subsection (a) above), and (vi) the period during which
such holder may elect to purchase such Newly Issued Securities, which
period shall extend for at least thirty (30) days following the receipt
by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series C Stock who desires to purchase Newly
Issued Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Newly Issued Securities he wishes to
purchase, as well as the number, if any, of additional Newly Issued
Securities he would be willing to purchase in the event that all of the
Newly Issued Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series C Stock.
(c) In the event a holder of Series C Stock declines to
subscribe for all or any part of its pro rata portion of any Newly
Issued Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive Acceptance
Period, then the other holders of Series C Stock shall have the right
to subscribe for all (or any declined part) of the Declining Preemptive
Purchaser's pro
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<PAGE> 24
rata portion of such Newly Issued Securities (to be divided among the
other holders of Series C Stock desiring to exercise such right on a
ratable basis).
(d) Any such Newly Issued Securities which none of the holders
elect to purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of three (3) months
after the expiration of the Preemptive Acceptance Period, to any other
person or persons at not less than the price and upon other terms and
conditions not less favorable to the Corporation than those set forth
in the Preemptive Notice.
(e) The preemptive rights afforded by this Section 10, and any
obligation for the Corporation to offer such shares of Common Stock,
Preferred Stock or other securities convertible into or exchangeable
for shares of Common Stock may be waived by a written instrument signed
by the holders of sixty-six and two-thirds percent (66 2/3 %) of the
Series C Stock.
11. Events of Default. An Event of Default shall mean any of the
following:
(i) Any failure by the Corporation to pay in cash any
dividend, if and when declared by the Board of Directors, on
the payment due dates and in the amounts provided pursuant to
Section 3 hereof, if such failure shall continue for any two
quarterly periods;
(ii) Any failure by the Corporation to satisfy its
redemption obligations pursuant to Section 7 hereof if any
such failure shall continue for a period of five days from the
appropriate redemption date;
(iii) Any failure by the Corporation to comply with
the provisions of Sections 4, 5, 6, 8, 9 or 10 hereof;
(iv) If any representation or warranty made by the
Corporation in the Stock Purchase Agreement dated as of August
22, 1997 or the exhibits or schedules thereto (the "Purchase
Agreements") is or shall be untrue in any material respect at
the time it was made, if such representation or warranty
remains untrue after 10 days' written notice, with such notice
delivered by hand or by first-class, certified or overnight
mail, postage prepaid, or by telecopier, from any holder of
Series C Stock, unless waived in writing by holders of not
less than 66 2/3% of the outstanding shares of Series C Stock;
(v) Any failure by the Corporation to comply with, or
any breach by the Corporation of, any of the covenants,
agreements or obligations of the Corporation contained in the
Purchase Agreements which continues for a period of 10 days
after written notice, with such notice delivered by hand or by
first-class, certified or overnight mail, postage prepaid, or
by telecopier, from
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<PAGE> 25
any holder of Series C Stock, unless waived in writing by
holders of not less than 66 2/3% of the outstanding shares of
Series C Stock;
(vi) Default by the Corporation in the performance or
observance of any obligation or condition with respect to any
Indebtedness of the Corporation that is not cured or waived
within 90 days or if the effect of such default is to
accelerate the maturity of such Indebtedness or cause such
Indebtedness to be prepaid, purchased or redeemed or to permit
the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed or to
realize upon any collateral or security for such Indebtedness,
unless such default shall have been waived by the appropriate
person. Indebtedness of any corporation shall mean the
principal of (and premium, if any) and unpaid interest on (i)
indebtedness which is for money borrowed from others; (ii)
indebtedness guaranteed, directly or indirectly, in any manner
by such corporation, or in effect guaranteed, directly or
indirectly, by such corporation through an agreement,
contingent or otherwise, to supply funds to or in any manner
invest in the debtor or to purchase indebtedness, or to
purchase assets or services primarily for the purpose of
enabling the debtor to make payment of the indebtedness or of
assuring the owner of the indebtedness against loss; (iii) all
indebtedness secured by any mortgage, lien, pledge, charge or
other encumbrance upon assets owned by such corporation, even
if such corporation has not in any manner become liable for
the payment of such indebtedness; (iv) all indebtedness of
such corporation created or arising under any conditional
sale, lease or other title retention agreement with respect to
assets acquired by such corporation even though the rights and
remedies of the seller, lessor or lender under such agreement
or lease in the event of default are limited to repossession
or sale of such assets and provided that obligations for the
payment of rent under a lease of premises from which the
business of such corporation will be conducted shall not
constitute indebtedness; and (v) renewals, extensions and
refunding of any such indebtedness; or
(vii) If the Corporation shall:
(a) become insolvent or generally fail to
pay, or admit in writing its inability to pay, its
debts as they become due;
(b) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator
or other custodian for the Corporation or any
property thereof, or make a general assignment for
the benefit of creditors (any of which shall be
referred to herein as a "Receiver");
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<PAGE> 26
(c) in the absence of such application,
consent or acquiescence, permit or suffer to exist
the appointment of a Receiver, and such Receiver
shall not be discharged within 60 calendar days;
(d) commit any act of bankruptcy, permit or
suffer to exist the commencement of any bankruptcy
reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or
any dissolution, winding up or liquidation proceeding
in respect of the Corporation, and, if any such case
or proceeding is not commenced by the Corporation,
such case or proceeding shall be consented to or
acquiesced in by the Corporation, or shall result in
the entry of an order for relief and shall remain for
30 calendar days undismissed; or
(e) take any corporate or other action
authorizing, or in furtherance of, any of the
foregoing.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
(The remainder of this page is intentionally left blank.)
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<PAGE> 27
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Designations, Preferences and Rights of Series C 7%
Cumulative Convertible Preferred Stock to be executed on its behalf by Robert P.
May, its Chief Executive Officer, and attested by Anthony W. Allen, its
Secretary, this 15th day of September, 1999, each hereby declaring and
certifying that this is the act and deed of the Corporation and that the facts
stated herein are true.
PNV.NET, INC.
By /s/ Robert P. May
------------------------------------------
Robert P. May, Chief Executive Officer
ATTEST:
By: /s/ Anthony Allen
----------------------------
Anthony Allen, Secretary
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<PAGE> 1
EXHIBIT 3.8.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF PNV.NET, INC.
PNV.NET, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss. 151 of the Delaware
General Corporation Law, the Board of Directors, pursuant to unanimous written
consent dated August 25, 1999, adopted the following resolution providing for
the designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series D 7%
Cumulative Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares known as common stock, $.001 par value per
share (the "Common Stock"), and preferred stock, $.01 par value per share
("Preferred Stock"); and
WHEREAS, the Board of Directors of the Corporation is
authorized by the Certificate of Incorporation to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
deems it advisable to, and hereby does, designate a Series D 7% Cumulative
Convertible Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series D 7%
Cumulative Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series D 7% Cumulative Convertible Preferred Stock" (referred to
herein as the "Series D Stock").
2. Authorized Number. The number of shares constituting the Series D
Stock shall be 3,000,000.
<PAGE> 2
3. Dividends. The holders of shares of Series D Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of assets legally available for such purpose, dividends at the rate of
$0.735 (i.e., 7%) (as adjusted for stock splits, and other subdivisions and
combinations of Common Stock after the date of the Purchase Agreements
("Recapitalization Events")) per share per annum, which shall be payable when
and if declared by the Board of Directors or shall accrue quarterly on the last
day of January, April, July and October in each year, commencing on October 31,
1999; provided, however, that upon an Event of Default (as hereinafter defined)
and so long as it shall continue, such dividend rate shall be $0.945 (i.e., 9%)
(as adjusted for Recapitalization Events) per share per annum. Dividends on the
Series D Stock shall be cumulative so that if, for any dividend accrual period,
cash dividends at the rate hereinabove specified are not declared and paid or
set aside for payment, the amount of accrued but unpaid dividends shall
accumulate and shall be added to the dividends payable for subsequent dividend
accrual periods and upon any redemption or conversion of shares of Series D
Stock. If any shares of Series D Stock are issued on a date which does not
coincide with a dividend payment date, then the initial dividend accrual period
applicable to such shares shall be the period from the date of issuance thereof
through whichever of January 31, April 30, July 31, or October 31 next occurs
after the date of issuance. If the date fixed for payment of a final liquidating
distribution on any shares of Series D Stock, or the date on which any shares of
Series D Stock are redeemed or converted into Common Stock, does not coincide
with a dividend payment date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend accrual period
applicable to such shares shall be the period from whichever of February 1, May
1, August 1 or November 1 most recently precedes the date of such payment,
conversion or redemption through the effective date of such payment, conversion
or redemption. Dividends paid in cash on the shares of Series D Stock (or Series
A Stock, Series B Stock or Series C Stock, which shall rank pari passu with the
Series D Stock) in an amount less than the total amount of such dividends shall
be allocated pro rata so that the total value of dividends paid on the Preferred
Stock shall in all cases bear to each other the same ratio that the total value
of accrued and unpaid dividends on the Series A Stock, the Series B Stock, the
Series C Stock and the Series D Stock bear to each other. Without the written
consent of the holders of at least 60 % of the then outstanding Series D Stock,
the Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities (as defined herein) of the Corporation unless at the time of such
declaration, payment or distribution all dividends on the Series D Stock accrued
for all past dividend accrual periods shall have been paid and the full
dividends thereon for the current dividend period shall be paid or declared and
set aside for payment. Notwithstanding any other term or condition of this
Section 3 to the contrary, upon the consummation of a Qualifying Offering (as
defined below) and in connection with the conversion of the Series D Stock
pursuant to Section 5(b) hereof, the Company may pay any and all accrued but
unpaid dividends on the Series D Stock with shares of Common Stock, each share
of which shall, for the purposes of determining the number of shares of Common
Stock issuable in satisfaction of such accrued but unpaid dividends pursuant to
this
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<PAGE> 3
Section 3, be deemed to have a value equal to the price at which the Common
Stock is sold in such Qualifying Offering.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series D Stock shall be entitled, before any distribution or
payment is made upon any Common Stock or any other class or series of
stock ranking junior to the Series D Stock as to distribution of assets
upon liquidation (other than the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock of the Corporation
which shall rank pari passu with the Series D Stock), to be paid an
amount equal to $10.50 per share (as adjusted for Recapitalization
Events) plus all accrued and unpaid dividends to such date
(collectively, the "Liquidation Payments"). If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series D
Stock shall be insufficient to permit payment in full to the holders of
Series D Stock of the Liquidation Payments, then the entire assets of
the Corporation shall be distributed ratably among such holders and the
holders of any class of preferred stock ranking on a parity with the
Series D Stock in proportion to the full respective distributive
amounts to which they are entitled.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after the holders of Series D Stock shall have been paid
in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference
to the holders of Common Stock and any other class or series of stock
ranking junior to the Series D Stock as to distribution of assets upon
liquidation.
(c) Written notice of a liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Payments, the
amounts to be paid to the holders of Common Stock (both per share and
in the aggregate) upon such a liquidation, dissolution or winding up,
and the place where said Liquidation Payments shall be payable, shall
be given by mail, postage prepaid, not less than 30 days prior to the
payment date stated therein, to each holder of record of Series D Stock
at its post office address as shown by the records of the Corporation.
5. Conversion.
The holders of the Series D Stock shall have the following conversion
rights:
(a) Optional Conversion. Each share of Series D Stock shall be
convertible at any time, at the option of the holder of record thereof,
into fully paid and nonassessable shares of Common Stock at the
"conversion rate" (as defined in
3
<PAGE> 4
paragraph (c) below) then in effect upon surrender to the Corporation
or its transfer agent of the certificate or certificates representing
the Series D Stock to be converted, as provided below, or if the holder
notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution
and delivery of an agreement satisfactory to the Corporation to
indemnify the Corporation from any losses incurred by it in connection
therewith.
(b) Conversion on Qualifying Offering. Upon the consummation
of a Qualifying Offering (as defined below), upon not less than ten
(10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series D Stock shall be
converted into fully paid and nonassessable shares of Common Stock at
the conversion rate then in effect. A "Qualifying Offering" means (i)
the Corporation shall have consummated a firm commitment underwritten
public offering of its Common Stock by a nationally recognized
investment banking firm pursuant to an effective registration under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock which results in gross proceeds of at least $20,000,000,
(ii) the Common Stock is quoted or listed by either The Nasdaq Stock
Market (National Market) ("Nasdaq"), the New York Stock Exchange or the
American Stock Exchange, (iii) the price at which the Common Stock is
sold in such offering is at least equal to the lesser of an amount
which (x) is 200% of the then effective conversion price or (y) would
represent, on an as converted basis, a compound annual rate of return
of 35% based upon the original issuance price of the Series D Stock,
and (iv) all outstanding shares of the Series B Preferred Stock and the
Series C Preferred Stock shall have been converted into shares of
common stock of the Company in accordance with the Certificate of
Designation relating to the Series B Preferred Stock and the Series C
Preferred Stock and all outstanding shares of the Series A Preferred
Stock shall have been redeemed in accordance with the Certificate of
Designation relating to the Series A Preferred Stock. Upon the
achievement of (i), (ii), (iii) and (iv) above and the giving of the
mandatory conversion notice by the Corporation, the outstanding shares
of Series D Stock to be converted shall be converted automatically
without any further action by the holders of such shares and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of
Series D Stock surrendered for conversion under this Section 5.
Initially, the conversion rate shall be 1.0, i.e., 1.0 share of Common
Stock for each share of Series D Stock being converted. Such conversion
rate shall be subject to adjustment as provided in Section 6 below. As
used herein, the term "conversion price" shall be an amount computed by
dividing $10.50 by the conversion rate then in effect. Initially, the
conversion price shall be $10.50 per share of Common Stock. If any
fractional interest in a share of Common Stock would be
4
<PAGE> 5
deliverable upon conversion of Series D Stock (taking into account all
shares of Series D Stock being converted by each holder), the
Corporation shall pay in lieu of such fractional share an amount in
cash equal to the conversion price of such fractional share (computed
to the nearest one hundredth of a share) in effect at the close of
business on the date of conversion. Any shares of Series D Stock which
have been converted shall be canceled and all dividends on converted
shares shall cease to accrue and the certificates representing shares
of Series D Stock so converted shall represent the right to receive (i)
such number of shares of Common Stock into which such shares of Series
D Stock are convertible, plus (ii) cash payable for any fractional
share plus (iii) all accrued but unpaid dividends relating to such
shares through the immediately preceding dividend payment date. Upon
the conversion of shares of Series D Stock as provided in this Section
5, the Corporation shall promptly pay all then accrued but unpaid
dividends to the holder of the Series D Stock being converted. The
Board of Directors of the Corporation shall at all times reserve a
sufficient number of authorized but unissued shares of Common Stock to
be issued in satisfaction of the conversion rights and privileges
aforesaid.
(d) Mechanics of Conversion. In the case of an optional
conversion, before any holder of Series D Stock shall be entitled to
convert the same into shares of Common Stock, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or its transfer agent for the Series D Stock, and shall
give written notice to the Corporation of the election to convert the
same and shall state therein the name or names in which the certificate
of certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series D Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series D Stock in any case in which fewer than all
of the shares of Series D Stock represented by a certificate are
converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies
that the shares of Common Stock to be issued on conversion are to be
issued in a name or names other than the name or names in which such
surrendered shares stand, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series D Stock at the time of surrender of the
shares involved, the shares of Common Stock issued upon conversion
thereof may be registered in the name or names in which the surrendered
shares were registered, despite the instructions to the contrary.
5
<PAGE> 6
6. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series D Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (including the
sale and issuance of any shares of Common Stock at any time
directly or indirectly owned or held by or for the account of
the Corporation), or deemed to be issued by the Corporation
pursuant to paragraph (g) of this Section 6, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to, the
Series B Stock, the Series C Stock or the Series D
Stock now or hereafter issued by the Corporation;
(B) up to 2,184,166 shares of Common
Stock (as reduced by previously exercised options to
purchase 10,432 shares of Common Stock) issuable upon
the exercise of options issued to officers,
directors, employees, and consultants of the
Corporation under stock option plans maintained from
time to time by the Corporation and approved by the
Board of Directors, subject to adjustment for all
subdivisions and combinations;
(C) up to 186,750 shares of Common Stock
issuable upon the exercise of the Warrant held by
Alex. Brown & Sons Incorporated;
(D) up to 505,375 shares of Common Stock
issuable upon the exercise of warrants granted to
lenders in connection with loans to the Corporation
or to guarantors or purchasers of such loans;
(E) up to 75,000 shares of Common Stock
issuable upon the exercise of the Warrant held by
Volpe Brown Whelan & Company, LLC;
(F) up to 12,000 shares of Common Stock
issuable upon the exercise of warrants to be issued
to customers in connection with contracts between the
Corporation and such customers; and
(G) shares of Common Stock issued with
respect to adjustments of the conversion price
hereunder.
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<PAGE> 7
(ii) The term "Common Stock" shall be deemed to mean
(i) the Common Stock, $.001 par value, and (ii) the stock of
the Corporation of any class, or series within a class,
whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets
of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than Series B
Stock, Series C Stock and Series D Stock issued prior to the
Original Issue Date (as defined below)) or other securities
directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(iv) The term "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire
directly or indirectly Common Stock or Convertible Securities.
(v) The term "Original Issue Date" shall mean the
date of the initial issuance of the Series D Stock.
(vi) The term "Fair Market Price" shall mean with
respect to a share of Common Stock (i) prior to the first
anniversary of the Original Issue Date, the conversion price
in effect on the Original Issue Date, and (ii) subsequent to
the first anniversary of the Original Issue Date, the average
closing bid price of the Common Stock as reported by Nasdaq
(or the last sale price if the Common Stock is traded on an
exchange) for a period of thirty (30) consecutive trading days
ending on the third day prior to the date of determination,
or, if the Common Stock is not listed on Nasdaq or an
exchange, the fair market value as determined by the vote of
66 2/3% of the Corporation's Board of Directors and approved
by the holders of not less than a majority of the then
outstanding shares of Series D Stock or if the Board of
Directors cannot reach such agreement (or if not so approved
by the holders of Series D Stock), as determined by a
qualified independent investment banker appointed by the vote
of 66 2/3% of the Corporation's Board of Directors, such
banker to be approved by the holders of not less than a
majority of the then outstanding shares of Series D Stock.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from no par
value to par value or a transaction described in subsection (c) or (d)
below, each share of Series D Stock shall, after such reorganization,
share exchange or reclassification (a "Reclassification Event"), be
convertible at the option of the holder into the kind and number of
shares of stock or other securities or other property of the
Corporation which the holder of Series D Stock would have been entitled
to receive if the holder had held the Common Stock
7
<PAGE> 8
issuable upon conversion of his Series D Stock immediately prior to
such reorganization, share exchange, or reclassification (subject to
adjustment as provided in this Section 6).
(c) Consolidation, Merger. In the event of a merger or
consolidation to which the Corporation is a party each share of Series
D Stock shall, after such merger or consolidation, be convertible at
the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of
such share of Series D Stock would have been entitled to receive if the
holder had held the Common Stock issuable upon conversion of such share
of Series D Stock immediately prior to such consolidation or merger
(subject to adjustment as provided in this Section 6).
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is earlier.
In case outstanding shares of Common Stock shall be combined, the
conversion price shall be proportionately increased as of the effective
date of such combination, or as of the date a record is taken of the
holders of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such
dividend is declared), then the conversion price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the earliest of the date of such declaration,
payment or other distribution), to that price determined by multiplying
the conversion price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the declaration of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding as of the time of the declaration and giving
effect to such dividend or other distribution as if paid. In the event
that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (g) below) after the Original Issue Date (other
than as provided in the foregoing subsections (b) through
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(e)), for no consideration or for a consideration per share less than
the greater of (i) the Fair Market Price in effect on the date of and
immediately prior to such issue or (ii) the conversion price in effect
on the date of and immediately prior to such issue, then in such event,
the conversion price shall be reduced (but not increased) as follows:
(i) For issuances of Additional Shares of Common
Stock on or before 9 months after the Original Issue Date, if
the issuance or sales price of the Additional Shares of Common
Stock is below $10.50, the conversion price shall be reduced
(but not increased) so as to equal such issuance or sales
price.
(ii) For issuances of Additional Shares of Common
Stock at any time after 9 months after the Original Issue
Date, the conversion price shall be reduced (but not
increased) concurrently with any such issuance to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number
of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the
conversion price in effect immediately prior to such
issuance or sale, plus (y) the aggregate
consideration received or deemed to be received by
the Corporation upon such issuance or sale, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or
sale.
For purposes of the formulas expressed in paragraph 6(e) and 6(f), all
shares of Common Stock issuable upon the exercise of outstanding Options with an
exercise price less than the then current fair market value of Common Stock or
issuable upon the conversion of the Series B Stock, the Series C Stock or the
Series D Stock or other outstanding Convertible Securities with an exercise or
exchange price less than the then current fair market value of Common Stock
(including Convertible Securities issued upon the exercise of outstanding
Options), shall be deemed outstanding shares of Common Stock both immediately
before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options, or, in the case of
Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue of Options or
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<PAGE> 10
Convertible Securities or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided that
in any such case in which Additional Shares of Common Stock are deemed
to be issued:
(i) except as provided in Section 6(g)(ii) below, no
further adjustments in the conversion price shall be made upon
the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options, or the issue
of Common Stock upon the conversion or exchange of such
Convertible Securities, in accordance with their terms;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise (or
the terms of such Options or Convertible Securities are
amended or modified to provide) for any increase or decrease
in the consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such
Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the
conversion price shall affect Common Stock previously issued
upon conversion of the Series D Stock);
(iii) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the conversion
price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as
if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor
was the consideration actually received by the
Corporation (x) for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon exercise of
the Options or (y) for the issue of all such
Convertible Securities which were actually converted
or exchanged plus the additional consideration, if
any, actually received by the Corporation upon the
conversion or exchange of the Convertible Securities;
and
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(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii)or (iii)
above shall have the effect of increasing the conversion price
to an amount which exceeds the lower of (x) the conversion
price on the original adjustment date or (y) the conversion
price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date
and such readjustment date.
(v) In the case of any Options which expire by
their terms not more than 30 days after the date of issue
thereof, no adjustment of the conversion price shall be made
until the expiration or exercise of all such Options,
whereupon such adjustment shall be made in the same manner
provided in clause (iii) above.
(h) Determination of Consideration. For purposes of this
Section 6, the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the Corporation;
and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of the issue, as determined by the vote of
66 2/3% of the Corporation's Board of Directors and
approved by holders of not less than a majority of
the then outstanding shares of Series D Stock or if
the Board of Directors cannot reach such agreement
(or if not so approved by the holders of Series D
Stock), by a qualified independent public accounting
firm, other than the accounting firm then engaged as
the Corporation's independent auditors, agreed upon
by the Corporation on the one hand and the holders of
60 % of the outstanding shares of Series D Stock on
the other hand.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed
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<PAGE> 12
to have been issued pursuant to paragraph (g) above, relating
to Options and Convertible Securities shall be determined by
dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(i) Adjustments Based Upon EBITDA for Fiscal Year Ending June
30, 2000. If the conversion price of the Series C Stock is adjusted
pursuant to the terms and conditions of Section 6(i) of the Certificate
of Designations providing for the rights, privileges and preferences of
the Series C Stock (the "EBITDA Adjustment), then the conversion price
of the Series D Stock shall be adjusted to an amount determined by
multiplying the conversion price of the Series D Stock by a ratio (x)
the numerator of which will equal the conversion price of the Series C
Stock, as adjusted pursuant to the EBITDA Adjustment, and (y) the
denominator of which will equal $8.00. If the conversion price of the
Series C Stock is subsequently adjusted pursuant to the terms and
conditions of Section 6(i)(iv) of the Certificate of Designations
providing for the rights, privileges and preferences of the Series C
Stock, then corresponding adjustments will be made to the conversion
price of the Series D Stock.
(j) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 6, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect on the Original Issue Date, by (y) the
adjusted conversion price.
(k) Other Provisions Applicable to Adjustment Under this
Section. The following provisions will be applicable to the adjustments
in conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for
the account of the Corporation.
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<PAGE> 13
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding
number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable effect on
the holders of Series D Stock, the conversion price shall be
adjusted in such manner and at such time as the Board of
Directors of the Corporation on the advice of the
Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the
conversion price shall be made if the amount of any such
adjustment would be an amount less than one percent (1%) of
the conversion price then in effect, but any such amount shall
be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall
not be adjusted upward except in the event of a combination of
the outstanding shares of Common Stock into a smaller number
of shares of Common Stock or in the event of a readjustment of
the conversion price pursuant to Section 6(g)(ii) or (iii).
(l) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series D Stock.
7. Redemption.
(a) Mandatory Redemption. On the date six (6) months
immediately after the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate principal amount of Seventy-five
Million Dollars ($75,000,000.00) (referred to herein as the "Mandatory
Redemption Date") the Corporation shall redeem all the shares of Series
D Stock originally issued hereunder (or such lesser amount as shall
then be outstanding) at the "Redemption Price" per share defined in
paragraph (c) below, payable in each case in cash on the Mandatory
Redemption Date. The Corporation shall deliver written notice of the
pending redemption to the holders of the Series D Stock at least thirty
(30) but no more than sixty (60) days prior to the Mandatory Redemption
Date.
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<PAGE> 14
(b) Redemption on Change of Control. Upon a "Change of
Control" of the Corporation, each holder of the then outstanding shares
of Series D Stock may elect to have the Corporation redeem all (but not
less than all) outstanding shares of Series D Stock owned by such
holder at the "Redemption Price" per share defined in paragraph (c)
below, payable in cash on any date within 100 days of the effective
date of the Change of Control (such date being herein referred to as
the "Change of Control Redemption Date"). The election shall be made by
delivering written notice to the Corporation at least thirty (30) but
no more than sixty (60) days prior to the Change of Control Redemption
Date. The Corporation will then be required to redeem all the shares of
Series D Stock owned by such holder on the Change of Control Redemption
Date. For purposes of this Section 7, "Change of Control" means any one
or more of the following events:
(i) The Corporation shall consolidate with or merge
into any other person or any person shall consolidate with or
merge into the Corporation (other than a consolidation or
merger of the Corporation and a wholly-owned subsidiary of the
Corporation in which all shares of the Corporation's Common
Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration), in either event pursuant to a transaction in
which any of the Corporation's common stock outstanding
immediately prior to the effectiveness thereof is changed into
or exchanged for cash, securities or other property; or
(ii) the Corporation shall directly or indirectly
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any
person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act") (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share
exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value
to par value; or
(iv) any person (other than the Corporation, any
subsidiary of the Corporation or an Existing Investor (as
defined in the Purchase Agreement (as hereinafter defined))),
including a "group" (within the meaning of Section 13(d) and
14(D)(2) of the 1934 Act) that includes such person, shall
purchase or otherwise acquire, directly or indirectly,
beneficial ownership of securities of the Corporation and, as
a result of such purchase or acquisition, such person
(together with its associates and affiliates) shall directly
or indirectly beneficially own in the aggregate (1) more than
50% of the Common Stock, or (2) securities representing more
than 50% of the combined voting power of the Corporation's
voting securities, in each case under subclause (1) or (2),
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<PAGE> 15
outstanding on the date immediately prior to the date of such
purchase or acquisition (or, if there be more than one, the
last such purchase or acquisition).
(c) The Redemption Price per share of Series D Stock shall
equal the sum of (x) $10.50 (as adjusted for Recapitalization Events)
plus (y) all accrued and unpaid dividends on such share of Series D
Stock to the Mandatory Redemption Date or Change of Control Redemption
Date, as the case may be.
(d) The term "Redemption Date" as used in this paragraph (d)
shall refer to whichever of the Mandatory Redemption Date or the Change
of Control Redemption Date is applicable in a particular circumstance.
On or prior to the Redemption Date, the Corporation shall deposit the
Redemption Price of all outstanding shares of Series D Stock to be
redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of
the holders of the shares of Series D Stock, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or
after the Redemption Date upon receipt of the certificate or
certificates of the shares of Series D Stock to be redeemed. From and
after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Series D Stock to be redeemed as holders of Series D Stock (except the
right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series D
Stock redeemed, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series D
Stock (or Series A Stock, Series B Stock and Series C Stock which shall
rank pari passu with the Series D Stock) are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date,
the Corporation will use those funds which are legally available
therefor to redeem the maximum possible number of shares of Preferred
Stock ratably among the holders of such shares to be redeemed based
upon the total amount payable by the Corporation pursuant to the
redemption of the Series D Stock, Series C Stock, Series B Stock and
Series A Stock if the Corporation had sufficient funds legally
available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series D Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of shares of Series D Stock
such funds will immediately be used to redeem the balance of the shares
of Series D Stock to be redeemed. No dividends or other distributions
shall be declared or paid on, nor shall the Corporation redeem,
purchase or acquire any shares of, the Common Stock or any other class
or series of stock of the Corporation unless the Redemption Price of
all shares elected to be redeemed shall have been paid in full. Until
the Redemption Price for a share of Series D Stock elected to be
redeemed shall have
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<PAGE> 16
been paid in full, such share of Series D Stock shall remain
outstanding for all purposes and entitle the holder thereof to all the
rights and privileges provided herein, including, without limitation,
that dividends and interest thereon shall continue to accrue and, if
unpaid prior to the date such shares are redeemed, shall be included as
part of the Redemption Price as provided in paragraph (c) above.
Notwithstanding anything in this Section 7 to the contrary, even if a
notice of redemption was delivered under paragraph (a) or (b) of this
Section 7, all shares of Series D Stock shall be convertible pursuant
to Section 5 at all times prior to the Redemption Date.
(e) Notwithstanding any other term of this Certificate of
Designation, the Corporation shall not redeem (or have any obligation
to redeem) any shares of Series D Stock under any circumstances,
whether upon a Change of Control or otherwise, prior to the payment in
full and satisfaction of all of the obligations of the Corporation to
the lenders who provide financing to the Corporation in the aggregate
principal amount of $75,000,000.00. If the Corporation shall not have
paid in full or satisfied all of its obligations to such lenders on or
before any Redemption Date, upon such payment and satisfaction the
Corporation will immediately use any funds legally available therefor
to redeem the shares of Series D Stock to be redeemed.
8. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or (e) of
a Change of Control, then the Corporation shall cause to be mailed to the
recordholders of the Series D Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation, winding up or Change of Control is
expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation, liquidation,
merger, sale, lease, exchange, dissolution, liquidation, winding up or Change of
Control.
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9. Voting Rights.
(a) Holders of Series D Stock shall be entitled to notice of
any stockholder's meeting. Except as otherwise required by law or
provided herein, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any
such meeting, each outstanding share of Series D Stock shall be
entitled to the number of votes equal to the number of full shares of
Common Stock into which such share of Series D Stock is then
convertible. Except as otherwise required by law or provided herein,
the Series B Stock, the Series C Stock, the Series D Stock and the
Common Stock shall vote together on each matter submitted to
stockholders, and not by class or series.
(b) Upon an Event of Default and so long as it shall continue,
the holders of the Series B Stock, the Series C Stock and the Series D
Stock, voting together as a class, shall be entitled at any annual
meeting of the stockholders or special meeting held in place thereof,
or at a special meeting of the holders of the Series B Stock, the
Series C Stock and the Series D Stock called as hereinafter provided,
to elect a majority of the Board of Directors and such right to elect a
majority of the Board of Directors shall be in lieu of the right of the
holders of the Series B Stock and the Series C Stock (and, as may be
provided pursuant to the terms of this Certificate of Designations,
Preferences and Rights of the Series D Stock, the Series D Stock) to
each elect one director. Such right of the holders of the Series B
Stock, the Series C Stock and the Series D Stock to elect a majority of
the Board of Directors may be exercised until an Event of Default shall
be cured, if curable, or waived, and when so cured or waived, the right
of the holders of Series B Stock, the Series C Stock and the Series D
Stock to elect a majority of the Board of Directors shall cease and the
right of the holders of the Series B Stock and the Series C Stock (and,
as may be provided pursuant to the terms of this Certificate of
Designations, Preferences and Rights of the Series D Stock, the Series
D Stock) to each elect one director shall resume, but subject always to
the same provisions for the vesting of such special voting rights in
the case of any such future Event of Default. At any time when such
special voting rights shall have so vested in the holders of the Series
B Stock, the Series C Stock and the Series D Stock, the Secretary of
the Corporation may, and upon the written request of the holders of 10%
or more of the number of shares of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding addressed to him at the
principal office of the Corporation, shall, call a special meeting of
the holders of the Series B Stock, the Series C Stock and the Series D
Stock for the election of a majority of the Board of Directors to be
elected by them as provided herein, to be held in the case of such
written request as soon as practicable after delivery of such request,
and in either case to be held at the place and upon the notice provided
by law and in the by-laws for the holding of meetings of stockholders.
If at any such annual or special meeting or adjournment thereof the
holders of at least a majority of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding shall be present or
represented at such meeting, the then authorized number of directors of
the Corporation shall be increased to the extent necessary to provide a
majority of new directors to be elected and the holders of the Series B
Stock, the Series C Stock and the Series D Stock shall
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<PAGE> 18
be entitled to elect the additional directors so provided for. The
directors so elected shall serve until the next annual meeting or until
their successors shall be elected and qualified, provided, however,
that whenever the holders of the Preferred Stock shall be divested of
the special rights to elect a majority of the Board of Directors as
above provided, the term of office of the persons so elected as
directors by the holders of the Series B Stock, the Series C Stock and
the Series D Stock as a class, or elected to fill any vacancies
resulting from the death, resignation or removal of the directors so
elected by the holders of Series B Stock, the Series C Stock and the
Series D Stock, shall forthwith terminate and the authorized number of
directors shall be reduced accordingly.
If during any interval between any special meeting of the
holders of Series B Stock, the Series C Stock and the Series D Stock
for the election of directors to be elected by them as provided above
and the next ensuing annual meeting of stockholders, or between annual
meetings of stockholders for the election of directors, and while the
holders of the Series B Stock, the Series C Stock and the Series D
Stock shall be entitled to elect a majority of the Board of Directors,
any of the directors who have been elected by the holders of the Series
B Stock, the Series C Stock and the Series D Stock shall, by reason of
resignation, death or removal, have departed from the Board, the
Secretary of the Corporation shall call a special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock and such vacancy or vacancies shall be filled at such special
meeting.
(c) In addition to any other vote or consent of stockholders
provided by law or by the Corporation's Certificate of Incorporation,
the Corporation shall not, without the approval by vote or written
consent of the holders of not less than 60 % of the then outstanding
shares of Series D Stock:
(i) amend, waive or repeal any provisions of, or add
any provision to, (i) this Certificate of Designation or (ii)
any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation filed
with the Secretary of State of Delaware by the Corporation
with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add
any provision to, the Corporation's By-Laws;
(iii) authorize, create, issue or sell any shares of
Equivalent Stock or Superior Stock, except as authorized in
this Certificate of Designation;
(iv) issue any shares of Series D Stock other than
pursuant to the Purchase Agreement or upon transfers of
outstanding shares of Series D Stock;
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(v) enter into any agreement, indenture or other
instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on or make
redemptions of the Series D Stock in accordance herewith;
(vi) dissolve the Corporation;
(vii) enter into any agreement(s) that would restrict
the Corporation's ability to perform its obligations pursuant
to the Purchase Agreements (as defined in Section 11(iv)
below);
(viii) (A) at any time prior to the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless (i) the aggregate consideration
received by the Corporation or its stockholders, divided by
(ii) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding as of the date of such
transaction, equals or exceeds $25.00 (as adjusted for
Recapitalization Events); or (B) at any time after the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless such transaction provides
holders of Series D Stock with an IRR (as defined in the
Certificate of Designations of the Corporation's Series C
Stock, as in effect on the Original Issue Date) equal to at
least twenty-five one hundredths (25/100), calculated as if
the holder of Series D Stock purchased such shares of Series D
Stock on the date such holder purchased such shares at the
purchase price paid by such holder;
(ix) sell, lease or otherwise dispose of 20% or more
of the assets of the Corporation, other than in the ordinary
course of business, unless the proceeds of such sale, lease or
other disposition are reinvested in assets of the general type
used in the business of the Corporation;
(x) issue more than 3,500,000 shares of Common Stock
(as adjusted for Recapitalization Events and excluding any
shares that the Corporation may issue pursuant to an
underwriters' overallotment option) in connection with any
public offering of the Corporation's Common Stock pursuant to
an effective registration under the Securities Act of 1933, as
amended, covering the offering and sale of Common Stock;
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(xi) issue equity securities to employees, officers
or directors of the Corporation, except (a) securities
issuable upon the exercise of outstanding options and warrants
and pursuant to existing contractual commitments and (b)
options to purchase up to 2,184,166 shares of Common Stock,
together with the Common Stock issuable upon exercise thereof;
(xii) issue any securities for a price less than fair
market value, other than as may be required by existing
contractual commitments, as permitted by clause (xi) hereof or
pursuant to warrants to purchase shares of Common Stock
granted by the Corporation from time to time where the
exercise price of such warrants equals or exceeds the fair
market value of the Common Stock as of the date of grant of
such warrants;
(xiii) enter into any transactions (or series of
transactions), including loans, with any officer or director
of the Corporation or to or with their affiliates and family
members involving $100,000.00 or more per year individually or
$500,000.00 or more per year in the aggregate except (a) as
may be contemplated by existing contractual commitments, (b)
reasonable compensation payable to officers and directors, and
(c) for options and warrants issued in compliance with clause
(ix) hereof; or
(xiv) engage in any transaction (or series of
transactions) that would impair or reduce the rights and
preferences of the holders of the Series D Stock as a class
relative to the rights and preferences of the holders of any
other class of the Corporation's capital stock.
"Assets" shall mean an interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Equivalent Stock" shall mean any shares of any class or series of
Stock of the Corporation having any preference or priority as to dividends or
Assets on a parity with any such preference or priority of the Series D Stock
and no preference or priority as to dividends or Assets superior to any such
preference or priority of the Series D Stock and any instrument or Security
directly or indirectly convertible into or exercisable or exchangeable for
Equivalent Stock. Without limiting the generality of the foregoing, a dividend
rate, mandatory or optional sinking fund payment amounts or schedules or
optional redemption provisions, the existence of a conversion right or the
existence of a liquidation preference of up to 100% of the original issue price
plus unpaid accrued dividends plus a premium of up to the dividend rate or up to
the percentage of the equity of the Corporation represented by such Stock, with
respect to any class or series of Stock, differing from that of the Series D
Stock, shall not prevent such class of Stock from being Equivalent Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument directly or
indirectly convertible into or
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exercisable or exchangeable for Securities or Security. The term "Security"
shall mean one of the Securities.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate stock.
"Superior Stock" shall mean any shares of any class or series of Stock
of the Corporation having any preference or priority as to dividends or Assets
superior to any such preference or priority of the Series D Stock and any
instrument or security directly or indirectly convertible into or exercisable or
exchangeable for Superior Stock.
(d) Notwithstanding anything else contained herein, the
affirmative vote or written consent of the holders of not less than 90%
of the then outstanding shares of Series D Stock shall be necessary to
amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or the Certificate of Designation creating
this Series D Stock which would alter or change (i) the dividend rate,
(ii) redemption provisions, (iii) anti-dilution provisions, (iv) the
place or currency of payments hereunder, (v) the right to institute
suit for the enforcement of any payment hereunder, (vi) the conversion
provisions, or (vii) provisions of this Section 9, so as to affect any
of the foregoing adversely.
10. Preemptive Rights.
(a) The Corporation shall not issue or sell any shares of
Common Stock, Preferred Stock or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares
of Common Stock, other than any such issuance or sale (i) pursuant to a
Qualifying Offering, (ii) pursuant to a stock option plan approved by
the Board of Directors, (iii) as a form of consideration in connection
with mergers or acquisitions where the Corporation is the surviving
entity or (iv) where the aggregate gross proceeds are less than
$500,000 in any single transaction, provided that the sale price per
share is not less than the then applicable fair market value of such
shares, as determined in good faith by the Corporation's Board of
Directors, and, provided further, that the aggregate gross proceeds of
all such transactions shall not exceed $1,500,000 (the securities
issued in such transactions being referred to as the "Newly Issued
Securities"), unless prior to the issuance or sale of such Newly Issued
Securities each holder of Series D Stock shall have been given the
opportunity (such opportunity being herein referred to as the
"Preemptive Right") to purchase (on the same terms as such Newly Issued
Securities are proposed to be sold) the same proportion of such Newly
Issued Securities being issued or offered for sale by the Corporation
as (x) the number of shares of Common Stock (calculated solely on
account of outstanding shares of Series D Stock on an as converted
basis) held by such holder on the day preceding the date of the
Preemptive Notice (as defined herein), as the case may be, bears to (y)
the total number of shares of Common Stock (calculated on a fully
diluted basis) outstanding on that day.
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(b) Prior to the issuance or sale by the Corporation of any
Newly Issued Securities, the Corporation shall give written notice
thereof (the "Preemptive Notice") to each holder of Series D Stock. The
Preemptive Notice shall specify (i) the name and address of the bona
fide investor to whom the Corporation proposes to issue or sell Newly
Issued Securities, (ii) the total amount of capital to be raised by the
Corporation pursuant to the issuance or sale of Newly Issued
Securities, (iii) the number of Securities of such Newly Issued
Securities proposed to be issued or sold, (iv) the price and other
terms of their proposed issuance or sale, (v) the number of such Newly
Issued Securities which such holder is entitled to purchase (determined
as provided in subsection (a) above), and (vi) the period during which
such holder may elect to purchase such Newly Issued Securities, which
period shall extend for at least thirty (30) days following the receipt
by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series D Stock who desires to purchase Newly
Issued Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Newly Issued Securities he wishes to
purchase, as well as the number, if any, of additional Newly Issued
Securities he would be willing to purchase in the event that all of the
Newly Issued Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series D Stock.
(c) In the event a holder of Series D Stock declines to
subscribe for all or any part of its pro rata portion of any Newly
Issued Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive Acceptance
Period, then the other holders of Series D Stock shall have the right
to subscribe for all (or any declined part) of the Declining Preemptive
Purchaser's pro rata portion of such Newly Issued Securities (to be
divided among the other holders of Series D Stock desiring to exercise
such right on a ratable basis).
(d) Any such Newly Issued Securities which none of the holders
elect to purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of three (3) months
after the expiration of the Preemptive Acceptance Period, to any other
person or persons at not less than the price and upon other terms and
conditions not less favorable to the Corporation than those set forth
in the Preemptive Notice.
(e) The preemptive rights afforded by this Section 10, and any
obligation for the Corporation to offer such shares of Common Stock,
Preferred Stock or other securities convertible into or exchangeable
for shares of Common Stock may be waived by a written instrument signed
by the holders of sixty percent (60 %) of the Series D Stock.
11. Events of Default. An Event of Default shall mean any of the
following:
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<PAGE> 23
(i) Any failure by the Corporation to pay in cash any
dividend, if and when declared by the Board of Directors, on
the payment due dates and in the amounts provided pursuant to
Section 3 hereof, if such failure shall continue for any two
quarterly periods;
(ii) Any failure by the Corporation to satisfy its
redemption obligations pursuant to Section 7 hereof if any
such failure shall continue for a period of five days from the
appropriate redemption date;
(iii) Any failure by the Corporation to comply with
the provisions of Sections 4, 5, 6, 8, 9 or 10 hereof;
(iv) If any representation or warranty made by the
Corporation in the Stock Purchase Agreement dated as of August
27, 1999 or the exhibits or schedules thereto (the "Purchase
Agreements") is or shall be untrue in any material respect at
the time it was made, if such representation or warranty
remains untrue after 10 days' written notice, with such notice
delivered by hand or by first-class, certified or overnight
mail, postage prepaid, or by telecopier, from any holder of
Series D Stock, unless waived in writing by holders of not
less than 60 % of the outstanding shares of Series D Stock;
(v) Any failure by the Corporation to comply with, or
any breach by the Corporation of, any of the covenants,
agreements or obligations of the Corporation contained in the
Purchase Agreements which continues for a period of 10 days
after written notice, with such notice delivered by hand or by
first-class, certified or overnight mail, postage prepaid, or
by telecopier, from any holder of Series D Stock, unless
waived in writing by holders of not less than 60 % of the
outstanding shares of Series D Stock;
(vi) Default by the Corporation in the performance or
observance of any obligation or condition with respect to any
Indebtedness of the Corporation that is not cured or waived
within 90 days or if the effect of such default is to
accelerate the maturity of such Indebtedness or cause such
Indebtedness to be prepaid, purchased or redeemed or to permit
the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed or to
realize upon any collateral or security for such Indebtedness,
unless such default shall have been waived by the appropriate
person. Indebtedness of any corporation shall mean the
principal of (and premium, if any) and unpaid interest on (i)
indebtedness which is for money borrowed from others; (ii)
indebtedness guaranteed, directly or indirectly, in any manner
by such corporation, or in effect guaranteed, directly or
indirectly, by such corporation through an agreement,
contingent or otherwise, to supply funds to or in any manner
invest
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in the debtor or to purchase indebtedness, or to purchase
assets or services primarily for the purpose of enabling the
debtor to make payment of the indebtedness or of assuring the
owner of the indebtedness against loss; (iii) all indebtedness
secured by any mortgage, lien, pledge, charge or other
encumbrance upon assets owned by such corporation, even if
such corporation has not in any manner become liable for the
payment of such indebtedness; (iv) all indebtedness of such
corporation created or arising under any conditional sale,
lease or other title retention agreement with respect to
assets acquired by such corporation even though the rights and
remedies of the seller, lessor or lender under such agreement
or lease in the event of default are limited to repossession
or sale of such assets and provided that obligations for the
payment of rent under a lease of premises from which the
business of such corporation will be conducted shall not
constitute indebtedness; and (v) renewals, extensions and
refunding of any such indebtedness; or
(vii) If the Corporation shall:
(a) become insolvent or generally fail to
pay, or admit in writing its inability to pay, its
debts as they become due;
(b) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator
or other custodian for the Corporation or any
property thereof, or make a general assignment for
the benefit of creditors (any of which shall be
referred to herein as a "Receiver");
(c) in the absence of such application,
consent or acquiescence, permit or suffer to exist
the appointment of a Receiver, and such Receiver
shall not be discharged within 60 calendar days;
(d) commit any act of bankruptcy, permit or
suffer to exist the commencement of any bankruptcy
reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or
any dissolution, winding up or liquidation proceeding
in respect of the Corporation, and, if any such case
or proceeding is not commenced by the Corporation,
such case or proceeding shall be consented to or
acquiesced in by the Corporation, or shall result in
the entry of an order for relief and shall remain for
30 calendar days undismissed; or
(e) take any corporate or other action
authorizing, or in furtherance of, any of the
foregoing.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this
15th day of September, 1999.
PNV.NET, INC.
By /s/ Robert P. May
------------------------------------------
Robert P. May, Chief Executive Officer
ATTEST:
By: /s/ Anthony Allen
----------------------------
Anthony Allen, Secretary
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EXHIBIT 3.10
AMENDED AND RESTATED BY-LAWS OF
PARK `N VIEW, INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect a Board of Directors and transact such other business as may
properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a member of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it
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appears on the stock transfer books of the Corporation. Nothing herein contained
shall preclude the stockholders from waiving notice as provided in Section 4.1
hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders. If, however, such quorum
shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. Notwithstanding the foregoing, if after any
such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or
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represented at any meeting of stockholders shall be the vote of the stockholders
with respect to any item of business, unless otherwise provided by any
applicable provision of law, by these By-Laws or by the Certificate of
Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns except in those cases where an irrevocable proxy
permitted by statute has been given.
Section 2.8. Consents. Any action which is required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed and dated
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereof were present and voted. Such signed
and dated action must be filed with the Secretary of the Corporation to be kept
in the corporate minute book.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a
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complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order and showing the address of
and the number and class and series, if any, of shares held by each. Such list,
for a period of ten (10) days prior to such meeting, shall be kept at the
principal place of business of the Corporation or at the office of the transfer
agent or registrar of the Corporation and such other places as required by
statute and shall be subject to inspection by any stockholder at any time during
usual business hours. Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one (1) nor more than seven (7). If a
certificate of designation of a series of preferred stock provides that the
number of directors shall be increased upon the occurrence of certain events,
then the provisions of such certificate of designation shall supersede the
provisions of these By-laws.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special
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meeting called for that purpose, either with or without cause, except that
directors elected by a class vote of holders of preferred stock may only be
removed by vote of the holders a majority of such preferred stock.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
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Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a member of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
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mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
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Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members
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thereof) shall serve at the pleasure of the Board and shall keep minutes of its
meetings and report the same to the Board. Except as otherwise provided by law,
each such committee, to the extent provided in the resolution establishing it,
shall have and may exercise all the authority of the Board with respect to all
matters. However, no such committee shall have power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided by
resolution of the Board, no such committee shall have power or authority to:
(1) declare a dividend; or
(2) authorize the issuance of shares of the
Corporation of any class.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by
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proxy without protesting prior to the conclusion of the meeting the lack of
notice thereof to him, and any director attending a meeting of the Board of
Directors without protesting prior to the meeting or at its commencement such
lack or notice, shall be conclusively deemed to have waived notice of such
meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a President or Chief Executive Officer, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Chief Financial Officer, Vice President,
Assistant Vice Presidents, Secretaries, Assistant Secretaries and Assistant
Treasurers, as it shall at any time or from time to time deem necessary or
advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
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Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. President. The President shall have general charge of the
business and affairs of the Corporation and in the absence of the Chairman of
the Board, the President shall preside at all meetings of the stockholders and
the directors. The President shall perform such other duties as are properly
required of him by the Board of Directors.
Section 5.8. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
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Section 5.9. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.10. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
President and to each member of the Board of Directors, whenever requested, an
account of all of his transactions as Treasurer and of the financial condition
of the Corporation; and in general, he shall perform all of the duties incident
to the office of the Treasurer of a
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<PAGE> 14
corporation, and such other duties as the Board of Directors may from time to
time prescribe.
Section 5.11. Other Officers. The Board of Directors may also elect or
may delegate to the President the power to appoint such other officers as it may
at any time or from time to time deem advisable, and any officers so elected or
appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold
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<PAGE> 15
liable for calls and assessments a person registered on its books as the owner
of stock, and shall not be bound to recognize any equitable or legal claim to or
interest in such shares on the part of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of the fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment
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<PAGE> 16
thereof, or to express written consent to any corporate action without a
meeting, or for the purpose of determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board may fix, in
advance, a record date. Such date shall not be more than sixty (60) nor less
than ten (10) days before the date of any such meeting, nor more than sixty (60)
days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
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<PAGE> 17
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
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<PAGE> 18
ARTICLE IX
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
ARTICLE VIII
ADOPTION AND AMENDMENT
Section 9.1. Power to Amend. Subject to any limitation contained in any
certificate of designation, these By-Laws may be amended or repealed and any new
By-Laws may be adopted by the Board of Directors; provided that these By-Laws
and any other By-Laws amended or adopted by the Board of Directors may be
amended, may be
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<PAGE> 19
reinstated, and new By-Laws may be adopted, by the stockholders of the
Corporation entitled to vote at the time for the election of directors.
THIS IS TO CERTIFY that the above Bylaws were duly adopted and include
all amendments adopted by the Board of Directors of the Corporation by action
taken at a meeting held on April 23, 1998, and subsequently approved by the
holders of the Series A Preferred Stock, the Series B 7% Cumulative Convertible
Preferred Stock, and the Series C 7% Cumulative Convertible Preferred Stock by
written consent.
/s/ Anthony Allen
-----------------------------------
Anthony Allen, Secretary
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<PAGE> 20
CERTIFICATION OF AMENDMENT TO BYLAWS
This is to certify that the following amendment to the Corporation's
By-laws was duly adopted by the Board of Directors of the Corporation by written
consent, dated as of August 25, 1999, and subsequently approved by the holders
of the Series A Preferred Stock, the Series B 7% Cumulative Convertible
Preferred Stock, and the Series C 7% Cumulative Convertible Preferred Stock by
written consent, dated as of August 27, 1999:
Section 3.1 of the Corporation's By-laws be, and hereby is, deleted in
its entirety and the following inserted in lieu thereof:
"The number of directors of the Corporation which shall constitute the
entire Board of Director shall initially be fixed by the Incorporator
and thereafter from time to time by a vote of a majority of the entire
Board and shall be not less than one (1) nor more than nine (9). If a
certificate of designation of a series of preferred stock provides that
the number of directors shall be increased upon the occurrence of
certain events, then the provisions of such certificate of designation
shall supersede the provisions of these By-laws."
This the 27th day of August, 1999.
/s/ Anthony Allen
---------------------------
Anthony Allen, Secretary
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<PAGE> 1
EXHIBIT 10.1
FLEET SERVICE AGREEMENT
THIS FLEET SERVICE AGREEMENT (this "Agreement") is entered into as of
February 1, 1999 (the "Effective Date") by and between Park 'N View, Inc., a
Delaware corporation ("PNV"), with its headquarters at 11711 NW 39th Street,
Coral Springs, Florida 33065 and Trucks For You, Inc., an Oklahoma corporation
("TFY"), with its headquarters at 3303 N. 32nd Street, Muskogee, Oklahoma 74402.
WHEREAS, TFY currently employs or has contracted for the services of
professional truck drivers to operate its fleet of trucks; and
WHEREAS, TFY operates a truck terminal located at 14407 Mines Road,
Laredo, Texas 78045 (hereinafter referred to as the "Fleet Terminal"); and
WHEREAS, PNV has designed and developed the concept and equipment (the
"System") to: (a) enable truck drivers to receive and/or have access to cable
television services and telecommunications services; and (b) provide such truck
drivers programming consisting of video and audio services, and telephone, voice
mail, fax or other data services while remaining in their vehicles parked at
truckstops and the Fleet Terminal; (collectively, the "Services"); and
WHEREAS, PNV provides the Services to truck drivers through a
membership program pursuant to which each member is entitled to use the Services
at the Fleet Terminal and at each truckstop at which the Services are provided
in return for a monthly membership fee; and
WHEREAS, PNV and TFY previously entered into that certain Fleet Service
Agreement dated January 28, 1998 (the "Prior Agreement"); and
WHEREAS, PNV and TFY desire to terminate the Prior Agreement and to
enter into this Agreement pursuant to which PNV shall: (i) install the System
and provide the Services at the Fleet Terminal; and (ii) provide memberships to
TFY's drivers.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, TFY and PNV (hereinafter collectively being referred to as the
"Parties"), intending to be legally bound, hereby mutually agree as follows:
1. Purpose. The Parties hereby agree that pursuant to the terms of this
Agreement: (i) PNV shall provide and TFY shall purchase memberships to be used
by certain of TFY's drivers; and (ii) PNV shall install the System and provide
the Services at the Fleet Terminal.
2. Installation of the System at the Fleet Terminal
(a) Within _________ (___) days of execution of this
Agreement, PNV shall commence installation of the System at the Fleet Terminal.
Prior to commencement of construction at the Fleet Terminal, PNV shall obtain
TFY's approval of the methods and
<PAGE> 2
materials to be used by PNV with respect to the installation of the System. The
Parties shall mutually determine the precise number and location of the truck
parking spaces at which the Services shall be provided, taking into account such
factors as the cost of construction and implementation, the layout of the
parking facilities, the usage of particular parking rows to drop trailers and
such other factors as the Parties may deem relevant. The Parties also
acknowledge and agree that if the Fleet Terminal parking lot needs to be paved,
it shall be paved at TFY's expense. PNV will repair any damage to the Fleet
Terminal which is caused by PNV. However, PNV shall not be responsible for any
existing defects or deficiencies or the normal wear and tear to the parking lot
or the Fleet Terminal.
(b) All of the equipment as currently used by PNV is described
on Schedule 1 hereto and is hereinafter, together with any additions or
deletions to said equipment, collectively referred to as the "PNV Equipment".
PNV reserves the right to make additions to and deletions from the PNV Equipment
to be installed at each Fleet Terminal.
(c) TFY shall make available to PNV a sufficient area in which
to install the PNV Equipment including: (i) such area as is required for the
installation of satellite dish(es); (ii) a secured air-conditioned interior area
of approximately 50 square feet for the installation of the headend equipment
and the telephone and related monitoring equipment; and (iii) an area at the
dispatcher desk or other interior location for installation of the equipment
required for activation of the Services (hereinafter collectively referred to as
the "Equipment Area"). Upon reasonable prior notice to TFY, PNV shall be
entitled to have continued access to the Equipment Area and all parking areas
for purposes of installing and monitoring the PNV Equipment, the System and the
Services.
(d) PNV shall on a timely basis secure, and continuously
maintain in full force and effect, all licenses, permits and approvals required
by governmental authorities with respect to the installation, operation and
maintenance of the System and providing the Services. TFY shall assist PNV (at
PNV's expense) in obtaining any such licenses, permits, or approvals upon PNV's
reasonable request. PNV shall at all times comply with all applicable laws,
rules, regulations, etc. in connection with the installation, operation and
maintenance of the System, or otherwise related to the performance of PNV's
obligations hereunder.
(e) The Parties agree that while PNV shall use reasonable
efforts to complete the installation of the System at the Fleet Terminal
pursuant to the terms of this Agreement, PNV's obligations to install the System
at the Fleet Terminal is subject to: (i) TFY authorizing PNV to use its standard
construction methods and materials with respect to the installation of the
System; (ii) completion of satisfactory engineering and environmental surveys at
the Fleet Terminal; (iii) confirmation that no part of the System crosses a
public right of way adjacent to the Fleet Terminal; (iv) receipt from TFY of all
requested maps, blue prints and other relevant information relating to the Fleet
Terminal on a timely basis; and (v) PNV not being able to complete any such
installation because of any of the following: floods, civil unrest, acts of God;
war; governmental interference or embargoes; labor strikes; failure of others to
supply fuel, power, materials or supplies; transportation delays by third
parties; or any other cause (whether or not similar to those described in this
Section 2(e)) beyond the control of PNV.
2
<PAGE> 3
3. Purchase of Memberships. Commencing on the Effective Date, TFY will
purchase memberships from PNV each month during the Term (as defined in Section
5). Prior to the Effective Date, TFY shall provide PNV with the name and a
unique all-numeric number of each driver to enable PNV to activate each driver's
membership. TFY shall provide to PNV, on or before the twenty-fifth (25th) day
of each month, the name and unique all-numeric number of all drivers for which
TFY shall purchase a membership for the following month (the "Member List"). If
TFY does not provide PNV with an updated Member List on a timely basis, PNV
shall issue memberships for the following month based upon the prior months
Member List. PNV shall: (i) deactivate the memberships of all members deleted
from each new Member List; and (ii) activate memberships for all new members
added to the Member List. PNV shall also determine which if any members on the
new Member List have been inactive for the prior two (2) months (a "Dormant
Member") and (i) the membership of each Dormant Member will be deactivated
(blocked) and any long distance phone time given during the dormant period will
be cancelled and discontinued. The Dormant Member will begin to accrue long
distance phone time when TFY adds the driver's name to the new Member List; and
(ii) PNV shall credit $50.00 to TFY's Monthly Fee (as defined below) for each
Dormant Member.
4. Fees.
(a) Commencing on the Effective Date, TFY shall pay to PNV a
fee of (i) $25.00 per month for each membership purchased by TFY (collectively
the "Monthly Fee"). PNV shall invoice TFY for the Monthly Fee on the first day
of each month for the purchase of memberships for its drivers for that month.
TFY shall pay the Monthly Fee to PNV on or before the tenth (10th) day of the
month. Monthly Fees not paid on or before the tenth (10th) day of the month
shall accrue interest at the rate of 1.5% per month until paid in full and PNV
may terminate the membership of TFY's drivers if the Monthly Fee is not received
by the last day of the month.
(b) The Parties acknowledge and agree that the cost for
installation of the System at the Fleet Terminal is $90,000 (the "Installation
Cost"). In consideration for PNV installing the System at the Fleet Terminal, it
is agreed that: (i) PNV shall cancel the 1,000 hours of phone time currently
held in TFY's account and credit $30,000 against the Installation Cost; and (ii)
TFY shall pay PNV $5,000 per month commencing on February 1, 1999 and ending on
January 31, 2000, which shall be applied against the Installation Cost. Upon
termination of this Agreement for any reason, TFY shall pay PNV in full the
unpaid balance of the Installation Cost.
(c) If TFY desires to terminate the membership of any driver,
PNV shall, upon receipt of an updated list of current drivers, cancel the
membership of the terminated driver(s). If TFY desires to purchase memberships
for additional drivers effective during the month (as opposed to the first day
of the month), PNV shall, upon receipt of the additional drivers name and unique
all-numeric number, provide additional membership cards at no cost to TFY for
the remainder of that month and shall not provide the driver with any free long
distance service for that month. On the first day of the following month, PNV
shall commence charging
3
<PAGE> 4
TFY the Monthly Fee and provide the driver with full membership privileges,
including any applicable free long distance phone service.
5. Term. The term of this Agreement shall be for a period of one (1)
year commencing on the Effective Date. Upon termination of the Agreement for any
reason, PNV shall be entitled to retain without offset or repayment all amounts
paid to PNV by TFY as of the date of termination.
6. Rights and Duties of The Parties With Respect To The PNV Equipment.
Upon the termination of this Agreement for any reason, PNV shall have the right
to remove, at its sole cost and expense, any or all of the PNV Equipment from
the Fleet Terminal. If PNV removes the PNV Equipment, PNV shall restore the
Fleet Terminal as near as reasonably possible to the condition of such premises
prior to the installation of the System, existing defects and normal wear and
tear excepted, but shall not be obligated or permitted without the prior consent
of TFY to remove any underground cables.
7. Programming and Telecommunications Services to Be Provided.
(a) PNV shall make the Services available on the System as
follows:
(i) PNV shall source and deliver a programming
package consisting of a minimum of eleven
(11) channels of entertainment programming.
PNV shall pay the cost of all such
programming. The current programming
schedule to be broadcast by PNV is as set
forth on Schedule 2 , PNV may make changes
to the programming schedule from time to
time.
(ii) In addition to the eleven (11) channel
entertainment lineup, there shall be other
channels which shall be used to provide a
programming schedule and advertising.
(iii) PNV may provide pay-per-view or other
non-traditional cable channels or services
as part of the Services.
(iv) PNV shall also provide telephone service at
each parking slot at which the Services are
provided. The current telephone services
offered by PNV are set forth on Schedule 3.
PNV shall have the right to determine and
make changes to the specific types of
telecommunication services provided from
time to time.
8. Promotion, Use, Operation and Maintenance of the PNV Equipment, the
System and the Services.
(a) PNV shall, at its cost, provide TFY and its drivers, for
whom TFY has purchased a membership, with all equipment (including a starter kit
consisting of a phone and a
4
<PAGE> 5
25 foot coaxial and telephone cable) and instructions necessary for TFY and its
drivers to use the System and the Services.
(b) Upon installation of the System at a Fleet Terminal, PNV
shall train TFY and its designated employees with respect to the maintenance and
operation of the System. This initial training will be designed so that TFY will
be able to maintain the System and train new personnel with respect to operation
of the System and maintenance of the PNV Equipment as needed. PNV shall provide
follow up training for TFY's personnel during normal business hours with respect
to the operation of the System and the maintenance of the PNV Equipment as may
be reasonably requested by TFY from time to time.
(c) PNV shall maintain a good quality signal and reception
through the System comparable to the signal and reception supplied for regular
television programming and telecommunications services to home consumers.
(d) The day to day maintenance of the System shall be handled
as follows:
(i) TFY's trained staff members shall: (i)
replace failed connecting drop cables and
accessories with equipment to be furnished
by PNV; (ii) maintain the cable and phone
boxes in the outside hookups in proper
operating order, including cleaning and
removal of debris (i.e. oil, dirt, ice,
snow, etc.); and (iii) replace cable and
phone connection outlets in the outside
hookups with equipment furnished by PNV at
PNV's cost. PNV shall provide such materials
and parts to TFY at PNV's cost.
(ii) If a mechanical problem arises other than
through a failed connecting cable or
accessory, TFY shall contact PNV by
telephone at PNV's office. Unless
extenuating circumstances exist, PNV shall,
within forty-eight (48) hours, either
authorize TFY to contact a designated repair
technician or dispatch a designated repair
technician to make the necessary repairs to
the System. Charges for repairs will be
billed directly to PNV and paid by PNV.
9. Representations and Warranties of PNV.
(a) PNV is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full power and
authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by PNV has been duly authorized by all necessary action of PNV. This Agreement
and each of the other documents to be executed and delivered by PNV pursuant to
this Agreement have been duly
5
<PAGE> 6
executed and delivered by PNV and are the valid and binding obligations of PNV
enforceable in accordance with their respective terms, subject only as to
enforceability affected by bankruptcy, insolvency or similar laws affecting the
rights of creditors generally and by general equitable principles. The
execution, delivery and performance of this Agreement and the other documents to
be executed, delivered and performed by PNV pursuant to this Agreement will not:
(i) conflict with or violate any provision of PNV's organizational documents, or
any law, ordinance or regulation or any decree or order of any court or
administrative or other governmental body which is either applicable to, binding
upon or enforceable against PNV; or (ii) result in any breach of or default
under or cause the acceleration of performance of any mortgage, contract,
agreement, indenture or other instrument which is either binding upon or
enforceable against PNV.
(c) PNV is not required to obtain the approval, consent or
waiver of any other person or entity for the execution, delivery or performance
of this Agreement.
10. Representations and Warranties of TFY.
(a) TFY is a corporation duly organized, validly existing and
in good standing under the laws of Oklahoma and has full power and authority:
(i) to enter into this Agreement; and (ii) to carry out the other transactions
and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by TFY has been duly authorized by all necessary action of TFY. This Agreement
and each of the other documents to be executed and delivered by TFY pursuant to
this Agreement have been duly executed and delivered by TFY and are the valid
and binding obligations of TFY enforceable in accordance with their respective
terms, subject only as to enforceability affected by bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and by general
equitable principles. The execution, delivery and performance of this Agreement
and the other documents to be executed, delivered and performed by TFY pursuant
to this Agreement will not: (i) conflict with or violate any provision of TFY's
organizational documents, or any law, ordinance or regulation or any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against TFY; or (ii) result in any
breach of or default under or cause the acceleration of performance of any
mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against TFY.
(c) TFY is not required to obtain the approval, consent or
waiver of any other person or entity for the execution, delivery or performance
of this Agreement. During the Term (and any renewal term) the parking spaces at
the Fleet Terminal shall be used exclusively by TFY drivers.
11. Ownership and Confidentiality. PNV agrees to maintain and cause its
employees and agents to maintain and keep strictly confidential all proprietary
information received from TFY relating to its drivers, Fleet Terminal,
operations and customers. TFY recognizes and agrees that PNV shall, during the
term of this Agreement and thereafter, retain sole ownership of
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<PAGE> 7
the System and the PNV Equipment. TFY recognizes the proprietary nature of the
concept and the design of the System, the PNV Equipment and the Services.
Accordingly, TFY and PNV agree to maintain and cause each of its employees and
agents to maintain and keep strictly confidential the terms and provisions of
this Agreement and all of the confidential information that it obtains or
receives in conjunction with the operation of the System, the PNV Equipment or
the Services. TFY further agrees that the "Park N' View" name and logo shall be
and remain the property of PNV and all references by TFY to the System or the
Services shall incorporate and/or refer to PNV by its full name (Park N' View),
whether in literature, electronic or print displays, articles, advertising,
billboards, banners or otherwise. The name, Park 'N View, is, or will be, a
registered service mark of PNV and to the extent required by PNV, TFY shall
execute a no cost limited license agreement for the use of such service mark.
12. Breach. In the event that either Party shall fail in any material
respect to perform any obligation under this Agreement, the other Party may in
writing notify the non-performing Party that such failure constitutes a breach.
If the breach is not remedied or cured within ten (10) days following receipt of
the notice of breach, without limiting any other remedy which may be available,
the non-breaching Party may terminate this Agreement by notice to the breaching
Party.
13. Arbitration. Any controversy, dispute or question arising out of,
or in connection with, or in relation to this Agreement or the interpretation,
performance or non-performance or any breach thereof shall be determined by
arbitration conducted in Ft. Lauderdale, Florida in accordance with the then
existing rules of the American Arbitration Association. PNV and TFY shall each
select one arbitrator, and the two arbitrators shall select a third with the
same qualifications. Any decision rendered shall be binding upon the Parties,
however, the arbitrators shall have no authority to grant any relief that is
inconsistent with this Agreement. The expense of arbitration shall be borne by
the non-prevailing Party.
14. General Provisions.
(a) Notices. All notices required or permitted hereunder shall
be in writing and, may either be delivered by overnight courier, transmitted by
facsimile, or delivered by the United States Mail, postage prepaid, addressed as
follows:
To PNV: Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Attn: Fleet Sales Department
Fax Number: (954) 745 7899
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<PAGE> 8
To Fleet: Trucks For You, Inc.
3303 N. 32nd Street
P.O. Box 2547
Muskogee, OK 74402
Attn: Smokey Irwin
Fax: (918) 667-9963
All notices shall be deemed delivered only upon actual receipt. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to the terms of this Section 14(a).
Miscellaneous. This Agreement shall amend and supersede the Prior
Agreement, provided that, if PNV does not install the System at the Fleet
Terminal for any reason, this Agreement shall terminate and the parties shall be
bound by the terms and provisions of the Prior Agreement. The section headings
in this Agreement are for convenience of reference only and shall not be deemed
to alter or affect any provision hereof. This Agreement shall be governed by the
laws of the State of Florida. This Agreement shall not be modified or amended
except by an instrument in writing executed by the parties to this Agreement.
This Agreement shall apply to, and be binding upon, the parties and their
respective successors and permitted assigns. If any part or sub-part of this
Agreement is found or held to be invalid, that invalidity shall not affect the
enforceability and binding nature of any other part of this Agreement. This
Agreement may be executed in one or more counterparts, each of which when so
executed shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
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<PAGE> 9
IN WITNESS WHEREOF, TFY and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
PARK 'N VIEW, INC., a
Delaware corporation
By: /s/
----------------------------------
Steve Conkling, President
and Chief Operating Officer
TRUCKS FOR YOU
By: /s/
----------------------------------
Title:
----------------------------
Date:
-----------------------------
9
<PAGE> 10
SCHEDULE 1
LIST OF CURRENT PNV EQUIPMENT
Current PNV Equipment:
Satellite Dish & Off-air receive antenna
Processing [head-end] equipment
Telephone PBX switch and TFY console
Distribution cables
Parking lot plug-in boxes
Cable TV "billing" computer and software
Membership card dispenser
Telephone & Cable TV accessories for resale
Voice-mail
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<PAGE> 11
SCHEDULE 2
LIST OF CURRENT PROGRAMMING SCHEDULE
Current Programming Schedule:
==================================== ==========================
Channel # Program
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04 HBO
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05 HBO2
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06 HBO3
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07 DISCOVERY
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08 ESPN 2
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09 FOX
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10 DEN
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11 CNN HN
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12 WEATHER
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13 ESPN
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14 NBC
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15 ABC
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16 A&E
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17 CBS
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18 TNN
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19 TNT
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20 WGN
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21 PNV
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11
<PAGE> 12
SCHEDULE 3
LIST OF CURRENT TELEPHONE SERVICES
Current Telephone Services:
1+ calls
1-800 calls
Local calls
TFY services
Direct call back to stall # (automated)
Message waiting
Wake-up calls (automated)
12
<PAGE> 1
EXHIBIT 10.14
[CB COMMERCIAL INDUSTRIAL REAL ESTATE LEASE LOGO]
ARDEN TECHNOLOGIES, INC.
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the Landlord
and Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.
Section 1.01. DATE OF LEASE: July 20, 1992 (for identification purposes only)
-------------------------------------------------
Section 1.02. LANDLORD: CB INSTITUTIONAL FUND VI, a California limited
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partnership
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Address of Landlord: 533 Freemont Avenue
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Los Angeles, California 90071
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Section 1.03. TENANT: ARDEN TECHNOLOGIES, INC., a Florida corporation
- -------------------------------------------------------------------------------
Address of Tenant: c/o United Equities Group
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93 Lombard Avenue, Suite 115, Winnipeg, Manitoba, Canada
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R3B 3BI
- -------------------------------------------------------------------------------
Section 1.04. PROPERTY: (Include street address, approximate square footage and
description)Approximately 4,103 square feet of premises known as Building 10,
all of Bays G, H, I and a portion of Bay F, Two Prospect Park Business Center,
at the Fort Lauderdale Commerce Center, 3403 N.W. 55th Street, Fort Lauderdale,
Florida 33309, as more particularly shown and described on Exhibit "D" - Site
Plan of Property, which is attached hereto and incorporated herein by specific
reference thereto.
Section 1.05. LEASE TERM: sixty (60) months BEGINNING ON October 1, 1992
------------------- -----------------
or such other date as is specified in this Lease, and ENDED ON September 30,
---------------
1997
- ----
Section 1.06. PERMITTED USES: (See Section 5.01) General office use, use for the
assembly of high-tech wireless cable equipment, and any other legal use
consented to in writing in advance by Landlord and which is in compliance with
applicable zoning regulations and other restrictions of record.
Section 1.07. TENANTS GUARANTOR: (If none, so state) N/A
-------------------------
Section 1.08. LANDLORD'S BROKER: (See Article Fourteen)(If none, so state)
CB Commercial Real Estate Group, Inc.
- -------------------------------------------------------------------------------
Section 1.09. TENANT'S BROKER: (If none, so state) Farbman/Stein Management
Company, Craig Canote
- -------------------------------------------------------------------------------
Section 1.10. COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article Fourteen)
$ N/A (be separate Agreement)
- -------------------------------------------------------------------------------
Section 1.11. INITIAL SECURITY DEPOSIT: (See Paragraphs 3.03 and 13.03(c))
$ 2,222.46
- -------------------------------------------------------------------------------
Section 1.12. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (See Multi-Tenant
Facility Lease Rider, if attached)
- -------------------------------------------------------------------------------
Thirteen (13)
- -------------------------------------------------------------------------------
Section 1.13. RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a)BASE RENT: TWO THOUSAND TWO HUNDRED TWENTY-TWO AND 46/100THS DOLLARS
--------------------------------------------------------------
($2,222.46) per month for the first TWELVE (12) months, such amount to be
- ----------- -----------
increased and to be subject to the provisions regarding abatement of rent as set
forth in Exhibit "B" - Rental Rider, which is attached hereto and incorporated
herein by specific reference thereto.
(b)OTHER PERIODIC PAYMENTS: (i) Operating Expenses, as set forth on Exhibit
"B" - Rental, which is attached hereto and incorporated herein by specific
reference thereto; (ii) Utilities (See Section 4.03); (iii) Maintenance, Repairs
and Alterations (See Article Six).
Section 1.14. RIDERS: The following Riders are attached to and made a part of
this Lease; (If none, so state) Exhibit "A"-Special Stipulations Rider; Exhibit
-----------------------------------------------
"B"-Rental Rider; Exhibit "C"-Multi-Tenant Facility Lease Rider; Exhibit
- -------------------------------------------------------------------------------
"D"-Site Plan of Property
- -------------------------------------------------------------------------------
ARTICLE TWO: LEASE TERM
Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the Property
to Tenant and Tenant leases the Property from Landlord for the Lease Term. The
Lease Term is for the period stated in Section 1.05 above and shall begin and
end on the dates specified in Section 1.05 above, unless the beginning or end of
the Lease Term is changed under any provision of this Lease. The "Commencement
Date" shall be the date specified in Section 1.05 above for the beginning of
the Lease Term, unless advanced or delayed under any provision of this Lease.
Section 2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant if
Landlord does not deliver possession of the Property to Tenant on the first date
specified in Section 1.05 above. Landlord's non-delivery of the Property to
Tenant on that date shall not affect this Lease or the obligations of Tenant
under this Lease. However, the Commencement Date shall be delayed until
possession of the Property is delivered to Tenant. The Lease Term shall be
extended for a period equal to the delay in delivery of possession of the
Property to Tenant, plus the number of days necessary to end the Lease Term on
the last day of a month. If Landlord does not deliver possession of the Property
to Tenant within sixty (60) days after the first date specified.
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
Reprinted under license
/s/
1 ----------------
(Net Form)
<PAGE> 2
In Section 1.05. above, Tenant may elect to cancel this Lease by giving written
notice to Landlord within ten (10) days after the 60-day period ends. If Tenant
gives such notice, the Lease shall be cancelled and neither Landlord nor Tenant
shall have any further obligations to the other. If Tenant does not give such
notice, Tenant's right to cancel the Lease shall expire and the Lease Term shall
commence upon the delivery of possession of the Property to Tenant. If delivery
of possession of the Property to Tenant is delayed, Landlord and Tenant shall,
upon such delivery, execute an amendment to this Lease setting forth the
Commencement Date and expiration date of the Lease.
Section 2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.04. HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages incurred by Landlord from any
delay by Tenant in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by one hundred percent (100%).
ARTICLE THREE: BASE RATE
Section 3.01. TIME AND MANNER OF PAYMENT.
Section 3.02. COST OF LIVING INCREASES.
Section 3.03. SECURITY DEPOSIT INCREASES. Each time the Base Rent is
increased, Tenant shall deposit additional funds with Landlord sufficient to
increase the Security Deposit to an amount which bears the same relationship to
the adjusted Base Rent as the initial Security Deposit bore to the initial
Base Rent.
Section 3.04. TERMINATION; ADVANCE PAYMENTS. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, an equitable
adjustment shall be made concerning advance rent, any other advance payments
made by Tenant to Landlord, and accrued real property taxes, and Landlord shall
refund the unused portion of the Security Deposit to Tenant or Tenant's
successor.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
all Additional Rent shall be paid with the next monthly installment of Base
Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. REAL PROPERTY TAXES.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i) any
fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property or land upon which the Property is located; (ii) any tax on the
Landlord's right to receive, or the receipt of, rent or income from the
Property or against Landlord's business of leasing the Property; (iii) any tax
or charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the Property by any governmental agency; (iv) any tax
imposed upon this transaction, or based upon a re-assessment of the Property
due to a change in ownership or transfer of all or part of Landlord's interest
in the Property; and (v) any charge of fee replacing any tax previously
included within the definition of real property tax. "Real property tax" does
not, however, include Landlord's federal or state income, franchise,
inheritance or estate taxes.
(c) JOINT ASSESSMENT.
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
Reprinted under license
/s/
2 ----------------
(Net Form)
<PAGE> 3
(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishing, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the
Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord
for such personal property taxes.
(e) TENANT'S RIGHT TO CONTEST TAXES.
Section 4.03. UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, and other utilities
and services supplied to the Property. However, if any services or utilities
are jointly metered with other property, Landlord shall make a reasonable
determination of Tenant's proportionate share of the cost of such utilities and
services and Tenant shall pay such share to Landlord within fifteen (15) days
after receipt of Landlord's written statement.
Section 4.04. INSURANCE PREMIUMS.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a
policy of comprehensive public liability insurance, at Tenant's expense,
insuring Landlord against liability arising out of the ownership, use,
occupancy or maintenance of the Property. The initial amount of such insurance
shall be at least $1,000,000. However, the amount of such insurance shall not
limit Tenant's liability nor relieve Tenant of any obligation hereunder. The
policy shall contain cross-liability endorsements, if applicable, and shall
insure Tenant's performance of the indemnity provisions of Paragraphs 5.04(a),
(b) and (e). Tenant shall, at Tenant's expense, maintain such other liability
insurance as Tenant deems necessary to protect Tenant.
(b) HAZARD AND RENTAL INCOME INSURANCE. During the Lease Term, Landlord
shall maintain policies of insurance, covering loss of or damage to the
Property in the full amount of its replacement value. Such policies shall
provide protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, special extended perils
(all risk), sprinkler leakage, earthquake sprinkler leakage, and Inflation
Guard endorsement, and any other perils (except flood and earthquake, unless
required by any lender holding a security interest in the Property) which
Landlord deems necessary. Landlord may obtain insurance coverage for Tenant's
fixtures, equipment or building improvements installed by Tenant in or on the
Property. Tenant shall, at Tenant's expense, maintain such primary or additional
insurance on its fixtures, equipment and building improvements as Tenant deems
necessary to protect its interest. During the Lease Term, Landlord shall also
maintain a rental income insurance policy with loss payable to Landlord in an
amount equal to one year's Base Rent, estimated real property taxes and
insurance premiums. Tenant shall not do or permit to be done anything which
invalidates any such insurance policies.
(c) PAYMENT OF PREMIUMS; INSURANCE POLICIES. Subject to Section 4.05 and
any Multi-Tenant Facility Lease Rider attached to this Lease, Tenant shall pay
all premiums for the insurance policies covering the Property described in
Paragraphs 4.04(a) within fifteen (15) days after receipt by Tenant of a copy of
the premium statement or other evidence of the amount due. All insurance shall
be maintained with companies holding a "General Policyholder's Rating" of B+ or
better, as set forth in the most current issue of "Best's Insurance Guide."
Tenant shall be liable for the payment of any deductible amount under Landlord's
insurance policies.
Section 4.05. MULTIPLE TENANT BUILDINGS; RULES AND REGULATIONS.
Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
Reprinted under license
/s/
3 ----------------
(Net Form)
<PAGE> 4
payable on late charges to be paid by Tenant under this Lease. The payment of
interest on such amounts shall not excuse or cure any default by Tenant under
this Lease. If the interest rate specified in this Lease is higher than the
rate permitted by law, the interest rate is hereby decreased to the maximum
legal interest rate permitted by law.
Section 4.08. IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. MANNER OF USE. Tenant shall not cause or permit the Property to
be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the development of which the Property is part, or which constitutes a
nuisance or waste. Tenant shall obtain and pay for all permits, required for
Tenant's occupancy of the Property and shall promptly take all substantial and
non-substantial actions necessary to comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements regulating the use by
Tenant of the Property, including the Occupational Safety and Health Act.
Section 5.03. SIGNS AND AUCTIONS. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.04. INDEMNITY. Tenant shall indemnity Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant hereby
assumes all risk of damage to property or injury to persons in or about the
Property arising from any cause, and Tenant hereby waives all claims in respect
thereof against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct.
Section 5.05. LANDLORD'S ACCESS. Landlord or its agents may enter the Property
at all reasonable times to show the Property to potential buyers, investors or
tenants or other parties, or for any other purpose Landlord deems necessary.
Landlord shall give Tenant prior notice of such entry, except in the case of an
emergency. Landlord may place customary "For Sale" or "For Lease" signs on the
Property.*
Section 5.06. QUIET POSSESSION. If Tenant pays the rent and complies with all
other terms of this Lease, Tenant may occupy and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. EXISTING CONDITIONS. Except as set forth in any rider requiring
Landlord to perform work on the Property prior to the Commencement Date, Tenant
accepts the Property in its condition as of the execution of the Lease, subject
to all recorded matters, laws, ordinances, and governmental regulations and
orders. Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use.
Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of any building of which the Property is a part,
or from other sources or places; or (d) any act or omission of any other tenant
of any building of which the Property is a part. Landlord shall not be liable
for any such damage or injury even though the cause of or the means of repairing
such damage or injury are not accessible to Tenant. The provisions of this
Section 6.02 shall not, however, exempt Landlord from liability for Landlord's
gross negligence or willful misconduct.
Section 6.03. TENANT'S OBLIGATIONS.
(a)
(b)
* Notwithstanding the foregoing, except upon first obtaining the prior written
consent of Tenant, Landlord hereby agrees that it shall not show the Property
to prospective tenants, nor shall it place customary "For Lease" signs on the
Property, until the final ninety (90) days of the Lease Term.
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
Reprinted under license
/s/
4 ----------------
(Net Form)
<PAGE> 5
Section 6.04. LANDLORD'S OBLIGATIONS.
Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or improvements to
the Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Five Thousand Dollars ($5,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
will be accomplished in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
(b) Tenant shall pay when due all claims for labor and material furnished
to the Property. Tenant shall give Landlord at least ten (10) days' prior
written notice of the commencement of any work on the Property. Landlord may
elect to record and post notices of non-responsibility on the Property.
Section 6.06 CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Properly to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required
to repair under Article Seven (Damage or Destruction). In addition, Landlord
may require Tenant to remove any alterations, additions or improvements
(whether or not made with Landlord's consent) prior to the termination of the
Lease and to restore the Property to its prior condition, all at Tenant's
expense. All alterations, additions and improvements which Landlord has not
required Tenant to remove shall become Landlord's properly and shall be
surrendered to Landlord upon the termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be removed without
material damage to the Properly. Tenant shall repair, at Tenant's expense, any
damage to the Properly caused by the removal of any such machinery or
equipment. In no event, however, shall Tenant remove any of the following
materials or equipment without Landlord's prior written consent; any power
wiring or power panels; lighting or lighting fixtures; wall coverings, drapes,
blinds or other window coverings; carpets or other floor coverings; heaters,
air conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.
Withstanding the foregoing, Tenant shall not be required to remove any
alterations, additions or improvements made to the Property by Landlord.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01 PARTIAL DAMAGE TO PROPERTY. Tenant shall notify Landlord in
writing immediately upon the occurrence of any damage to the Property. If
the Property is only partially damaged, whether or not the proceeds
received by Landlord from the insurance policies described in Paragraph
4.04(b) are sufficient to pay for the necessary repairs, Landlord shall be
required to repair such damage within ninety (90) days after receipt of
notice from Tenant of the occurrence of the damage, and this Lease shall
remain in full force and effect. Upon such repair by Landlord, Tenant
shall pay Landlord the "deductible" amount (if any) under Landlord's
insurance policies, and, if the damage was due to an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost
of repair and any insurance proceeds received by Landlord. Landlord may
also elect to repair any damage to Tenant's fixtures, equipment or
improvements, but in no event shall Landlord be required to repair any
such items. If the damage to the Property occurs during the last six (6)
months of the Lease Term, Landlord may elect to terminate this Lease as of
the date the damage occurred. In such event, Landlord shall not be
obligated to repair or restore the Property and Tenant shall have no right
to continue this Lease. Landlord shall notify Tenant of its election
within thirty (30) days after receipt of notice of the occurrence of the
damage.
Section 7.02. TOTAL OR SUBSTANTIAL DESTRUCTION. If the Property is totally
or substantially destroyed by any cause whatsoever, or if the Property is in a
building which is substantially destroyed (even though the Property is not
totally or substantially destroyed), this Lease shall terminate as of the date
the destruction occurred regardless of whether Landlord receives any insurance
proceeds. However, if the Property can be rebuilt within ** after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case, this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after the
occurrence of total or substantial destruction. If the destruction was caused
by an act or omission of Tenant, Tenant shall pay Landlord the difference
between the actual cost of rebuilding and any insurance proceeds received by
Landlord. ** ninety (90) days.
Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, and Operating
Expenses. Except for such possible reduction in Base Rent, and Operating
Expenses, Tenant shall not be entitled to any compensation, reduction or
reimbursement from Landlord as a result of any damage, destruction, repair, or
restoration of or to the Property.
(c) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors(c) Inc. -----------------
Reprinted under license /s/
-----------------
5
(Net Form)
<PAGE> 6
Section 7.04. WAIVER. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial destruction of the leased property. Tenant agrees that
the provisions of Section 7.02 above shall govern the rights and obligations of
Landlord and Tenant in the event of any substantial or total destruction to the
Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes possession). If neither Landlord nor Tenant terminates this Lease, this
Lease shall remain in effect as to the portion of the Property not taken, except
that the Base Rent shall be reduced in proportion to the reduction in the floor
area of the Property. Any condemnation award or payment shall be distributed in
the following order: (a) first, to any ground lessor, mortgagee or beneficiary
under a deed of trust encumbering the Property, the amount of its interest in
the Property; (b) second, to Tenant, only the amount of any award specifically
designated for loss of or damage to Tenant's trade fixtures or removable
personal property; and (c) third, to Landlord, the remainder of such award,
whether as compensation for reduction in the value of the leasehold, the taking
of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Property caused by the Condemnation, except that Landlord
shall not be obligated to repair any damage for which Tenant has been reimbursed
by the condemning authority. If the severance damages received by Landlord are
not sufficient to pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by assignment, mortgage, sublease, transfer, operation of law, or act of
Tenant, without Landlord's prior written consent, except as provided in Section
9.02 below. Landlord shall grant or withhold its consent as provided in Section
9.04 below. Any attempted transfer without consent shall be void and shall
constitute a non-curable breach of this Lease. If Tenant is a partnership, any
cumulative transfer of more than 20% of the partnership interests shall require
Landlord's consent. If Tenant is a corporation, any change in a controlling
interest of the voting stock of the corporation shall require Landlord's
consent.
Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. NO RELEASE OF TENANT. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or
change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's
transferee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing remedies against the transferee. Landlord may consent
to subsequent assignments or modifications of this Lease by Tenant's
transferee, without notifying Tenant or obtaining its consent. Such action
shall not relieve Tenant's liability under this Lease.
Section 9.04. LANDLORD'S ELECTION. Tenant's request for consent to any
transfer described in Section 9.01 above shall be accompanied by a written
statement setting forth the details of the proposed transfer, including the
name, business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and rent and security
deposit payable under any assignment or sublease), and any other information
Landlord deems relevant. Landlord shall have the right
(a) to withhold consent, if reasonable; (b) to grant consent; or (c) if the
transfer is a sublease of the Property or an assignment of this Lease, to
terminate this Lease as of the effective date of such sublease or assignment,
in which case Landlord may elect to enter into a direct lease with the proposed
assignee or subtenant.
Section 9.05. NO MERGER. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant or
sublandlord thereunder.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. DEFAULTS. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge required to be paid by
Tenant, as and when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30) day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
/s/
(C) 1984 Southern California Chapter of the Initials ------------
Society of Industrial Realtors,(R) Inc. /s/
Reprinted under license ------------
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(d)(i) Tenant makes a general assignment of general arrangement for the benefit
of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subject to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest thereunder,
then Landlord shall receive, as Additional Rent, the difference between the rent
(or any other consideration) paid in connection with such assignment or sublease
and the rent payable by Tenant hereunder.
Section 10.03. REMEDIES. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason
of Tenant's default, including (i) the worth at the time of the award of the
unpaid Base Rent, Additional Rent and other charges which had been earned at
the time of the termination, (ii) the worth at the time of the award of the
amount by which the unpaid Base Rent, Additional Rent and other charges which
would have been earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which would have been paid
for the balance of the term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonable avoided; and (iv) any
other amount necessary to compensate Landlord for all of the detriment
proximately caused by Tenant's failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses incurred by
Landlord in maintaining or preserving the Property after such default, the cost
of recovering possession of the Property, expenses or reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate
commission paid or payable. As used in subparts (i) and (ii) above, the "worth
at the time of the award" is computed by allowing interest on unpaid amounts at
the rate of fifteen percent (15%) per annum, or such lesser amount as may then
be the maximum lawful rate. As used in subpart (iii) above, the "worth at the
time of the award" is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of the award, plus 1%.
If Tenant shall have abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant shall have abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it
becomes due hereunder;
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decision of the state in which the Property is located.
Section 10.04 CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. SUBORDINATION. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever
made or recorded. However, Tenant's right to quiet possession of the Property
during the Lease Term shall not be disturbed if Tenant pays the rent and
performs all of Tenant's obligations under this Lease and is not otherwise in
default. If any ground lessor, beneficiary or mortgagee elects to have this
Lease prior to the lien of its ground lease, deed or trust or mortgage and
gives written notice thereof to Tenant, this Lease shall be deemed prior to
such ground lease, deed or trust or mortgage whether this Lease is dated prior
to subsequent to the date of said ground lease, deed of trust or mortgage or
the date of said ground lease, deed or trust or mortgage or the date of
recording thereof.
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule or law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. Such subordination and
attornment documents may contain such provisions as are customarily required
by any ground lessor, beneficiary under a deed of trust or mortgagee.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) that the last date of payment of the Base Rent
and other charges and the time period covered by such payment; (iv) that
Landlord is not in default under this Lease (or, if Landlord is claimed to be
in default, stating why); and (v) such other matters as may be reasonably
required by Landlord or the holder of a mortgage, deed or trust or lien to
which the Property is or becomes subject. Tenant shall deliver such statement
to Landlord within ten (10) days after Landlord's request. Any such statement
by Tenant may be given by Landlord to any
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
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prospective purchaser or encumbrancer of the Property. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such ten
(10) day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except
as otherwise represented by Landlord; (iii) that not more than one month's Base
Rent or other charges have been paid in advance; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from
denying the truth of such facts.
Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall deliver to any bona fide potential
purchaser or mortgagee of the Property such financial statements necessary to
verify the net worth of Tenant as may be reasonably requested in writing by any
such party to facilitate the purchase or refinancing of the Property. Tenant
represents and warrants to Landlord that each such financial statement is a
true and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth herein.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. LEGAL PROCEEDINGS. Tenant shall reimburse Landlord, upon
demand, for any costs or expenses incurred by Landlord in connection with any
breach or default of Tenant under this Lease, whether or not suit is commenced
or judgment entered. Such costs shall include legal fees and costs incurred for
the negotiation of a settlement, enforcement of rights or otherwise.
Furthermore, if any action for breach of or to enforce the provisions of this
Lease is commenced, the court in such action shall award to the party in whose
favor a judgment is entered, a reasonable sum as attorneys' fees and costs.
Such attorneys' fees and costs shall be paid by the losing party in such
action. Tenant shall also indemnify Landlord against and hold Landlord harmless
from all costs, expenses, demands and liability incurred by Landlord if
Landlord becomes or is made a party to any claim or action (a) instituted by
Tenant, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement
with Tenant; (b) for foreclosure of any lien for labor or material furnished to
or for Tenant or such other person; (c) otherwise arising out of or resulting
from any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs incurred by Landlord in
any such claim or action.
Section 12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Nine (Assignment and Subletting), or in
connection with any other act which Tenant proposes to do and which requires
Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no
discrimination against, or segregation of, any person or group of persons or
the basis of race, color, sex, creed, national origin or ancestry in the
leasing, subleasing, transferring, occupancy, tenure or use of the Property or
any portion thereof.
Section 13.02. WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waive any and all rights of recovery against the other, or against the
officers, employees, agents or representatives of the other, for loss of or
damage to its property or the property of others under its control, if such
loss or damage is covered by any insurance policy in force (whether or not
described in this Lease) at the time of such loss or damage. Upon obtaining the
policies of insurance described herein, Landlord and Tenant shall give notice
to the insurance carrier or carriers of the foregoing mutual waiver of
subrogation.
Section 13.03. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a)
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord. Landlord shall not
be in default under this Lease unless Landlord fails to cure such
non-performance within thirty (30) days after receipt of Tenant's notice.
However, if such non-performance reasonably requires more than thirty (30) days
to cure, Landlord shall not be in default if such cure is commenced within such
thirty (30) day period and thereafter diligently pursued to completion.
(c) Upon the execution of this Lease, Tenant shall deposit with Landlord
a cash Security Deposit in the amount set forth in Section 1.11 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security
Deposit to its full amount within ten (10) days after Landlord's written
request. Tenant's failure to do so shall be a material default under this
Lease. No interest shall be paid on the Security Deposit. Landlord shall not be
required to keep the Security Deposit separate from its other accounts and no
trust relationship is created with respect to the Security Deposit.
Section 13.04. SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.05. INTERPRETATION. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a
part of the terms or provisions of this Lease. Whenever required by the context
of this Lease, the singular shall include the plural and the plural shall
include the singular. The masculine, feminine and neuter genders shall each
include
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ------------------
Reprinted under license /s/
------------------
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the other. In any provision relating to the conduct, acts or omissions of
Tenant, the term "Tenant" shall include Tenant's agents, employees,
contractors, invitees, successors or others using the Property with Tenant's
expressed or implied permission.
Section 13.06. INCORPORATION OF PRIOR AGREEMENTS MODIFICATIONS. This Lease
is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.07. NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above, except that upon
Tenant's taking possession of the Property, the Property shall be Tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.02 above. All notices shall be effective upon
delivery or attempted delivery in accordance with this Section 13.07. Either
party may change its notice address upon written notice to the other party.
Section 13.08. WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.09. NO RECORDATION. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties
be recorded.
Section 13.10 BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor
unless the rights or interests of Tenant's successor are acquired in accordance
with the terms of this Lease. The laws of the state in which the Property is
located shall govern this Lease.
Section 13.11 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Lease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership. Tenant shall give written notice to Landlord of any general
partner's withdrawal or addition. Within thirty (30) days after this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant's recorded statement
of partnership or certificate of limited partnership.
Section 13.12. JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.13. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government
regulation or restriction and weather conditions.
Section 13.14. EXECUTION OF LEASE. This Lease may be executed in
counterparts, and, when all counterpart documents are executed, the
counterparts shall constitute a single binding instrument. The delivery of this
Lease by Landlord to Tenant shall not be deemed to be an offer and shall not be
binding upon either party until executed and delivered by both parties.
ARTICLE FOURTEEN; BROKERS
Section 14.01. BROKER'S FEE. When this Lease is signed by and delivered to
both Landlord and Tenant, Landlord shall pay a real estate commission to
Landlord's Broker named in Section 1.08 above, if any, as provided in a written
agreement between Landlord and Landlord's Broker. If there is no such written
agreement, Landlord shall pay the sum stated in Section 1.10 above for services
rendered to Landlord by Landlord's Broker in this transaction. Landlord shall
pay Landlord's Broker a commission if Tenant exercises any option to extend the
Lease Term or to buy the Property, or any similar option or right which Landlord
may grant to Tenant, or if Landlord's Broker is the procuring cause of any
other lease or sale entered into between Landlord and Tenant covering the
Property. Such commission shall be the amount set forth in Landlord's Broker's
commission schedule in effect as of the execution of this Lease. If a Tenant's
Broker is named in Section 1.09 above, Landlord's Broker shall pay an
appropriate portion of its commission to Tenant's Broker if so provided in any
agreement between Landlord's Broker and Tenant's Broker. Nothing contained
in this Lease shall impose any obligation on Landlord to pay a commission or fee
to any party other than Landlord's Broker.
Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignees shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights
under this provision. The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees
shall be fixed by the court in such action. This Paragraph is included in this
Lease for the benefit of Landlord's Broker.
Section 14.03. NO OTHER BROKERS. Tenant represents and warrants to Landlord
that the brokers named in Sections 1.08 and 1.09 above are the only agents,
brokers, finders or other parties with whom Tenant has dealt who are or may be
entitled to any commission or fee with respect to this Lease or the Property.
(c) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. -----------------
Reprinted under license
/s/
9 -----------------
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ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO OR
IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE DRAW
A LINE THROUGH THE SPACE BELOW.
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.
CB Institutional Fund VI,
a California limited partnership
Signed on September 2, 1992 -----------------------------------------
- ---------------------------
By: CB COMMERCIAL REAL ESTATE GROUP, INC.
a Delaware corporation
at
------------------------- -----------------------------------------
Witnesses: By: /s/
-------------------------------------
- --------------------------- Its: VP
------------------------------------
- --------------------------- By: /s/
------------------------------------
Its: Portfolio Manager
------------------------------------
"LANDLORD"
Signed on August 31, 1992 ARDEN TECHNOLOGIES, INC.,
- --------------------------- a Florida corporation
at County -----------------------------------------
- ---------------------------
Witnesses: By: /s/
------------------------------------
- ---------------------------
- --------------------------- Its: President
------------------------------------
- --------------------------- By:
------------------------------------
- --------------------------- Its:
------------------------------------
"TENANT"
CONSULT YOUR ADVISORS - This document has been prepared for approval by your
attorney. No representation or recommendation is made by CB COMMERCIAL REAL
ESTATE GROUP, INC. as to the legal sufficiency or tax consequences of this
document or the transaction to which it relates. Those are questions for your
attorney.
In any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other person,
with experience in evaluating the condition of the property, including the
possible presence of asbestos, hazardous materials and underground storage
tanks.
(C) 1984 Southern California Chapter of the
Society of Industrial Realtors,(c) Inc.
Reprinted under license
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<PAGE> 11
EXHIBIT "A"
SPECIAL STIPULATIONS RIDER
The following Rider is attached to and made a part of that certain
Industrial Real Estate Lease dated July 20, 1992 (hereinafter referred to as
the "Lease"), by and between CB INSTITUTIONAL FUND VI, a California limited
partnership (hereinafter referred to as the "Landlord"), and ARDEN
TECHNOLOGIES, INC., a Florida corporation (hereinafter referred to as the
"Tenant"), for the lease of premises located in Building 10, all of Bays G, H,
I, and J and a portion of Bay F, Two Prospect Park Business Center, at the Fort
Lauderdale Commerce Center, 3403 N.W. 55th Street, Fort Lauderdale, Florida
33309, consisting of approximately 4,103 square feet (hereinafter referred to
as the "Property").
1. MORTGAGEE PROTECTION. Tenant agrees to give any mortgagees, security
deed holders, and/or trust deed holders (hereinafter being collectively
referred to as "Mortgagees"), by certified mail or overnight mail delivery
service, a copy of any notice of default served upon Landlord, provided that
prior to such notice Tenant has been notified in writing (by way of Notice of
Assignment of Rents and Leases, or otherwise), of the address of such
Mortgagees. Tenant further agrees that if Landlord shall have failed to cure
such default within the time period provided for in this Lease, then the
Mortgagees shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that time, and, if within
such thirty (30) days any Mortgagees have commenced and are diligently pursuing
the remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure),
then such Mortgagees shall have such additional time as may be necessary to
cure such default, in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
2. EXCULPATORY LANGUAGE. If Landlord fails to perform its obligations
in accordance with any of the provisions of this Lease, Landlord agrees that it
shall, to the extent and under the conditions provided for in this Lease, be
liable to Tenant on account of any damages caused thereby, but Tenant hereby
waives any right to satisfy any such judgment against Landlord except out of
Landlord's interest in the building of which the Property is a part, and no
other real, personal, or other property of Landlord or of any of the partners
comprising Landlord, or of any of the officers, shareholders, directors,
partners, or principles of such partners comprising Landlord, shall be subject
to levy, attachment, or execution, or shall be otherwise used to satisfy any
such judgment. The term "Landlord", as used in this Paragraph, shall mean only
the owner or owners at the time in question of the fee title or interest in a
ground lease of the Property, and in the event of any transfer of such title or
interest, the Landlord as herein named (and in the case of any subsequent
transfers, the then grantor) shall be relieved from and after the date of such
transfer of all liability as respects Landlord's obligations thereafter to be
performed, provided that, any funds in the hands of Landlord or the then
grantor at the time of such transfer, in which Tenant has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject to the aforesaid, be binding upon
Landlord's successors and assigns only during their respective periods of
ownership.
3. HAZARDOUS SUBSTANCES AND MATERIALS.
A. Tenant hereby agrees that no activity will be conducted on the
Property without the express written consent of Landlord that will produce or
otherwise involve the storage, use, maintenance or removal of any pollutants,
contaminants, toxic or hazardous waste, or any other controlled or regulated
substances or materials (hereinafter referred to collectively as "Hazardous
Initials: /s/
---------
/s/
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<PAGE> 12
Materials"), the removal of which is required or the use of which is
restricted, prohibited or subject to penalty pursuant to the terms or
provisions of any federal, state or local law or ordinance relating to
pollution or protection of the environment, or any rule, order or regulation
relating thereto (hereinafter referred to collectively as the "Environmental
Laws"). As used herein, the term Hazardous Materials shall mean and include any
flammable items, explosives, radioactive materials, hazardous or toxic
substances, materials or waste and any related materials, including any
substances defined in or included under the definition of "hazardous
substances", "hazardous wastes", "hazardous materials" or "toxic wastes" as now
or hereafter regulated by and defined in any of the Environmental Laws,
including, without limitation, petroleum-based products, paints, solvents,
lead, cyanide, DDT, acids, pesticides, ammonia compounds and other chemical
products, PCBs and similar compounds, and including any different products and
materials which are subsequently determined to have adverse effects on the
environment or the health and safety of persons.
B. Tenant hereby agrees that any Hazardous Materials expressly permitted
by Landlord to be used, produced or otherwise stored or brought onto the
Property by Tenant or its agents, employees, invitees or concessionaires shall
be properly used, stored or maintained in a manner consistent and in conformity
with all applicable Environmental Laws. In the event of any unauthorized
Hazardous Materials are brought onto or found located on the Property, the same
shall be immediately removed by Tenant, after first obtaining the written
consent of Landlord, and all required disposal and clean-up procedures shall be
properly and diligently undertaken by Tenant pursuant to all applicable
Environmental Laws. Nothing contained herein, however, shall be construed to
imply that Tenant need not obtain Landlord's consent prior to the storage, use,
maintenance or removal of Hazardous Materials by Tenant in, on or about the
Property. In addition to all other indemnifications provided for in this Lease,
Tenant further hereby specifically agrees to indemnify and hold Landlord
harmless from and against any and all claims, demands, actions, liabilities,
costs, expenses, damages and obligations of any nature arising or resulting from
Tenant's failure to comply in all respects with the covenants and agreements
contained in this Rider Section 3 or any of the Environmental Laws, or otherwise
arising from the presence, storage, release or suspected release of any such
Hazardous Materials in or into the air, floor, walls, ceiling, soil, surface
water or groundwater at, on, about, under or within the Property or any portion
thereof. It is also hereby specifically provided that the foregoing
indemnification shall survive the termination or expiration of this Lease.
4. STATUTORY RADON GAS NOTIFICATION. It is a requirement of Florida law
that the following notification be included in all lease agreements executed
within the State of Florida:
"RADON GAS: Radon is a naturally occurring radioactive gas,
that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may
be obtained from your county public health unit."
5. STATUTORY FLOOD ZONE NOTIFICATION. The Property is located in a "flood
zone" as set forth on H.U.D. "Special Flood Zone Area Maps". The law requires
that as a condition of obtaining financing on most properties located in "flood
zones", banks, savings and loan associations, and some insurance lenders will
require that H.U.D. flood insurance be carried where the property or its
attachments are security for the loan. This requirement is mandated by the
H.U.D. National Flood Insurance Program, which requirement became effective
March 1, 1976. The purpose of this program is to provide flood insurance to
property owners at a reasonable cost. The program directs the Federal Government
to
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subsidize the underwriting of flood insurance through a private insurance
company in each state, so that the carrier can provide flood insurance at
affordable rates. By working together to encourage protective zoning, the
Federal and local governments are trying to encourage building practices that
will, in the future, reduce damage caused by flood and mud slides. The extent
of coverage available in the area in which the Property is located and the cost
of this coverage may vary, and for further information Tenant should consult
its insurance carrier to the extent such insurance is required to be maintained
by Tenant under the terms of this Lease. No representation or recommendation is
hereby made by Landlord or its agents or employees as to the legal effect,
interpretation or economic consequences of the National Flood Insurance Program
and related legislation, and any questions regarding same should be directed to
Tenant's designated insurance carrier.
6. CONDITION OF PROPERTY AND IMPROVEMENTS. Landlord hereby agrees, at its
sole cost and expense, to make and construct certain interior improvements to
the Property in accordance with and as shown on those certain Plans and
Specifications attached hereto as Exhibit "A-1", and incorporated herein by
specific reference thereto (hereinafter referred to collectively as the
"Improvements"). The Improvements shall be made, except as otherwise
specifically agreed, in accordance with Landlord's usual building standards and
shall, except as otherwise specifically provided, be completed generally at
such cost, in such manner and utilizing such contractors and quality of
materials and workmanship as Landlord shall deem to be commercially reasonable
in its sole and absolute discretion with regard to leasehold space of similar
type, size, location and use in the Fort Lauderdale, Florida area. Except for
the construction of the Improvements as set forth hereinabove, Tenant hereby
accepts the Property in its condition as of the date of this Lease, and
Landlord is hereby expressly relieved and released from any other duty or
obligation to make any repairs, improvements or alterations to the Property
prior to the Commencement Date of the Lease Term.
7. RELATED ENTITIES. Landlord hereby acknowledges that the Property may
from time to time be utilized as the corporate main offices of certain Tenant
Affiliates and other companies related to Tenant by common ownership of stock or
otherwise (hereinafter referred to as the "Related Companies"). Tenant hereby
agrees, however, that the terms and provisions of Section 5.04 and other
applicable provisions of the Lease shall remain in full force and effect and
shall be fully applicable to the use of the Property by such Tenant Affiliates
and Related Companies, and that accordingly, Tenant shall be and remain fully
liable for any and all of the actions and omissions of such Tenant Affiliates
and Related Companies and their respective officers, directors, employees,
contractors, agents, invitees, and concessionaires and shall indemnify Landlord
against any and all loss, liability, damage, cost or expense incurred as a
result thereof in accordance with the express terms of said Section 5.04 and
such other applicable provisions of this Lease. Tenant also hereby agrees that
Tenant shall, however, continue to occupy the Property and to oversee the
activities of such Tenant Affiliates and Related Companies within the Property
at all times during the Lease Term, except in the event of a valid assignment of
this Lease or a sublease of the Property as provided for in this Lease.
8. EARLY TERMINATION.
A. Notwithstanding anything contained in this Lease to the contrary,
and subject to the terms and conditions as set forth hereinbelow, Tenant shall
have and is hereby granted the option to terminate this Lease prior to the
designated expiration date of the Lease Term as set forth in this Lease
(hereinafter referred to as the "Termination Option"). To the extent the
Termination Option is validly exercised in accordance with the terms and
conditions set forth herein, the Lease Term shall be terminated effective as of
the last day of the thirty-sixth (36th) month of the Lease Term
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(hereinafter referred to as the "Early Termination Date"). The Termination
Option shall be exercised by Tenant only by delivery of written notice to
Landlord at least ninety (90) days prior to the Early Termination Date. If
Tenant fails to deliver such written notice to Landlord within such prescribed
time period, then the Termination Option shall lapse and expire and shall
become null and void and of no further force or effect, and thereafter Tenant
shall have no other or further right to terminate the Lease Term prior to the
designated expiration date of the Lease Term as set forth in this Lease. In
addition, the Termination Option shall be exercisable by Tenant and the Lease
Term shall terminate on the Early Termination Date only upon the express
condition that at the time of any attempted exercise of the Termination Option
by Tenant and at all times prior to the Early Termination Date, Tenant shall
not be in default under any of the provisions of the Lease.
B. In the event that the Termination Option is validly exercised by
Tenant in accordance with the terms and provisions set forth herein, then
effective as of the Early Termination Date the Lease Term shall terminate and
Landlord and Tenant shall be relieved and released from any and all of their
respective duties and obligations under the Lease accruing after said Early
Termination Date. Tenant shall in such event waive and relinquish all rights to
occupancy or entry upon the Property and shall remove all of its equipment,
supplies, furnishings and other personal property therefrom, and Tenant shall
surrender possession of the Property to Landlord in such condition and shall
make such repairs to the Property as may be required under the terms of the
Lease. It is also hereby expressly agreed to by Landlord and Tenant that in
such event any and all options to extend the Lease Term which have previously
been granted to Tenant shall, effective as of the Early Termination Date, be
and become null and void and of no further force and effect, and Tenant shall
thereafter have no other or further right to extend the Lease Term.
C. In consideration of Landlord's agreement to allow Tenant to
terminate this Lease on the Early Termination Date, Tenant hereby agrees to pay
Landlord a fee in the amount of THIRTEEN THOUSAND AND NO/100THS DOLLARS
($13,000.00) (hereinafter referred to as the "Lease Termination Fee"). The
Lease Termination Fee shall be payable in full by Tenant on the date Tenant
notifies Landlord in writing of its intention to exercise the Termination
Option. Notwithstanding anything contained in this Section 8 of Exhibit "A" to
the contrary, Landlord and Tenant hereby agree that Tenant's right to exercise
the Termination Option is hereby expressly stipulated to be contingent upon
delivery and payment of the Lease Termination Fee to Landlord in the manner and
at the time as hereinabove set forth. In the event that Tenant, for any reason
whatsoever, fails to pay the Lease Termination Fee to Landlord in a timely
manner or fails to surrender possession of the Property to Landlord in the
manner required hereinabove on the Early Termination Date, then the Termination
Option shall, at the option of Landlord, lapse and expire and shall become null
and void and of no further force and effect, and thereafter Tenant shall have
no other or further right to terminate the Lease Term prior to the designated
expiration date of the Lease Term as set forth in this Lease. Landlord and
Tenant hereby further agree that the Lease Termination Fee shall be construed
and interpreted not as liquidated damages or as a penalty but as a bargained
for charge knowingly agreed to as a material consideration for the early
termination of this Lease as contemplated hereunder.
9. RIDER CONSTRUCTION. Except as otherwise herein provided, the terms
used herein shall have the same meaning and definition as set forth in the
Lease. In addition, in the event of any inconsistency or conflict between the
terms and provisions of this Rider and the terms and provisions of the Lease,
the terms and provisions of this Rider shall be controlling and shall prevail
over and shall supersede any such inconsistent or conflicting terms or
provisions contained in the Lease.
* * * * * END OF RIDER * * * * *
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<PAGE> 15
Exhibit "A-1"
Plans and Specifications
[FLOORPLAN]
TENANT APPROVAL
I HAVE REVIEWED THESE
PLANS AND THEY CONFORM
TO OUR REQUIREMENTS. I
UNDERSTAND THAT ANY MOD-
IFICATIONS TO THESE PLANS
WILL BE AN ADDITIONAL
SERVICE.
ACCEPTED AS IS: [X]
ACCEPTED AS NOTED: [ ]
UNACCEPTED [ ]
Initials: /s/ SIGNATURE: /s/
--------- --------------
/s/
--------- DATE: 7/20/92
-------------------
<PAGE> 16
EXHIBIT "B"
RENTAL RIDER
The following Rider is attached to and made a part of that certain
Industrial Real Estate Lease dated July 20, 1992 (hereinafter referred to as
the "Lease"), by and between CB INSTITUTIONAL FUND VI, a California limited
partnership (hereinafter referred to as the "Landlord"), and ARDEN
TECHNOLOGIES, INC., a Florida corporation (hereinafter referred to as the
"Tenant"), for the lease of premises located in Building 10, all of Bays G, H,
I, and J and a portion of Bay F, Two Prospect Park Business Center, at the Fort
Lauderdale Commerce Center, 3403 N.W. 55th Street, Fort Lauderdale, Florida
33309, consisting of approximately 4,103 square feet (hereinafter referred to
as the "Property").
1. BASE RENT. Tenant hereby agrees, pursuant to Section 1.13(a) of the
Lease, to pay to Landlord the following amounts as monthly Base Rent for the
months of the Lease Term hereafter indicated: TWO THOUSAND TWO HUNDRED
TWENTY-TWO AND 46/100THS DOLLARS ($2,222,46) per month for each of the first
twelve (12) months of the Lease Term (months 1 through 12), subject to the
provisions regarding abatement of rent as set forth hereinbelow; then TWO
THOUSAND TWO HUNDRED EIGHTY-NINE AND 13/100THS DOLLARS ($2,289.13) per month
for each of the next twelve (12) months of the Lease Term (months 13 through
24); then TWO THOUSAND THREE HUNDRED FIFTY-SEVEN AND 80/100THS DOLLARS
($2,357.80) per month for each of the next twelve (12) months of the Lease Term
(months 25 through 36); ten TWO THOUSAND FOUR HUNDRED TWENTY-EIGHT AND
53/100THS DOLLARS ($2,428.53) per month for each of the next twelve (12) months
of the Lease Term (months 37 through 48); and then TWO THOUSAND FIVE HUNDRED
ONE AND 39/100THS DOLLARS ($2,501.39) per month for each of the final twelve
(12) months of the Lease Term (months 49 through 60).
2. ABATEMENT OF BASE RENT. If Tenant faithfully performs all of the terms
and conditions of this Lease during the Lease Term, Tenant's obligation to pay
Base Rent, as provided for in Section 1.13(a) of the Lease and Section 1 of this
Exhibit "B"-Rental Rider hereinabove, shall be abated by one-half (1/2) during
the first six (6) months of the Lease Term (months 1 through 6); that is, the
amount of Base Rent payable by Tenant during the first six (6) months of the
Lease Term (months 1 through 6) shall be limited to ONE THOUSAND ONE HUNDRED
ELEVEN AND 23/100THS DOLLARS ($1,111.23) per month. Abatement of rent as
provided for herein shall apply to payment of Base Rent only and shall not be
applicable to payment of any Additional Rent, Operating Expenses (as such term
is hereinafter defined) or any other charges, expenses or costs payable by
Tenant under this Lease.
3. RECAPTURE UPON DEFAULT. If Tenant at any time commits a material breach
or default under any term or covenant required to be performed by Tenant
pursuant to the provisions of this Lease, which breach or default is not cured
within any applicable right to cure period provided for in this Lease, Landlord
may, in addition to all other rights or remedies it may have, rescind the
abatement of rent provided for herein and may thereafter immediately collect
from Tenant all of the Base Rent which Landlord would have otherwise been
entitled to collect from Tenant pursuant to the terms of the Lease had there
been no period of rent abatement. Landlord's failure to rescind the abatement
of Base Rent provided for hereunder as a result of any breach or default by
Tenant shall not be deemed to constitute a waiver of Landlord's right to so
rescind such abatement with regard to any subsequent breach or default by
Tenant.
4. RENT SCHEDULE. The above-referenced monthly payments of Base Rent,
exclusive of applicable sales, rental or use taxes as set forth hereinbelow,
but inclusive of the provisions regarding abatement of rent as set forth
hereinabove, are summarized in the following schedule for convenience:
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<TABLE>
<CAPTION>
<S> <C> <C>
(a) Months 1 through 6 ...................... $1,111.23
(b) Months 7 through 12 ...................... $2,222.46
(c) Months 13 through 24 ...................... $2,289.13
(d) Months 25 through 36 ...................... $2,357.80
(e) Months 37 through 48 ...................... $2,428.53
(f) Months 49 through 60 ...................... $2,501.39
</TABLE>
5. OPERATING EXPENSES. Pursuant to Sections 1.13(b) and 4.01 of the
Lease, Tenant hereby agrees to pay to Landlord the following amounts as monthly
Operating Expenses (as such term is hereinafter defined) for the months of the
Lease Term hereafter indicated: ONE THOUSAND EIGHT AND 65/100THS DOLLARS
($1,008.65) per month for each of the first twelve (12) months of the Lease
Term (months 1 through 12); then ONE THOUSAND FIFTY-NINE AND 08/100THS DOLLARS
($1,059.08) per month for each of the next twelve (12) months of the Lease Term
(months 13 through 24); then ONE THOUSAND ONE HUNDRED TWELVE AND 03/100THS
DOLLARS ($1,112.03) per month for each of the next twelve (12) months of the
Lease Term (months 25 through 36); then ONE THOUSAND ONE HUNDRED SIXTY-SEVEN
AND 63/100THS DOLLARS ($1,167.63) per month for each of the next twelve (12)
months of the Lease Term (months 37 through 48); and then ONE THOUSAND TWO
HUNDRED TWENTY-SIX AND 01/100THS DOLLARS ($1,226.01) per month for each of the
final twelve (12) months of the Lease Term (months 49 through 60).
6. OPERATING EXPENSE SCHEDULE. The above-referenced monthly payments of
Operating Expenses, exclusive of applicable sales, rental or use taxes as set
forth hereinbelow, are summarized in the following schedule for convenience:
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Months 1 through 12 ...................... $1,008.65
(b) Months 13 through 24 ...................... $1,059.08
(c) Months 25 through 36 ...................... $1,112.03
(d) Months 37 through 48 ...................... $1,167.63
(e) Months 49 through 60 ...................... $1,226.01
</TABLE>
7. DEFINITION OF OPERATING EXPENSES. As used herein, the term Operating
Expenses shall be deemed to include and be limited to real property taxes,
hazard and rental income insurance premiums, maintenance charges pursuant to
Section 6.03 of attached Exhibit "C" - Multi-Tenant Facility Lease Rider, the
Common Area costs associated with or incurred in connection with the
maintenance and operation of the Common Areas, and the cost of water, sewer
service and garbage pickup.
8. RENTAL TAXES. Notwithstanding anything contained in this Lease to the
contrary, and if applicable in the jurisdiction where the Property is located,
Tenant hereby agrees to pay to Landlord and be liable for any amount of sales,
rental, and use taxes or other similar taxes, if any, which may be levied or
imposed upon the payment of rent or other charges or consideration by Tenant by
any applicable state, county or municipal government or authority, or by any
department or agency thereof, such payments to be in addition to all other
payments required to be paid to Landlord by Tenant under the terms of this
Lease. Any such payments shall be paid concurrently with and shall be in
addition to the payment of the rent or other charges or consideration upon
which the tax is based as set forth above. The parties hereto hereby stipulate,
acknowledge and agree that payments of rent or other consideration under a lease
in the county in which the Property is located are subject to a six percent
(6.0%) sales tax as of the date of this Lease.
9. PAYMENT. Upon execution of this Lease, Tenant shall pay to Landlord
the amount of the Security Deposit set forth in Section 1.11 of the Lease. In
addition, Tenant shall pay to Landlord the sum of THREE THOUSAND FOUR HUNDRED
TWENTY-FOUR AND 98/100THS DOLLARS ($3,424.98), such amount representing payment
of abated Base Rent for the first (1st) and second (2nd) months of the Lease
Term and representing payment of Operating Expenses for the first (1st) month
of the Lease Term, and such amount being computed after
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<PAGE> 18
application of the applicable six percent (6.0%) Florida sales tax as set forth
hereinabove. On the first day of the third (3rd) month of the Lease Term and on
the first day of each succeeding month of the Lease Term thereafter, Tenant
shall pay Landlord the amount of the monthly Base Rent, as set forth in Section
1.13(a) of the Lease and this Exhibit "B" - Rental Rider, and on the first day
of the second (2nd) month of the Lease Term and on the first day of the second
(2nd) month of the Lease Term and on the first (1st) day of each succeeding
month thereafter, Tenant shall pay Landlord the amount of the monthly Operating
Expenses, as set forth in Section 1.13(b) of the Lease and this Exhibit "B" -
Rental Rider, all such payments of Base Rent and Operating Expenses to be made
in advance, and without offset, deduction, prior notice or demand, except as
otherwise expressly provided in this Lease. Notwithstanding anything contained
in this Lease to the contrary, and until receipt of written notice from Landlord
specifying a different address for payment, all amounts payable by Tenant
pursuant to the terms and provisions of this Lease shall be made payable to
"Florida Commerce Center" and shall be addressed to Landlord c/o Farbman/Stein
Management Co., Fort Lauderdale Commerce Center, 3449 N.W. 55th Street, Fort
Lauderdale, Florida 33309. The amount of Base Rent payable for any period which
is for less than one (1) month shall be equal to a prorated portion of the
monthly installment provided for herein, based upon a thirty (30) day month.
10. RIDER CONSTRUCTION. Except as may be otherwise herein provided, the
terms and provisions used in this Rider shall have the same meaning and
definition as set forth in the Lease. In addition, in the event of any
inconsistency or conflict between the terms and provisions of this Rider and the
terms and provisions of the Lease, the terms and provisions of this Rider shall
prevail over and shall supersede any such inconsistent or conflicting terms or
provisions contained in the Lease.
* * * * * END OF RIDER * * * * *
3
<PAGE> 19
[LOGO]CB MULTI-TENANT FACILITY
COMMERCIAL LEASE RIDER
EXHIBIT "C"
This Rider is attached to and made part of that certain lease dated July
20, 1992 between CB INSTITUTIONAL FUND Vt, a California Limited partnership, as
Landlord, and ARDEN TECHNOLOGIES, INC., a Florida corporation, as Tenant,
covering the Property commonly known as Building 10, all of Bays G, II, I, and a
portion of Bay F, Two Prospect Park Business Center, at the Fort Lauderdale
Commerce Center, 3403 N.W. 55th Street, Fort Lauderdale, Florida 33309,
consisting of approximately 4,103 square feet (the "Lease"). The terms used in
this Rider shall have the same definitions as set forth in the Lease. The
provisions of this Rider shall prevail over any inconsistent or conflicting
provisions of the Lease.
A. AMENDMENT TO SECTION 1.04 OF THE LEASE.
The following is hereby added at the end of Section 1.04 of the Lease:
"The Property is part of a multi-tenant industrial/commercial real
property development of Landlord described in an exhibit attached hereto
and Incorporated herein by this reference (the "Project"). The Project
includes the land, the buildings and all other Improvements located
thereon, and the common areas described in Paragraph 4.05(a) below."
B. AMENDMENT TO SECTION 4.05 OF THE LEASE.
Section 4.05 of the Lease is hereby deleted and the following is inserted
in its place:
"4.05 COMMON AREAS; USE, MAINTENANCE AND COSTS."
(a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants
of the Project and which are not leased or held for the exclusive use of
Tenant or other tenants, including, but not limited to, parking areas,
driveways, sidewalks, loading areas, access roads, corridors, landscaping
and planted areas. Landlord may from time to time change the size,
location, nature and use of any of the Common Areas, including converting
Common Areas into leasable areas, constructing additional parking
facilities (including parking structures) in the Common Areas, and
increasing or decreasing Common Area land and/or facilities. Tenant
acknowledges that such activities may result in occasional inconvenience to
Tenant from time to time. Such activities and changes shall be expressly
permitted if they do not materially affect Tenant's use of the Property.
(b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or
may grant such rights) to use the Common Areas for the purposes intended,
subject to such reasonable rules and regulations as Landlord may establish
from time to time. Tenant shall abide by such rules and regulations and
shall use its best effort to cause others who use the Common Areas with
Tenant's expressed or implied permission to abide by Landlords' rules and
regulations. At any time, Landlord may close any Common Areas to perform
any acts in and to the Common Areas as, in Landlord's judgment, may be
desirable to improve the Project. Tenant shall not, at any time, interfere
with the rights of Landlord, other tenants, or any other person entitled to
use the Common Areas.
(c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled
to use the vehicle parking spaces in the Project allocated to Tenant in
Section 1.12 of the Lease without paying any additional rent. Tenant's
parking shall not be reserved and shall be limited to vehicles no larger
than standard size automobiles or pickup utility vehicles. Tenant shall not
cause large trucks or other large vehicles to be parked within the Project
or on the adjacent public streets. Temporary parking of large delivery
vehicles in the Project may be permitted by the rules and regulations
established by Landlord. Vehicles shall be parked only in striped parking
spaces and not in driveways, loading areas or other locations not
specifically designated for parking. If Tenant parks more vehicles in the
parking area than the number set forth in Section 1.12 of the Lease, such
conduct shall be a material breach of the Lease. In addition to Landlord's
other remedies under the Lease, Tenant shall pay a reasonable daily charge
for each additional vehicle.
(d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first class industrial/commercial real
property development. Common Area costs include, but are not limited to,
costs and expenses for the following: gardening and landscaping; utilities,
water and sewage charges; maintenance of signs (other than Tenants' signs);
premiums for liability, property damage, fire and other types of casualty
insurance on the Common Areas and worker's compensation insurance; all rent
property taxes and assessments levied on or attributable to the Common
Areas and all Common Areas improvements; all personal property taxes levied
on or attributable to personal property used in connection with the Common
Areas; straight-line depreciation on personal property owned by Landlord
which is consumed in the operation or maintenance of the Common Areas;
rental or lease payments paid by Landlord for rented or leased personal
property used in the operation or maintenance of the Common Areas; fees for
required licenses and permits; repairing, resurfacing, repaving,
maintaining, painting, lighting, cleaning, refuse removal, security and
similar items; reserves for roof replacement and exterior painting and
other appropriate reserves; and a reasonable allowance to Landlord for
Landlord's supervision of the Common Areas (not to exceed five percent (5%)
of the total of all other Common Area costs for the calendar year).
Landlord may cause any or all of such services to be provided by third
parties. Common Area costs shall not include depreciation of real property
which forms part
(C) 1984 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ----------------
Reprinted under license
/s/
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<PAGE> 20
of the Common Areas.
(c) TENANT'S SHARE AND PAYMENT.
C. AMENDMENT TO ARTICLE SIX OF LEASE
Sections 6.03 and 6.04 of the Lease are hereby deleted and the following
inserted in their place:
"Section 6.03 LANDLORD'S OBLIGATIONS.
(a) Except as provided in Article Seven (Damage and Destruction) and
Article Eight (Condemnation), Landlord shall keep the following in good order,
condition and repair: the foundations, exterior walls and exterior roof of the
Property (including painting the exterior walls of the Property not more often
than once every five (5) years, if necessary) and all components of electrical,
mechanical, plumbing, heating and air conditioning systems and facilities
located in the Property which are concealed or used in common by tenants of the
building in which the Property is located. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the interior
surfaces of exterior walls. Landlord shall have no obligation to make repairs
under this Section 6.03 until a reasonable time after receipt of written notice
from Tenant for the need for such repairs.*
(b) Tenant expressly waives the benefit of any statute in effect now or in
the future which might give Tenant the right to make repairs at Landlord's
expense or to terminate this Lease due to Landlord's failure to keep the
Property in good order, condition and repair.
Section 6.04 TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including, nonstructural, interior, exterior and portions, systems
and equipment) in good order, condition and repair. If any portion of the
Property or any system or equipment in the Property which Tenant is obligated to
repair cannot be fully repaired, Tenant shall promptly replace such portion of
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term. If any part of the Property or
the Project is damaged by any act or omission of Tenant, Tenant shall pay
Landlord the cost of repairing or replacing such damaged property, whether or
not Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that, at all
times during the Lease Term, Tenant shall maintain the portions of the Property,
which it is obligated to maintain, in an attractive, first-class and fully
operative condition.
(b) All of Tenant's obligations under this Section 6.04 shall be
accomplished at Tenant's solo expense. If Tenant fails to maintain or repair
the Property as required by this Section 6.04, Landlord may, upon ten (10)
days' prior notice to Tenant (except that no notice shall be required in the
case of an emergency), enter the Property and perform such maintenance or
repair on behalf of Tenant. In such case, Tenant shall reimburse Landlord for
all costs incurred in performing such maintenance or repair immediately upon
demand."
ATTACH SITE PLAN OF PROJECT AS AN EXHIBIT. CROSS-HATCH THE PROPERTY LEASED ON
SUCH EXHIBIT OR ATTACH A SEPARATE EXHIBIT SHOWING THE PROPERTY LEASED.
(c) 1982 Southern California Chapter of the Initials /s/
Society of Industrial Realtors,(R) Inc. ------------------
Reprinted under license /s/
------------------
*Landlord hereby further expressly provides that it shall be solely liable and
responsible for the repair and maintenance of the heating, air-conditioning,
electrical, plumbing and mechanical systems currently serving the Property,
and that the cost of such repair and maintenance is included in Tenant's
Operating Expenses as set forth in Exhibit "B" of this Lease.
<PAGE> 21
EXHIBIT "D"
SITE PLAN
Two Prospect Park Business Center
(Property Indicated in Dark)
[MAP]
<PAGE> 22
ADDENDUM DESIGNATING COMMENCEMENT AND EXPIRATION DATES
This Addendum is made and entered into this 19th day of November, 1992, by and
between CB INSTITUTIONAL FUND VI (hereinafter referred to as "Landlord") and
ARDEN TECHNOLOGIES, INC., a Florida Corporation, (hereinafter referred to as
"Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Industrial Real Estate
Lease dated July 20, 1992 (for identification purposes only) for the lease of
premises commonly known as TWO PROSPECT PARK in the Fort Lauderdale Commerce
Center, Building 10, 3403 N.W. 55th Street, Forth Lauderdale, Florida 33309
(hereinafter referred to as the "Property"); and
WHEREAS, the parties hereto are desirous of designating the Commencement Date
and the expiration or ending date of the initial Lease Term.
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100th's
Dollars ($10.00) and other good and valuable consideration in hand received by
each party from the other, the receipt, adequacy and sufficiency whereof are
hereby acknowledged, the parties hereto hereby agree as follows:
I.
Landlord and Tenant hereby stipulate and agree that the Commencement Date of
the initial Lease Term shall, for all purposes of the Lease, be deemed to be
November 1, 1992 and that the expiration or ending date of the initial Lease
Terms shall be October 31, 1997.
II.
Landlord and Tenant hereby reaffirm and ratify all of their obligations as set
forth in the Lease. In the event of any inconsistency or conflict between the
terms and provisions of this Addendum and the terms and provisions of the
Lease, the terms and provisions of this Addendum shall be controlling and shall
supersede and prevail over any inconsistent or conflicting terms or provisions
of the Lease. The terms used in this Addendum shall have the same meaning and
definition as set forth in the Lease, except as may be otherwise hereinabove
provided.
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III.
Upon the execution of this Addendum, it shall be annexed and attached to
the Lease and shall form and constitute a part hereof.
IN WITNESS WHEREOF, the Landlord and Tenant have caused this Agreement to
be executed under seal on the dates set forth opposite their respective
signatures.
LANDLORD:
CB INSTITUTIONAL FUND VI, a
California Limited Partnership
By: CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware Corporation
Its: Sole General Partner
Date: 12/3/92 By: /s/
---------------------- -------------------------------
Its: VP
-------------------------------
By: /s/
-------------------------------
Its: Portfolio Manager
-------------------------------
TENANT:
ARDEN TECHNOLOGIES, INC., a Florida
Corporation
Date: By: /s/
---------------------- -------------------------------
Its:
-------------------------------
By:
-------------------------------
Its:
-------------------------------
2
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ADDENDUM DESIGNATING COMMENCEMENT AND EXPIRATION DATES
This Addendum is made and entered into this 19th day of November, 1992, by and
between CB INSTITUTIONAL FUND VI (hereinafter referred to as "Landlord") and
ARDEN TECHNOLOGIES, INC., a Florida Corporation, (hereinafter referred to as
"Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain Industrial Real Estate
Lease dated July 20, 1992 (for identification purposes only) for the lease of
premises commonly known as TWO PROSPECT PARK in the Fort Lauderdale Commerce
Center, Building 10, 3403 N.W. 55th Street, Fort Lauderdale, Florida 33309
(hereinafter referred to as the "Property"); and
WHEREAS, the parties hereto are desirous of designating the Commencement Date
and the expiration or ending date of the initial Lease Term.
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100th's
Dollars ($10.00) and other good and valuable consideration in hand received by
each party from the other, the receipt, adequacy and sufficiency whereof are
hereby acknowledged, the parties hereto hereby agree as follows:
I.
Landlord and Tenant hereby stipulate and agree that the Commencement Date of
the initial Lease Term shall, for all purposes of the Lease, be deemed to be
November 1, 1992 and that the expiration or ending date of the initial Lease
Terms shall be October 31, 1997.
II.
Landlord and Tenant hereby reaffirm and ratify all of their obligations as set
forth in the Lease. In the event of any inconsistency or conflict between the
terms and provisions of this Addendum and the terms and provisions of the
Lease, the terms and provisions of this Addendum shall be controlling and shall
supersede and prevail over any inconsistent or conflicting terms or provisions
of the Lease. The terms used in this Addendum shall have the same meaning and
definition as set forth in the Lease, except as may be otherwise hereinabove
provided.
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III.
Upon the execution of this Addendum, it shall be annexed and attached to
the Lease and shall form and constitute a part hereof.
IN WITNESS WHEREOF, the Landlord and Tenant have caused this Agreement to
be executed under seal on the dates set forth opposite their respective
signatures.
LANDLORD:
CB INSTITUTIONAL FUND VI, a
California Limited Partnership
By: CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware Corporation
Its: Sole General Partner
Date: 12/3/92 By: /s/
-------------------------- ---------------------------------------
Its: VP
--------------------------------------
By: /s/
---------------------------------------
Its: Portfolio Manager
--------------------------------------
TENANT:
ARDEN TECHNOLOGIES, INC., a Florida
Corporation
Date: By: /s/
-------------------------- ---------------------------------------
Its: Treasurer
--------------------------------------
By:
---------------------------------------
Its:
--------------------------------------
2
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FIRST AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE
PARK N' VIEW, INC.
THIS FIRST AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE (hereinafter referred
to as this "First Amendment") dated March 29, 1996 (for identification purposes
only), is made and entered into on the day and year last below written by and
between CB INSTITUTIONAL FUND VI, a California Limited Partnership (hereinafter
referred to as the "Landlord"), and PARK N' VIEW, INC., A Delaware corporation
lawfully qualified to transact business within the State of Florida
(hereinafter referred to as the "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and ARDEN TECHNOLOGIES, INC., a Florida corporation
(hereinafter referred to as the "Assignor"), entered into that certain
Industrial Real Estate Lease dated July 20, 1992 (hereinafter referred to as the
"Lease"); and
WHEREAS, Landlord, Tenant and Assignor entered into that certain
Assignment of Lease dated October 16, 1995 (hereinafter referred to as the
"Assignment Agreement"), which, by its terms, provides for the assignment of
all of Assignor's right, title and interest in the Lease to Tenant; and
WHEREAS, pursuant to the terms and provisions of the Lease, as assigned
pursuant to the Assignment Agreement, Tenant is currently leasing and occupying
approximately 4,103 rentable square feet of space located in and being commonly
known and identified as Building 10, all of Bays G, H, and I, and a portion of
Bay F, Two Prospect Park Business Center, within the Fort Lauderdale Commerce
Center, 3403 N.W. 55th Street, Fort Lauderdale, Florida 33309 (hereinafter
referred to as the "Existing Property"), the Existing Property being further
shown and identified on Exhibit "A" - Site Plan, which is attached hereto and
incorporated herein by specific reference thereto; and
WHEREAS, the Lease Term with respect to the Existing Property is for an
original period of sixty (60) consecutive months (hereinafter referred to as
the "Existing Property Original Lease Term") and is presently scheduled to
terminate and expire on October 31, 1997 (hereinafter referred to as the
"Existing Property Scheduled Expiration Date"); and
WHEREAS, Landlord and Tenant are desirous of expanding the total leasehold
space of Tenant so that Tenant leases from Landlord an additional 7,544
rentable square feet of space located in and being commonly known and
identified as Building 10, all of Bays A, B, C, D and E and a portion of Bay F,
Two Prospect Park Business Center, within the Fort Lauderdale Commerce Center,
3405 N.W. 55th Street, Fort Lauderdale, Florida 33309 (hereinafter referred to
as the "Expansion Property"), the Expansion Property being further identified
on attached Exhibit "A" - Site Plan; and
WHEREAS, the Existing Property and the Expansion Property shall be
hereinafter referred to collectively as the "Total Property"; and
WHEREAS, Tenant is desirous of retaining and continuing to lease the
Existing Property from Landlord pursuant to all of the terms and provisions of
the Lease, for the remaining period of the Existing Property Original Lease
Term; and
WHEREAS, immediately upon the substantial completion of the Landlord's
Improvements (as such term is hereinafter defined) with respect to the
Expansion Property, Landlord is desirous of leasing the Expansion Property to
Tenant and Tenant is desirous of leasing the Expansion Property from Landlord,
for a period which shall commence on the date of such substantial completion
and which shall expire and terminate approximately
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sixty (60) months thereafter (hereinafter referred to as the "Expansion
Property Lease Term"); and
WHEREAS, immediately following the Existing Property Scheduled Expiration
Date, Landlord is desirous of extending the Lease Term with respect to the
lease of the Existing Property for a period commencing on the day following the
Existing Property Scheduled Expiration Date and expiring conterminously with
the Expansion Property Lease Term (hereinafter referred to as the "Existing
Property First Extension Term"); and
WHEREAS, Landlord and Tenant are desirous of entering into this First
Amendment for the purpose of formalizing and memorializing the foregoing
intentions of the parties regarding the expansion of Tenant's total leasehold
space and the extension of the Lease Term as hereinabove described, and for the
purpose of setting forth additional terms and provisions relating thereto.
NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/100THS
DOLLARS ($10.00), the mutual covenants and premises herein contained and other
good and valuable consideration in hand received by each party from the other,
the receipt, adequacy and efficiency of which is hereby acknowledged, the
parties hereto hereby covenant and agree as follows:
1.
EXPANSION EFFECTIVE DATE
For all purposes hereunder, the term "Expansion Effective Date" shall be
deemed to mean the date upon which the Landlord's Improvements with respect to
the Expansion Property are substantially completed and possession of the
Expansion Property is tendered to Tenant. Landlord and Tenant hereby stipulate
and agree that, commencing with the Expansion Effective Date, the Total
Property leased by Tenant hereunder shall consist of a total of approximately
11,647 rentable square feet.
2.
AGREEMENT TO LEASE TOTAL PROPERTY
A. Pursuant to the terms and provisions of the Lease, Tenant hereby
acknowledges its existing obligation to lease the Existing Property from
Landlord, and Landlord hereby acknowledges its existing obligation to lease the
Existing Property to Tenant, for the remaining period of the Existing Property
Original Lease Term, up to and including the Existing Property Scheduled
Expiration Date.
B. In addition, commencing on the Expansion Effective Date, Landlord hereby
agrees to lease the Expansion Property to Tenant and Tenant hereby agrees to
lease the Expansion Property from Landlord for the entire period of the
Expansion Property Lease Term, as described hereinbelow, subject to all of the
terms and conditions set forth in the Lease, as amended and modified by this
First Amendment.
C. Finally, Tenant hereby agrees to lease the Existing Property from Landlord
and Landlord hereby agrees to lease the Existing Property to Tenant for the
period of the Existing Property First Extension Term, as described hereinbelow,
subject to all of the terms and conditions set forth in the Lease, as amended
and modified by this First Amendment.
D. Upon completion of the Landlord's Improvements with respect to the
Expansion Property and delivery of possession of the Expansion Property to
Tenant, Landlord and Tenant agree to execute and deliver an Addendum to the
Lease which shall be prepared in a form reasonably acceptable to both Landlord
and Tenant and which shall set forth and conclusively establish the
commencement and expiration dates of the Expansion Property Lease Term and the
Existing Property First Extension Term.
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3.
TERM OF LEASE OF EXPANSION PROPERTY
Landlord and Tenant hereby covenant and agree that Tenant's lease of the
Expansion Property as provided for in this Agreement shall commence on the
Expansion Effective Date and shall end and terminate on the day which is the
last day of the month which is exactly sixty (60) consecutive months thereafter
(such period being defined hereinabove as the Expansion Property Lease Term).
4.
TERM OF EXTENSION OF LEASE OF EXISTING PROPERTY
Landlord and Tenant hereby further covenant and agree that the Lease Term
as it relates to the lease of the Existing Property shall be and hereby is
extended for a period beyond the Existing Property Scheduled Expiration Date
equal to the number of months by which sixty (60) months exceeds the number of
full months which shall elapse between the Expansion Effective Date and the
Existing Property Scheduled Expiration Date (such period being defined
hereinabove as the Existing Property First Extension Term). In this regard,
Landlord and Tenant hereby further stipulate and agree that the Existing
Property First Extension Term shall commence on November 1, 1997, which is the
day immediately following the Existing Property Scheduled Expiration Date, and
that the Existing Property First Extension Term shall terminate and expire
conterminously with the Expansion Property Lease Term on the last day of the
month which is exactly sixty (60) months following the Expansion Effective Date
(hereinafter referred to as the "Total Property Scheduled Expiration Date").
5.
BASE RENT
A. Tenant hereby acknowledges its continuing obligation to pay Landlord Base
Rent with respect to the lease of the Existing Property during the period of
the Existing Property Original Lease Term remaining following the date of this
First Amendment, in the amounts as set forth and provided for in Exhibit "B" of
the Lease.
B. Tenant further hereby agrees to pay Landlord, and Landlord hereby agrees
to accept as monthly Base Rent for the lease of the Expansion Property during
the period of the Expansion Property Lease Term, the following amounts for the
months of the Expansion Property Lease Term hereafter indicated: TWO THOUSAND
TWO HUNDRED AND 33/100THS DOLLARS ($2,200.33) per month during each of the
first twelve (12) months of the Expansion Property Lease Term (months 1 through
12); then TWO THOUSAND THREE HUNDRED TEN AND 35/100THS DOLLARS ($2,310.35) per
month during each of the next twelve (12) months of the Expansion Property
Lease Term (months 13 through 24); then TWO THOUSAND FOUR HUNDRED TWENTY-FIVE
AND 87/100THS DOLLARS ($2,425.87) per month during each of the next twelve (12)
months of the Expansion Property Lease Term (months 25 through 36); then TWO
THOUSAND FIVE HUNDRED FORTY-SEVEN AND 16/100THS DOLLARS ($2,547.16) per month
during each of the next twelve (12) months of the Expansion Property Lease Term
(months 37 through 48); and then TWO THOUSAND SIX HUNDRED SEVENTY-FOUR AND
52/100THS DOLLARS ($2,674.52) per month during each of the final twelve (12)
months of the Expansion Property Lease Term (months 49 through 60).
C. Tenant further hereby agrees to pay Landlord and Landlord hereby agrees to
accept as monthly Base Rent for the Lease of the Existing Property during the
period of the Existing Property First Extension Term, the following amounts for
the months of the Existing Property First Extension Term hereafter indicated:
TWO THOUSAND TWO HUNDRED TWENTY-TWO AND 46/100THS DOLLARS ($2,222.46) per month
during each of the first twelve (12) months of the Existing Property First
Extension Term (months 1 through 12); then TWO THOUSAND THREE HUNDRED
THIRTY-THREE AND
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4A.
EARLY TERMINATION
A. Notwithstanding anything contained in this First Amendment to the
contrary, Landlord hereby agrees that Tenant shall be provided with the right
(hereinafter referred to as the "Early Termination Right") to cancel and
terminate Tenant's lease of the Total Property upon the expiration of the
thirty-sixth (36th) full month following the Expansion Effective Date
(hereinafter referred to as the "Early Termination Date"). The Early
Termination Right shall be exercised by Tenant only by delivery of written
notice to Landlord at least ninety (90) days prior to the Early Termination Date
(hereinafter referred to as the "Termination Notice"). In addition, the
effectiveness of the exercise of the Early Termination Right by Tenant shall be
contingent upon the delivery to Landlord, simultaneously with the Termination
Notice, of an amount computed as set forth hereinbelow (hereinafter referred to
as the "Termination Fee"). The Termination Fee shall be computed by adding the
total cost of the Landlord's Improvement (as such term is hereinafter
described) to the amount of the total brokerage fees and commissions which have
been paid to the Broker (as such term is hereinafter defined) in connection
with this lease extension and expansion transaction and by multiplying such
total sum by a fraction, the numerator of which is twenty-four (24) and the
denominator of which is sixty (60).
B. If the Termination Notice is given in a timely manner and if the
Termination Fee is fully paid as hereinabove provided, then, effective upon the
Early Termination Date, Landlord and Tenant shall be relieved of and released
from any and all of their respective duties, responsibilities and obligations
under the Lease accruing after said Early Termination Date, and Tenant shall on
such date waive and relinquish all rights to occupancy, entry and possession of
the Total Property, shall vacate the Total Property and remove all of its
equipment, supplies, furnishings and other personal property therefrom, and
shall forthwith surrender, deliver and return possession of the Total Property
to Landlord. However, in the event that Tenant fails to deliver the Termination
Notice to Landlord at least ninety (90) days prior to the Early Termination
Date or, in the event Tenant fails to deliver the Termination Fee to Landlord
at the time and in the manner as hereinabove required, then the Early
Termination Right shall become null and void and of no further force or effect,
and Tenant shall thereafter have no further right or option to terminate
Tenant's lease of the Total Property prior to the Total Property Scheduled
Expiration Date.
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58/100THS DOLLARS ($2,333.58) per month during each of the next twelve (12)
months of the Existing Property First Extension Term (months 13 through 24);
then TWO THOUSAND FOUR HUNDRED FIFTY AND 26/100THS DOLLARS ($2,450.26) per
month during each of the next twelve (12) months of the Existing Property First
Extension Term (months 25 through 36); and then TWO THOUSAND FIVE HUNDRED
SEVENTY-TWO AND 77/100THS DOLLARS ($2,572.77) per month during each of the
final months of the Existing Property First Extension Term (months 37 through
the Total Property Scheduled Expiration Date; the number of such months to be
hereafter ascertained).
6.
SCHEDULE OF BASE RENT PAYMENTS
A. The above-referenced payments of monthly Base Rent with respect to the
lease of the Expansion Property during the period of the Expansion Property
Lease Term, exclusive of any applicable Florida sales, rental or use taxes as
set forth hereinbelow, are summarized in the following schedule for convenience:
Expansion Property
Expansion Property Lease Term
(a) Months 1 through 12................................$2,200.33 per month
(b) Months 13 through 24...............................$2,310.35 per month
(c) Months 25 through 36...............................$2,425.87 per month
(e) Months 37 through 48...............................$2,547.16 per month
(f) Months 49 through 60...............................$2,674.52 per month
B. The above-referenced payments of monthly Base Rent with respect to the
lease of the Existing Property during the remaining period of the Existing
Property Original Lease Term and during the period of the Existing Property
First Extension Term, exclusive of any applicable Florida sales, rental or use
taxes as set forth hereinbelow, are summarized in the following schedule for
convenience:
Existing Property
(1) Original Lease Term (Remaining Period)
(a) Months 42 through 48 (04/01/96 - 10/31/96).........$2,428.52 per month
(b) Months 49 through 60 (11/01/96 - 10/31/97).........$2,501.39 per month
(2) Existing Property First Extension Term
(a) Months 1 through 12 (11/01/97 - 10/31/98)..........$2,222.46 per month
(b) Months 13 through 24 (11/01/98 - 10/31/99).........$2,333.58 per month
(c) Months 25 through 36 (11/01/99 - 10/31/00).........$2,450.26 per month
(d) Month 37 (11/01/00) through Total Property
Scheduled Expiration Date..........................$2,572.77 per month
7.
OPERATING EXPENSES
A. Tenant hereby acknowledges its continuing obligation to pay Landlord
Operating Expenses with respect to the lease of the Existing Property during
the period of the Existing Property Original Lease Term remaining following the
date of this First Amendment, in the amounts as set forth and provided for in
Exhibit "B" of the Lease.
B. Tenant further hereby agrees to pay Landlord, and Landlord hereby agrees
to accept as monthly Operating Expenses for the lease of the Expansion Property
during the period
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of the Expansion Property Lease Term, the following amounts for the months of
the Expansion property Lease Term hereafter indicated: TWO THOUSAND FORTH-THREE
AND 17/100THS DOLLARS ($2,043.17) per month during each of the first twelve
(12) months of the Expansion Property Lease Term (months 1 through 12); then
TWO THOUSAND ONE HUNDRED FORTH-FIVE AND 33/100THS DOLLARS ($2,145.33) per month
during each of the next twelve (12) months of the Expansion Property Lease Term
(months 13 through 24); then TWO THOUSAND TWO HUNDRED FIFTY-TWO AND 60/100THS
DOLLARS ($2,252.60) per month during each of the next twelve (12) months of the
Expansion Property Lease Term (months 25 through 36); then TWO THOUSAND THREE
HUNDRED SIXTY-FIVE AND 23/100THS DOLLARS ($2,365.23) per month during each of
the next twelve (12) months of the Expansion Property Lease Term (months 37
through 48); and then TWO THOUSAND FOUR HUNDRED EIGHTY-THREE AND 49/100THS
DOLLARS ($2,483.49) per month during each of the final twelve (12) months of
the Expansion Property Lease Term (months 49 through 60).
C. Tenant further hereby agrees to pay Landlord and Landlord hereby agrees to
accept as monthly Operating Expenses for the Lease of the Existing Property
during the period of the Existing Property First Extension Term, the following
amounts for the months of the Existing Property First Extension Term hereafter
indicated: ONE THOUSAND ONE HUNDRED ELEVEN AND 23/100THS DOLLARS ($1,111.23)
per month during each of the first twelve (12) months of the Existing Property
First Extension Term (months 1 through 12); then ONE THOUSAND ONE HUNDRED
SIXTY-SIX AND 79/100THS DOLLARS ($1,166.79) per month during each of the next
twelve (12) months of the Existing Property First Extension Term (months 13
through 24); then ONE THOUSAND TWO HUNDRED TWENTY-FIVE AND 13/100THS DOLLARS
($1,225.13) per month during each of the next twelve (12) months of the
Existing Property First Extension Term (months 25 through 36); and then ONE
THOUSAND TWO HUNDRED EIGHT-SIX AND 39/100THS DOLLARS ($1,286.38) per month
during each of the final months of the Existing Property First Extension Term
(months 37 through the Total Property Scheduled Expiration Date; the number of
such months to be hereafter ascertained).
8.
SCHEDULE OF OPERATING EXPENSE PAYMENTS
A. The above-referenced payments of monthly Operating Expenses with respect to
the lease of the Expansion Property during the period of the Expansion Property
Lease Term, exclusive of any applicable Florida sales, rental or use taxes as
set forth hereinbelow, are summarized in the following schedule for convenience:
Expansion Property
Expansion Property Lease Term
(a) Months 1 through 12 ........... $2,043.17 per month
(b) Months 13 through 24 ........... $2,145.33 per month
(c) Months 25 through 36 ........... $2,252.60 per month
(e) Months 37 through 48 ........... $2,365.23 per month
(f) Months 49 through 60 ........... $2,483.49 per month
B. The above-referenced payments of monthly Operating Expenses with respect to
the lease of the Existing Property during the remaining period of the Existing
Property Original Lease Term and during the period of the Existing Property
First Extension Term, exclusive of any applicable Florida sales, rental or use
taxes as set forth hereinbelow, are summarized in the following schedule for
convenience:
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Existing Property
(1) Original Lease Term (Remaining Period)
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Months 42 through 48 (04/01/96 - 10/31/96)................ $1,167.63 per month
(b) Months 49 through 60 (11/01/96 - 10/31/97)................ $1,226.01 per month
</TABLE>
(2) Existing Property First Extension Term
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Months 1 through 12 (11/01/97 - 10/31/98)................. $1,111.23 per month
(b) Months 13 through 24 (11/01/98 - 10/31/99)................ $1,166.79 per month
(c) Months 25 through 36 (11/01/99 - 10/31/00)................ $1,225.13 per month
(d) Month 37 (11/01/00) through Total Property
Scheduled Expiration Date................................. $1,286.39 per month
</TABLE>
9.
SALES AND RENTAL TAX
Tenant hereby agrees to pay to Landlord and be liable for any amount of
sales, rental, and use taxes or other similar taxes, if any, which may be levied
or imposed upon the payment by Tenant of rent or any other charges or
consideration hereunder or under the Lease by any applicable state, county or
municipal government or authority, or by any department or agency thereof, such
payments to be in addition to all other payments required to be paid to Landlord
by Tenant under the terms of the Lease, as modified and amended by this First
Amendment. Any such payments shall be paid concurrently with and shall be in
addition to the payment of the rent or other charges or consideration upon which
the tax is based as set forth above. In this regard, the parties hereto hereby
stipulate, acknowledge and agree that rental payments in the county in which the
Property is located are subject to a six percent (6%) sales tax as of the date
of this Agreement, and that such tax is expressly applicable to the payment of
Base Rent, Operating Expenses and other charges or amounts payable under the
terms of the Lease, as amended and modified by this First Amendment.
10.
ADVANCE RENT
Upon execution of the Lease, Tenant shall pay to Landlord the sum of FOUR
THOUSAND FOUR HUNDRED NINETY-EIGHT AND 11/100THS DOLLARS ($4,498.11)
(hereinafter referred to as the "Advance Rent"), such amount representing
payment of Base Rent and Operating Expenses with respect to the lease of the
Expansion Property for the first (1st) month of the Expansion Property Lease
Term, and such amount being computed after application of the applicable six
percent (6.0%) Florida sales tax as set forth hereinabove (hereinafter referred
to as the "Advance Rent"). Notwithstanding anything contained in the Lease or in
this First Amendment to the contrary, if the first day of the Expansion Property
Lease Term falls on a day other than the first day of a month, then Base Rent
and Operating Expenses with respect to such first partial month shall be
prorated in the manner provided for hereinbelow and a portion of the Advance
Rent equal to such prorated amount shall be applied and credited toward the rent
due for such first partial month. The amount of the Advance Rent paid by Tenant
which is in excess of such prorated amount for such first partial month of the
Expansion Property Lease Term shall be applied and credited against Base Rent
and Operating Expenses due for the first full calendar month of the Expansion
Property Lease Term, and on the first day of such first full calendar month of
the Expansion Property Lease Term, Tenant shall be required to pay Landlord the
balance of any uncredited amounts of Base Rent and Operating Expenses which are
due and payable hereunder with respect to such month. In this regard, the
Advance Rent shall be initially payable to "CB Commercial Real Estate Group,
Inc." (hereinafter referred to as the "Broker"), and the Broker shall be and
hereby is authorized and instructed to hold such amount in its escrow account
until delivery of such amount to
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Landlord's property manager pursuant to the leasing agreement between Landlord
and the Broker.
11.
PAYMENT
All amounts of rent and other charges hereunder are to be payable in
lawful money of the United States in advance on the first day of each month or
partial month during the Existing Property Original Lease Term, the Expansion
Property Lease Term and the Existing Property First Extension Lease Term, as
applicable, beginning with the first month or partial month of each such period,
without offset, deduction, prior notice or demand. The amount of rent or other
charges which is payable for any period which is for less than one (1) month
shall be equal to a prorated portion of the monthly installment provided for
herein, based upon a thirty (30) day month. Notwithstanding anything contained
in the Lease to the contrary, and until receipt of written notice from Landlord
specifying a different address for payment, all amounts payable by Tenant
pursuant to the terms and provisions of the Lease, as amended and modified by
this First Amendment, shall be made payable to "Westmark" and shall be
addressed and delivered to Landlord at the following address:
c/o Westmark/CBIF VI/Commerce Center
P.O. Box 905701
Charlotte, North Carolina 28290-5701
12.
SECURITY DEPOSIT
Landlord hereby acknowledges that it currently remains in possession of a
security deposit in the amount of TWO THOUSAND TWO HUNDRED TWENTY-TWO AND
46/100TH DOLLARS ($2,222.46) (hereinafter referred to as the "Security
Deposit"), and the parties hereto hereby agree that Landlord shall continue to
hold and apply such Security Deposit during the respective periods of the
Existing Property Original Lease Term, the Expansion Property Lease Term and
the Existing Property First Extension Term in accordance with all of the terms
and provisions of the Lease relating thereto, in order to insure the faithful
payment and performance of all of Tenant's duties and responsibilities under
the terms and provisions of the Lease, as amended and modified by this First
Amendment. No additional amount of security deposit, however, shall be payable
by Tenant solely as the result of the expansion of the total leasehold space
leased by Tenant to include the Expansion Property, as provided for herein.
13.
LANDLORD'S IMPROVEMENTS
A. Landlord hereby agrees, at Landlord's sole cost and expense, to make the
following improvements to the Expansion Property: (i) to install one 12' wide x
13'8" high rollup door within the first door space west of the meter room; (ii)
to install ten 8' strip light fixtures within the warehouse area of the
Expansion Property; (iii) to install carpet within the existing production area
of the Expansion Property utilizing a color and quality of carpet to selected
by Tenant from Landlord's samples; and (iv) to paint the interior walls of the
existing production area of the Expansion Property utilizing a color of paint
to be selected by Tenant from Landlord's samples.
B. Landlord hereby further agrees, at Landlord's sole cost and expense, prior
to the Existing Property Scheduled Expiration Date, to repaint the interior
painted walls of the office area of the Existing Property utilizing a color of
paint to be selected by Tenant from Landlord's samples.
Initials: /s/
-----------------------------
/s/
-----------------------------
7
<PAGE> 34
C. Landlord hereby further represents, warrants and agrees that the heating,
ventilation, air conditioning, plumbing and electrical systems and equipment
serving the Expansion Property shall be in good working order, condition and
repair upon the commencement of the Expansion Property Lease Term.
D. All of the foregoing improvements to the Expansion Property and the
Existing Property shall be referred to collectively as the "Landlord's
Improvements". The Landlord's Improvements shall be made, except as otherwise
specifically agreed, in accordance with Landlord's usual building standards and
shall, except as otherwise specifically provided, be constructed and/or
installed generally at such costs, in such manner and utilizing such quality of
materials and workmanship as Landlord shall deem to be commercially reasonable
its sole and absolute discretion with regard to leasehold space of similar
size, type, location and use in the Fort Lauderdale, Florida area. The Landlord
agrees to complete the Landlord's Improvements as soon as reasonably
practicable following the execution and delivery of this First Amendment,
except as otherwise herein expressly provided.
E. Tenant hereby acknowledges that it currently remains in possession of the
Existing Property pursuant to the terms and provisions of the Lease, and except
for the Landlord's Improvements as hereinabove described, Landlord is hereby
relieved of and released from any duty or obligation to make any other repairs,
improvements or alterations to either the Existing Property or the Expansion
Property prior to or following the Expansion Effective Date, except to the
extent Landlord may be otherwise required to make repairs under the express
terms and provisions of the Lease. Furthermore, except for the construction of
the Landlord's Improvements as described hereinabove, Tenant hereby accepts the
Total Property on an "as-is" basis and in its condition as of the date of this
First Amendment, subject to all matters of record, laws, ordinances,
governmental regulations and orders pertaining to or affecting the Total
Property or the occupancy or operation thereof by Tenant. Tenant hereby further
acknowledges that Landlord has made no representation as to the condition of the
Total Property or as to the suitability of the Total Property for Tenant's
intended use, except as may be otherwise set forth in the Lease, as amended and
modified by this First Amendment.
14.
NOTICE TO LANDLORD
Notwithstanding anything contained in the Lease or in this First Amendment
to the contrary, and until receipt of written notice from Landlord specifying a
different address for notice, all notices and other communications required or
permitted to be given to Landlord pursuant to the terms of the Lease, as
amended and modified by this First Amendment, shall be sent and given pursuant
to the provisions of Section 13.07 of the Lease, and shall be delivered to
Landlord at the following addresses:
CB Institutional Fund VI
c/o Westmark Realty Advisors
865 South Figueroa Street
Thirty-Fifty Floor
Los Angeles, California 90017
With an additional copy to:
The Farbman Group
5229 N.W. 33rd Avenue
Fort Lauderdale, Florida 33309
Initials: /s/
--------
/s/
--------
8
<PAGE> 35
15.
BROKERS AND BROKERAGE COMMISSION
Landlord and Tenant hereby represent and warrant that they have been
jointly represented for brokerage services with regard to this transaction by
CB COMMERCIAL REAL ESTATE GROUP, INC. (such party being previously herein
identified as the "Broker"). Landlord hereby agrees that Landlord shall be
fully and solely liable for the payment of any applicable real estate
commission which is payable to the Broker in connection with the extension of
the Lease Term as set forth in this Agreement. Landlord shall not, however, be
liable for any other brokerage fee or commission alleged to be due and payable
to any other person or party claiming any other brokerage fee or commission
in connection with this lease extension transaction, which other party claims it
is due a commission or fee based upon a course of business or dealings with
Tenant, and Tenant hereby agrees to indemnify and hold Landlord harmless from
and against any and all costs, expenses and damages incurred by Landlord as the
result of or otherwise arising in connection with any such claim or action by
any such other person or party.
16.
PARKING
Notwithstanding anything contained in the Lease to the contrary, Landlord
hereby agrees that Tenant shall be permitted to parallel park in front of the
Expansion Property on the north side of the building in which the Total
Property is located at all times during the Expansion Property Lease Term.
17.
RATIFICATION OF THE LEASE
Landlord and Tenant hereby reaffirm, ratify, acknowledge and approve all
of their obligations as set forth in the Lease, and hereby agree to perform,
comply with and abide by each and every one of the covenants, agreements,
conditions, stipulations, terms, and provisions contained therein during the
remaining period of the Existing Property Original Lease Term and during the
periods of the Expansion Property Lease Term and the Existing Property First
Extension Term, to the extent they are not inconsistent or in conflict with
this First Amendment. Moreover, except as otherwise specifically set forth in
this First Amendment, nothing contained herein shall invalidate, impair or
release any covenant, condition, agreement or stipulation contained in the
Lease, and Landlord and Tenant hereby agree, acknowledge and confirm that,
except as otherwise hereinabove expressly provided, all of the terms,
provisions, conditions and obligations contained in the Lease are and shall be
incorporated herein by specific reference thereto and shall hereinafter be and
remain in full force and effect, and that all such terms, provisions,
conditions and obligations shall be and hereby are made expressly applicable to
the lease of the Total Property as herein provided.
18.
CONSTRUCTION OF FIRST AMENDMENT
In the event of any inconsistency or conflict between the terms and
provisions of this First Amendment and the terms and provisions of the Lease,
the terms and provisions of this First Amendment shall be controlling and shall
supersede and prevail over any such inconsistent or conflicting terms or
provisions of the Lease. The terms used in this First Amendment shall have the
same meaning and definition as set forth in the Lease, except as may be
otherwise hereinabove expressly provided. Landlord and Tenant hereby stipulate,
acknowledge and agree that all representations and recitals contained in this
First Amendment are true, correct, accurate and complete as of the date hereof.
Upon execution hereof, this First Amendment shall be incorporated into, shall
become a part of and shall be annexed to the Lease, and thereafter, all
references to the "Lease" contained
Initials: /s/
---------------------
/s/
---------------------
9
<PAGE> 36
in the Lease shall be deemed to refer to the Lease as modified and amended by
this First Amendment.
IN WITNESS WHEREOF, the undersigned parties have caused this First
Amendment to be executed under seal on the day and year set forth opposite their
respective signatures.
LANDLORD:
CB INSTITUTIONAL FUND, VI,
a California limited partnership
Date: April 11, 1996
----------------------- By: CB COMMERCIAL REAL
ESTATE GROUP, INC., a
Signed, sealed and acknowledged Delaware corporation
in the presence of: Its: Sole general partner
Witnesses: By: /s/
-----------------------
- ---------------------------- Its: Authorized Signatory
- ---------------------------- By: /s/
-----------------------
Its: Authorized Signatory
TENANT:
Date:
----------------------- PARK N' VIEW, INC.
a Delaware corporation
Signed, sealed and acknowledged
in the presence of: By: /s/
-----------------------
Witnesses: Its: President
- ---------------------------- Attest: /s/
-----------------------
- ---------------------------- Its:
[CORPORATE SEAL]
<PAGE> 37
EXHIBIT "A"
SITE PLAN
(EXISTING PROPERTY INDICATED IN DARK)
(EXPANSION PROPERTY INDICATED IN CROSS-HATCH)
TWO PROSPECT PARK BUSINESS CENTER
[MAP]
<PAGE> 38
ADDENDUM TO LEASE
DATED MARCH 29, 1996 BETWEEN
CB INSTITUTIONAL FUND VI
AND
PARK N' VIEW, INC., AS TENANT
ADDENDUM DESIGNATING COMMENCEMENT AND EXPIRATION DATE
THIS AGREEMENT made and entered into as of the 30th day of March, 1996, by and
between CB INSTITUTIONAL FUND VI, as Landlord (hereinafter "Landlord"), and
PARK N' VIEW, INC., as Tenant (hereinafter "Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated as of March 29, 1996
(the "Lease") for certain space in the premises located at Fort Lauderdale
Commerce Center, Building 10, 3405 N.W. 55th Street, Ft. Lauderdale, FL 33309;
and
WHEREAS, the provisions of said Lease relating to commencement of the term
thereof provided for a change in the Commencement Date in the event the Lease
Premises were not ready of on the date set forth in the Lease; and
WHEREAS, the Leased Premises were ready for occupancy on June 1, 1996 and
Landlord and Tenant now desire to set forth in this instrument the exact
commencement and expiration dates of the Term of said Lease;
WITNESSETH:
NOW THEREFORE, pursuant to the provisions of said Lease relating to
commencement of the term thereof, Landlord and Tenant, for themselves, their
heirs, successors and assigns, intending to be legally bound hereby, agree and
stipulate that the original Term of said Lease commenced June 1, 1996 and will
expire May 31, 2001 unless sooner terminated as in said Lease provided. Except
as otherwise set forth herein, all other dates and terms shall remain as set
forth in said Lease.
1
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as an
addendum to said Lease for the purpose set forth above, as of the day and year
first above written.
WITNESSES: LANDLORD:
- ------------------------------ CB INSTITUTIONAL FUND VI, a California
Limited Partnership
- ------------------------------ By: CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware Corporation
By: /s/
----------------------------------
Its:
----------------------------------
By:
----------------------------------
Its:
----------------------------------
WITNESSES: TENANT:
PARK N' VIEW, INC.
/s/ Teresa Glick By: /s/
- ------------------------------ ----------------------------------
Its: VP OPS
- ------------------------------ ----------------------------------
2
<PAGE> 40
ESTOPPEL CERTIFICATE
The undersigned, CB INSTITUTIONAL FUND VI ("Landlord") whose mailing address is
c/o The Farbman Group, 5229 N.W. 33rd Avenue, Ft. Lauderdale, FL 33309 and PARK
N'VIEW, INC. ("Tenant") whose mailing address is 3403 N.W. 55th Street, Ft.
Lauderdale, FL 33309, hereby certify as follows:
1. Attached hereto is a true, correct and complete copy of that
certain First Amendment to Industrial Real Estate Lease dated March
29, 1996 (the "Lease"), which premises (the "Premises") located at
3405 N.W. 55th Street, Bldg. 10. The Lease is now in full force and
effect and has not been amended, modified or supplemented, except as
set forth in paragraph 4 below.
2. The term of the Lease commences on June 1, 1996.
3. The term of the Lease expires on May 31, 2001.
4. The Lease has: (Initial One)
[ ] not been amended, modified, supplemented, extended renewed or
assigned.
[X] been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements, copies of which
are attached hereto: Addendum Designating Commencement and
Expiration Date dated May 30, 1996.
5. Tenant has accepted and is now in possession of the Premises.
6. The amount of fixed monthly rent is presently $2,200.33.
7. The amount of security deposit (if any) paid by Tenant is $2,222.46
currently on deposit. No other security deposits have been paid by
Tenant.
8. Tenant is paying all rentals required under the Lease, which have
been paid in full as of the date hereof. No rent becoming due under
the lease has been paid more than thirty (30) days in advance of its
due date.
9. All construction work required to be performed under the Lease has
been completed and has been accepted by Tenant.
1
<PAGE> 41
10. There are no defaults on the part of the Landlord or Tenant under the
Lease.
11. Tenant has no defense to is obligations under the Lease and claims no
right of set-off and has no counterclaim against Landlord.
12. Tenant has no right of any concession (rental or otherwise) or similar
compensation in connection with its lease of the Premises, except as
provided in the Lease.
All provisions of the Lease and amendments thereto (if any) referred to
above are hereby ratified by Landlord and Tenant.
Dated:
-----------------------
TENANT
By: PARK N VIEW, INC.
--------------------------
Title: VP OPS.
--------------------------
By:
--------------------------
Title:
--------------------------
2
<PAGE> 42
ADDENDUM TO LEASE
DATED MARCH 29, 1996 BETWEEN
CB INSTITUTIONAL FUND VI
AND
PARK N' VIEW, INC., AS TENANT
ADDENDUM DESIGNATING COMMENCEMENT AND EXPIRATION DATE
THIS AGREEMENT made and entered into as of the 20th day of June, 1996, by and
between CB INSTITUTIONAL FUND VI, as Landlord (hereinafter "Landlord"), and
PARK N' VIEW, INC., as Tenant (hereinafter "Tenant").
WHEREAS, Landlord and Tenant entered into a lease dated as of March 29, 1996
(the "Lease") for certain space in the premises located at Fort Lauderdale
Commerce Center, Building 10, 3405 N.W. 55th Street, Ft. Lauderdale, FL 33309;
and
WHEREAS, the provisions of said Lease relating to commencement of the term
thereof provided for a change in the Commencement Date in the event the Lease
Premises were not ready of on the date set forth in the Lease; and
WHEREAS, the Leased Premises were ready for occupancy on July 1, 1996 and
Landlord and Tenant now desire to set forth in this instrument the exact
commencement and expiration dates of the Term of said Lease;
W I T N E S S E T H:
NOW THEREFORE, pursuant to the provisions of said Lease relating to
commencement of the term thereof, Landlord and Tenant, for themselves, their
heirs, successors and assigns, intending to be legally bound hereby, agree and
stipulate that the original Term of said Lease commenced July 1, 1996 and will
expire June 30, 2001 unless sooner terminated as in said Lease provided. Except
as otherwise set forth herein, all other dates and terms shall remain as set
forth in said Lease.
1
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as an
addendum to said Lease for the purpose set forth above, as of the day and year
first above written.
WITNESSES: LANDLORD:
- ---------------------- CB INSTITUTIONAL FUND VI, a California
Limited Partnership
- ---------------------- By: CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware Corporation
By: /s/
----------------------------------
Its:
----------------------------------
By:
----------------------------------
Its:
----------------------------------
WITNESSES: TENANT:
PARK N' VIEW, INC.
/s/ Teresa Geick By: /s/
- ---------------------- ----------------------------------
Its: VP OPS.
- ---------------------- ----------------------------------
2
<PAGE> 44
ESTOPPEL CERTIFICATE
The undersigned, CB INSTITUTIONAL FUND VI ("Landlord") whose mailing address is
c/o The Farbman Group, 5229 N.W. 33rd Avenue, Ft. Lauderdale, FL 33309 and PARK
N' VIEW, INC. ("Tenant") whose mailing address is 3403 N.W. 55th Street, Ft.
Lauderdale, FL 33309, hereby certify as follows:
1. Attached hereto is a true, correct and complete copy of that certain
First Amendment to Industrial Real Estate Lease dated March 29, 1996
(the "Lease"), which premises (the "Premises") located at 3405 N.W.
55th Street, Bldg. 10. The Lease is now in full force and effect and
has not been amended, modified or supplemented, except as set forth
in paragraph 4 below.
2. The term of the Lease commences on July 1, 1996.
3. The term of the Lease expires on June 30, 2001.
4. The Lease has: (Initial One)
[ ] not been amended, modified, supplemented, extended renewed or
assigned.
[X] been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements, copies of which
are attached hereto: Addendum Designating Commencement and
Expiration Date dated June 20, 1996.
5. Tenant has accepted and is now in possession of the Premises.
6. The amount of fixed monthly rent is presently $2,200.33.
7. The amount of security deposit (if any) paid by Tenant is $2,222.46
currently on deposit. No other security deposits have been paid by
Tenant.
8. Tenant is paying all rentals required under the Lease, which have
been paid in full as of the date hereof. No rent becoming due under
the lease has been paid more than thirty (30) days in advance of its
due date.
9. All construction work required to be performed under the Lease has
been completed and has been accepted by Tenant.
1
<PAGE> 45
10. There are no defaults on the part of the Landlord or Tenant under the
Lease.
11. Tenant has no defense to its obligations under the Lease and claims no
right of set-off and has no counterclaim against Landlord.
12. Tenant has no right of any concession (rental or otherwise) or similar
compensation in connection with its lease of the Premises, except as
provided in the Lease.
All provisions of the Lease and amendments thereto (if any) referred to
above are hereby ratified by Landlord and Tenant.
Dated:
--------------
TENANT
By: PARK'N VIEW, INC.
---------------------
Title: VP OPS
---------------------
By:
---------------------
Title:
---------------------
2
<PAGE> 46
SECOND AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE
PARK N' VIEW, INC.
THIS SECOND AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE (hereinafter referred
to as this "Second Amendment") dated April 5, 1996 (for identification purposes
only), is made and entered into on the day and year last below written by and
between CB INSTITUTIONAL FUND VI, a California Limited Partnership (hereinafter
referred to as the "Landlord"), and PARK N' VIEW, INC., a Delaware corporation
lawfully qualified to transact business within the State of Florida (hereinafter
referred to as the "Tenant").
WITNESSETH:
WHEREAS, Landlord and ARDEN TECHNOLOGIES, INC., a Florida corporation
(hereinafter referred to as the "Assignor"), entered into that certain
Industrial Real Estate Lease dated July 20, 1992 (hereinafter referred to as the
"Lease"); and
WHEREAS, Landlord, Tenant and Assignor entered into that certain Assignment
of Lease dated October 16, 1995 (hereinafter referred to as the "Assignment
Agreement"), which, by its terms, provides for the assignment of all of
Assignor's right, title and interest in the Lease to Tenant; and
WHEREAS, Landlord and Tenant entered into that certain First Amendment to
Industrial Real Estate Lease dated March 29, 1996 (hereinafter referred to as
the "First Amendment"); and
WHEREAS, the Lease, the Assignment Agreement and the First Amendment shall
be hereinafter referred to collectively as the "Lease Documents"; and
WHEREAS, pursuant to the terms and provisions of the Lease, as assigned
pursuant to the Assignment Agreement, Tenant is currently leasing and occupying
approximately 4,103 rentable square feet of space located in and being commonly
known and identified as Building 10, all of Bays G, H, and I, and a portion of
Bay F, Two Prospect Park Business Center, within the Fort Lauderdale Commerce
Center, 3403 N.W. 55th Street, Fort Lauderdale, Florida 33309 (hereinafter
referred to as the "Existing Property"); and
WHEREAS, pursuant to the terms and provisions of the First Amendment,
Landlord and Tenant have agreed to expand the total leasehold space of Tenant so
that Tenant leases from Landlord an additional 7,544 rentable square feet of
space located in and being commonly known and identified as Building 10, all of
Bays A, B, C, D and E and a portion of Bay F, Two Prospect Park Business Center,
within the Fort Lauderdale Commerce Center, 3405 N.W. 55th Street, Fort
Lauderdale, Florida 33309 (hereinafter referred to as the "Expansion Property");
and
WHEREAS, the Existing Property and the Expansion Property shall be
hereinafter referred to collectively as the "Total Property"; and
WHEREAS, prior to the completion of the Landlord's Improvements to the
Expansion Property (as defined and described in the First Amendment), Tenant is
desirous of making use of that certain warehouse space located in and being
commonly known and identified as Building 9, Bay C, Two Prospect Park Business
Center, 3427 N.W. 55th Street, Fort Lauderdale, Florida 33309, consisting of
approximately 902 square feet (hereinafter referred to as the "Temporary
Warehouse Space"), said Temporary Warehouse Space being further shown and
identified on Exhibit "A", which is attached hereto and incorporated herein by
specific reference thereto; and
WHEREAS, Landlord and Tenant are desirous of entering into this Second
Amendment for the purpose of formalizing and memorializing the foregoing
intentions of the parties regarding the temporary use and occupancy by Tenant of
the Temporary Warehouse Space, and for the purpose of setting forth additional
terms and provisions relating thereto.
Initials: /s/
---------
/s/
---------
1
<PAGE> 47
the temporary use and occupancy by Tenant of the Temporary Warehouse Space, and
for the purpose of setting forth additional terms and provisions relating
thereto.
NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/100THS
DOLLARS ($10.00), the mutual covenants and premises herein contained and other
good and valuable consideration in hand received by each party from the other,
the receipt, adequacy and sufficiency of which is hereby acknowledged, the
parties hereto hereby covenant and agree as follows:
1.
AGREEMENT FOR USE OF TEMPORARY WAREHOUSE SPACE
Landlord hereby agrees to allow Tenant to use and occupy the Temporary
Warehouse Space, subject to all of the terms and conditions of the Lease
Documents and of this Second Amendment. Landlord shall deliver possession of the
Temporary Warehouse Space to Tenant promptly following the execution of this
Second Amendment by both Landlord and Tenant. Tenant hereby acknowledges that
Landlord is permitting Tenant to use and occupy the Temporary Warehouse Space
merely as an accommodation to Tenant in order to allow Tenant to commence its
operations promptly once the Landlord's Improvements with respect to the
Expansion Property have been completed and so as to effect on orderly transition
by Tenant to the occupancy of the Expansion Property. Such use and occupancy of
the Temporary Warehouse Space will continue, however, only until the date upon
which such Landlord's Improvements to the Expansion Property are substantially
completed and possession of the Expansion Property is tendered to Tenant
(hereinafter referred to as the "Expansion Effective Date").
2.
TEMPORARY WAREHOUSE SPACE LEASE TERMS
Tenant shall use and occupy the Temporary Warehouse Space on a
month-to-month basis (hereinafter referred to as the "Temporary Space Lease").
In this regard, Landlord and Tenant hereby covenant and agree that the Temporary
Space Lease Term shall commence immediately upon the Effective Date (as such
term is hereinafter defined) of this Second Amendment. Unless earlier terminated
as set forth hereinbelow, the Temporary Space Lease Term shall end and terminate
without further notice from Landlord upon the Expansion Effective Date. Landlord
and Tenant hereby further agree that the Temporary Space Lease Term may be
terminated by either Landlord or Tenant at any time following the Effective Date
of this Second Amendment, and for any reason whatsoever, upon first providing
the other such party with at least fifteen (15) days prior written notice
(hereinafter referred to as the "Termination Notice") of the terminating party's
intention to terminate the Temporary Space Lease Term, and Landlord and Tenant
hereby expressly waive any provision of applicable law which would otherwise
require a longer period of notice prior to the termination of a month-to-month
tenancy. Such Termination Notice shall expressly designate and set forth the
date upon which the Temporary Space Lease Term is to terminate. Upon the
termination or expiration of the Temporary Space Lease Term, whether upon the
Expansion Effective Date or upon earlier delivery by Landlord or Tenant of the
Termination Notice, Tenant hereby agrees to vacate the Temporary Warehouse
Space, to remove all of its property therefrom and to relinquish all rights to
possession thereof not later than by the date upon which the Temporary Space
Lease Term so terminates.
3.
RENT
Landlord hereby expressly agrees that Tenant shall use and occupy the
Temporary Warehouse Space rent free during the period of the Temporary Space
Lease Term, and that no amounts of Base Rent, Operating Expenses or other
amounts of Additional Rent (as such terms
Initials: /s/
-----------------
/s/
-----------------
2
<PAGE> 48
are used and defined in the Lease Documents) shall be due and payable by Tenant
during such period. However, Tenant shall be solely liable and responsible for
all costs of electrical consumption and other utility charges incurred in
connection with Tenant's use and occupancy of the Temporary Warehouse Space. In
the event that Tenant holds over in the Temporary Warehouse Space following any
termination of the Temporary Space Lease Term as set forth hereinabove, Tenant
hereby agrees that such continued occupancy shall be deemed to be a tenancy at
sufferance. Tenant further agrees, in the event of any such holdover, to pay
Landlord Base Rent at the then fair rental value of the Temporary Warehouse
Space, as determined by Landlord in its sole reasonable discretion, and to pay
Landlord Additional Rent with respect to the Temporary Warehouse Space at the
rate per square foot then being charged to other tenants of the project within
which the Temporary Warehouse Space is located (hereinafter referred to as the
"Project").
4.
USE AND OCCUPANCY
Tenant shall use and occupy the Temporary Warehouse Space solely and
exclusively for the storage and warehousing of Tenant's equipment, supplies and
inventory and for no other uses or purposes whatsoever. Tenant shall not
commit, or suffer to be committed, any annoyance, waste, nuisance, act or thing
against public policy, or which may disturb the quiet enjoyment of Landlord or
any other tenant or occupant of the Project. Tenant agrees not to deface or
damage the Temporary Warehouse Space in any manner whatsoever, and upon the
termination of the Temporary Space Lease Term, to return and deliver possession
of the Temporary Warehouse Space to Landlord in the same condition as of the
Effective Date of this Second Amendment. If Tenant fails to return the
Temporary Warehouse Space to Landlord in such condition, Tenant shall promptly
reimburse Landlord for any costs and expenses which may be incurred by Landlord
in repairing or restoring the Temporary Warehouse Space. Tenant further agrees
to comply with and abide by any and all rules and regulations applicable to the
Project which may be promulgated by Landlord from time to time. Tenant shall
not make any alterations, modifications or repairs to the Temporary Warehouse
Space without first obtaining the prior written consent of Landlord. Tenant
hereby accepts possession of the Temporary Warehouse Space on an as-is basis
and in its condition as of the Effective Date of this Second Amendment.
Furthermore, Landlord is hereby expressly relieved of and released from any
duty or obligation to make any alterations, modifications or repairs to the
Temporary Warehouse Space prior to or following the Effective Date of this
Second Amendment. Tenant hereby acknowledges that Landlord has otherwise made
no representations as to the condition of the Temporary Warehouse Space or as to
the suitability of the Temporary Warehouse Space for Tenant's intended use.
5.
MARKETING OF TEMPORARY WAREHOUSE SPACE
Tenant hereby expressly acknowledges and agrees that Landlord and its
agents shall have the right to show and market the Temporary Warehouse Space to
prospective tenants and other applicable parties at any and all times during
the Temporary Space Lease Term, and that Landlord and its employees,
representatives and agents may enter the Temporary Warehouse Space at all
reasonable times during the Temporary Space Lease Term in connection with said
marketing efforts after first providing Tenant with such advance notification
as is reasonably possible.
6.
TENANT'S INSURANCE OBLIGATIONS
Notwithstanding anything contained in this Second Amendment to the
contrary, Tenant shall in no event be entitled to occupy any portion of the
Temporary Warehouse Space until such time as Tenant has furnished and provided
Landlord with evidence of the proper maintenance by
Initials /s/
---------
/s/
---------
3
<PAGE> 49
Tenant of all amounts of insurance with respect to the Temporary Warehouse Space
as Landlord shall reasonably request or require, including specifically, but not
limited to, a policy of commercial general liability insurance in the amounts as
required pursuant to Section 4.04 of the Lease and naming Landlord as an
additional insured thereunder.
7.
STATUTORY RADON GAS NOTIFICATION
It is a requirement of Florida law that the following notification be
included in all lease agreements executed within the State of Florida:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit."
8.
EFFECTIVE DATE
For all purposes of this Second Amendment, the Effective Date of this
Second Amendment shall be deemed to be the date upon which this Second Amendment
is executed by both Landlord and Tenant and possession of the Temporary
Warehouse Space is tendered to Tenant.
9.
RATIFICATION OF THE LEASE DOCUMENTS
Landlord and Tenant hereby reaffirm, ratify, acknowledge and approve all of
their obligations as set forth in the Lease Documents, and hereby agree to
perform, comply with and abide by each and every one of the covenants,
agreements, conditions, stipulations, terms, and provisions contained therein,
to the extent they are not inconsistent or in conflict with this Second
Amendment. Moreover, except as otherwise specifically set forth in this Second
Amendment, nothing contained herein shall invalidate, impair or release any
covenant, condition, agreement or stipulation contained in the Lease Documents,
and Landlord and Tenant hereby agree, acknowledge and confirm that, except as
otherwise hereinabove expressly provided, all of the terms, provisions,
conditions and obligations contained in the Lease Documents are and shall be
incorporated herein by specific reference thereto and shall hereinafter be and
remain in full force and effect, and that all such terms, provisions, conditions
and obligations shall be and hereby are made expressly applicable to the lease
of the Temporary Warehouse Space as herein provided.
10.
CONSTRUCTION OF SECOND AMENDMENT
In the event of any inconsistency or conflict between the terms and
provisions of this Second Amendment and the terms and provisions of the Lease
Documents, the terms and provisions of this Second Amendment shall be
controlling and shall supersede and prevail over any such inconsistent or
conflicting terms or provisions of the Lease Documents. The terms used in this
Second Amendment shall have the same meaning and definition as set forth in the
Lease Documents, except as may be otherwise hereinabove expressly provided.
Landlord and Tenant hereby stipulate, acknowledge and agree that all
representations and recitals contained in this Second Amendment are true,
correct, accurate and complete as of the date hereof. Upon execution hereof,
this Second Amendment shall be incorporated into, shall become a part of and
shall be annexed to the Lease Documents, and thereafter, all references to the
"Lease" contained
Initials: /s/
-----------------------
/s/
-----------------------
4
<PAGE> 50
in the Lease Documents shall be deemed to refer to the Lease Documents as
modified and amended by this Second Amendment.
IN WITNESS WHEREOF, the undersigned parties have caused this Second
Amendment to be executed under seal on the day and year set forth opposite
their respective signatures.
LANDLORD:
CB INSTITUTIONAL FUND VI,
a California limited partnership
Date: April 11, 1996 By: CB COMMERCIAL REAL
------------------------- ESTATE GROUP, INC.
Signed, sealed and acknowledged a Delaware corporation
in the presence of: Its: Sole general partner
Witnesses:
By: /s/
- ------------------------------- -------------------------
Its: Authorized Signatory
By: /s/
-------------------------
- ------------------------------- Its: Authorized Signatory
TENANT:
Date:-------------------------- PARK N' VIEW, INC.,
a Delaware corporation
Signed, sealed and acknowledged
in the presence of: By: /s/
------------------------------
Its:
Witnesses:
Attest:--------------------------
- ------------------------------- Its:
[CORPORATE SEAL]
- -------------------------------
Initials: /s/
--------
/s/
--------
5
<PAGE> 51
EXHIBIT "A"
SITE PLAN
(Temporary Warehouse Space Indicated by Dark Shading)
TWO PROSPECT PARK BUSINESS CENTER
[MAP]
Initials: /s/
-----------------
/s/
-----------------
<PAGE> 52
Assignment of Lease
CB Commercial Real Estate Group, Inc.
BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
1. This Assignment of Lease, dated October 16, 1995, is made between Arden
Technologies, Inc. ("Assignor"), and Park N' View, Inc. ("Assignee"), with
respect to that written lease dated July 20, 1992 and any Addendum thereto,
19__, under which CB Institutional Fund IV ("Lessor") leased to Assignor the
real property located in the City of Ft. Lauderdale, County of Broward,
State of Florida, described as approximately 4,103 sq. ft. of premises known
as bldg. 10, all of Bays G, H, I & portion of Bay F, Two Prospect Park
Business Center, at the Ft. Lauderdale Commerce Center, 3403 NW 55 St., Ft.
Lauderdale, FL 33309. ("Premises") Said lease has been amended by the
following amendments_______________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
said lease and amendments are herein collectively referred to as the "Lease"
and are attached hereto as Exhibit "A."
2. Assignor assigns and transfers to Assignee all of Assignor's right, title,
and interest in the Lease, and Assignee accepts the Assignment and assumes
and agrees to perform, as a direct obligation to Lessor, all of the
obligations of the lessee under the Lease which shall accrue from and after
the effective date hereof. This Assignment shall take effect on October 16,
1995, or when Lessor consents to this Assignment (if such consent is
required under the Lease), whichever shall last occur (the "Effective
Date"), and Assignor shall deliver possession of the Premises to Assignee on
such date.
3. As consideration for this Assignment, Assigns shall pay Assignor the sum of
good and valuable consideration _________________ Dollars ($ N/A), which
shall be payable as follows pursuant to terms of separate written agreement
between Assignor and Assignee
4. Assignor warrants and represents to Assignee that the Lease has not been
amended or modified except as expressly set forth herein, that Assignor is
not now and as of the Effective Date will not be in default or breach of any
of the provisions of the Lease, and that Assignor has no knowledge of any
claim by Lessor that Assignor is in default or breach of any of the
provisions of the Lease.
5. Assignor shall not, by reason of this Assignment, be relieved of liability
for the performance of those terms, conditions and provisions of the Lease
on its part to be performed, unless the Lease provides otherwise. All
charges under the Lease accruing prior to the Effective Date which are due
after such date shall be payable by Assignor to Assignee within ten days
after delivery to Assignor of a statement thereof. If the Lease provides for
payment by the lessee of any charges on the basis of an estimate thereof,
then as and when an adjustment between estimated and actual charges is first
made after the Effective Date. Assignee shall receive from or pay to
Assignor (as the case may be) Assignor's share of such adjustment, prorated
on a pardiem basis.
6. If Assignees defaults in or breaches any of its obligations under the Lease,
Assignee shall indemnify and hold Assignor harmless from all damage
resulting therefrom. If Assignor cures any default or breach of Assignee, or
if Assignor performs any of Assignee's obligations under the Lease in order
to prevent Assignee from being in default or breach thereof. Assignee shall
immediately reimburse Assignor for all amounts thereby incurred by Assignor.
In addition to the foregoing, Assignor shall have the right to exercise any
remedy against Assignee that is available by law or contained in the Lease,
except for any right of reentry.
7. Lessor now holds the sum of Two Thousand Two Hundred Twenty-Two Dollars &
Forty-six 100ths ($2,222.46) as a security deposit and the sum of N/A
Dollars ($_____) as prepaid rent for N/A. Assignor releases all claims to
these sums, and said sums shall be held by Lessor for the benefit of
Assignee, subject to the provisions of the Lease.
8. Lessor and Assignee shall have the right to amend, modify, terminate,
extend, or renew the Lease without the consent of Assignor, provided
however, that no such amendment, modification, termination, extension, or
renewal shall increase or alter Assignor's then existing liability or
obligations under the Lease, unless Assignor shall have expressly consented
thereto. In the event Assignee exercises any right provided by the Lease to
expand the Premises or to extend or renew the term of the Lease, Assignor's
obligations and liability shall remain as if such right had not been
exercised.
9. This Assignment shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns, except as otherwise
provided in the Lease.
10. AGENCY DISCLOSURE:
Assignor and Assignee each warrant that they have dealt with no other real
estate broker in connection with this transaction except: CB COMMERCIAL REAL
ESTATE GROUP, INC. who represent Lessor and none other, who represents
N/A.
1
<PAGE> 53
["CB COMMERCIAL" LOGO]
ASSIGNMENT OF LEASE
CB COMMERCIAL REAL ESTATE GROUP INC.
BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
1. This Assignment of Lease, dated October 16, 1995, is made between Arden
Technologies, Inc. ("Assignor"), and Park N' View, Inc. ("Assignee"), with
respect to that written lease dated July 20, 1992 and any Addendum
thereto, 19____, under which CB Institutional Fund IV ("Lessor") leased to
Assignor the real property located in the City of Ft. Lauderdale, County
of Broward, State of Florida, described as approximately 4,103 sq ft of
premises known as bldg 10, all of Bays G, H, I & portion of Bay F, Two
Prospect Park Business Center, at the Ft. Lauderdale Commerce Center, 3403
NW 55 St., Ft. Lauderdale, FL 33309, ("Premises). Said lease has been
amended by the following amendments_______________________________________
__________________________________________________________________________
__________________________________________________________________________
said lease and amendments are herein collectively referred to as the
"Lease" and are attached hereto as Exhibit "A".
2. Assignor assigns and transfers to Assignee all of Assignor's right, title,
and interest in the Lease, and Assignee accepts the Assignment and assumes
and agrees to perform, as a direct obligation to Lessor, all of the
obligations of the leasee under the Lease which shall accrue from and
after the effective date hereof. This Assignment shall take effect on
October 16, 1995, or when Lessor consents to this Assignment (if such
consent is required under the Lease), whichever shall last occur (the
"Effective Date"), and Assignor shall deliver possession of the Premises
to Assignee on such date.
3. As consideration for this Assignment, Assignee shall pay Assignor the sum
of good and valuable consideration Dollars ($ N/A), which shall be payable
as follows: pursuant to terms of separate written agreement between
Assignor and Assignee.
4. Assignor warrants and represents to Assignee that the Lease has not been
amended or modified except as expressly set forth herein, that Assignor is
not now and as of the Effective Date will not be in default or breach of
any of the provisions of the Lease, and that Assignor has no knowledge of
any claim by Lessor that Assignor is in default or breach of any of the
provisions of the Lease.
5. Assignor shall not, by reason of this Assignment, be relieved of liability
for the performance of those terms, conditions and provisions of the Lease
on its part to be performed, unless the Lease provides otherwise. All
charges under the Lease accruing prior to the Effective Date which are due
after such date shall be payable by Assignor to Assignee within ten days
after delivery to Assignor of a statement thereof. If the Lease provides
for payment by the leasee of any charges on the basis of an estimate
thereof, then as and when an adjustment between estimated and actual
charges is first made after the Effective Date, Assignee shall receive
from or pay to Assignor (as the case may be) Assignor's share of such
adjustment, prorated on a perdiem basis.
6. If Assignee defaults in or breaches any of its obligations under the Lease,
Assignee shall indemnify and hold Assignor harmless from all damage
resulting therefrom. If Assignor cures any default or breach of Assignee,
or if Assignor performs any of Assignee's obligations under the Lease in
order to prevent Assignee from being in default or breach thereof, Assignee
shall immediately reimburse Assignor for all amounts thereby incurred by
Assignor. In addition to the foregoing, Assignor shall have the right to
exercise any remedy against Assignee that is available by law or contained
in the Lease, except for any right of reentry.
7. Lessor now holds the sum of Two Thousand Two Hundred Twenty-Two & 46/100
Dollars ($2,222.46) as a security deposit and the sum of N/A Dollars
($_______) as prepaid rent for N/A Assignor releases all claims to these
sums, and said sums shall be held by Lessor for the benefit of Assignee,
subject to the provisions of the Lease.
8. Lessor and Assignee shall have the right to amend, modify, terminate,
extend, or renew the Lease without the consent of Assignor, provided
however, that no such amendment, modification, termination, extension, or
renewal shall increase or alter Assignor's then existing liability or
obligations under the Lease, unless Assignor shall have expressly
consented thereto. In the event Assignee exercises any right provided by
the Lease to expand the Premises or to extend or renew the term of the
Lease, Assignor's obligations and liability shall remain as if such right
had not been exercised.
9. This Assignment shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns, except as
otherwise provided in the Lease.
10. AGENCY DISCLOSURE: Assignor and Assignees each warrant that they have dealt
with no other real estate broker in connection with this transaction
except: CB COMMERCIAL REAL ESTATE GROUP, INC., who represents Lessor and
non other, who represents N/A
1
<PAGE> 54
In the event that CB COMMERCIAL REAL ESTATE GROUP, INC. represents both
Assignor and Assignee, Assignor and Assignee hereby confirm that they were
timely advised of the dual representation and that they consent to the
same, and that they do not expect said broker to disclose to either of them
the confidential information of the other party.
11. If Assignor, Assignee, or Broker shall commence an action against the other
arising out of or in connection with this Assignment, the prevailing party
shall be entitled to recover its costs of suit and reasonable attorneys'
fees.
12. Upon execution of this Assignment, and consent thereto by Lessor (if such
consent is required under the terms of the Lease), Assignor shall pay
Broker a real estate brokerage commission in accordance with Assignor's
contract with Broker for the assignment of the Lease, if any, and
otherwise in the amount of N/A Dollars ($ N/A ), for services
----------- ----------
rendered in effecting this Assignment. Broker is hereby made a third party
beneficiary of this Assignment for the purpose of enforcing its right to
said commission.
13. THIS ASSIGNMENT SHALL BE OF NO FORCE OR EFFECT UNLESS CONSENTED TO BY
LESSOR WITHIN 10 DAYS AFTER EXECUTION HEREOF, IF SUCH CONSENT IS REQUIRED
UNDER THE TERMS OF THE LEASE.
14. The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders
having jurisdiction over the parties, property or the subject matter of
this Agreement, including, but not limited to, the 1964 Civil Rights Act
and all amendments thereto, the Foreign Investment in Real Property Tax
Act, the Comprehensive Environmental Response Compensation and Liability
Act, and The Americans With Disabilities Act.
Date: 11/14/95 Date: 11/14/95
--------------------------------- ----------------------------------
Assignor: Arden Technologies, Inc. Assignee: Park 'N View
----------------------------- ------------------------------
By: /s/ By: /s/
----------------------------------- ------------------------------------
Title: President Title: President
-------------------------------- ---------------------------------
By: By:
----------------------------------- ------------------------------------
Title: Title:
-------------------------------- ---------------------------------
Address: 3403 N.W. 55th St. Address: 3403 N.W. 55th St.
------------------------------ -------------------------------
Ft. Lauderdale, FL 33309 Ft. Lauderdale, FL 33309
- -------------------------------------- ---------------------------------------
Telephone: 305-730-0565 Telephone: 305-730-0565
---------------------------- -----------------------------
- -------------------------------------------------------------------------------
CONSULT YOUR ADVISORS -- This document has been prepared for approval
by your attorney. No representation or recommendation is made by
Broker as to the legal sufficiency or tax consequences of this
document or the transaction to which it relates. These are questions
for your attorney.
In any real estate transaction, it is recommended that you consult
with a professional, such as a civil engineer, industrial hygienist or
other person, with experience in evaluating the condition of the
property, including the possible presence of asbestos, hazardous
materials and underground storage tanks.
- -------------------------------------------------------------------------------
LESSOR'S CONSENT TO ASSIGNMENT OF LEASE
The undersigned ("Lessor"), lessor under the Lease, hereby consents to the
foregoing Assignment without waiver of any restriction in the Lease concerning
further assignment or subletting. Lessor certifies that, as of the date of
Lessor's execution hereof, Assignor is not in default or breach of any of the
provisions of the Lease, that Lessor holds the prepaid rent and security deposit
set forth in Section 7 of the foregoing Assignment. Lessor agrees to send
Assignor a copy of any notice of default or breach Lessor sends to or serves on
Assignee, at the following address: 3403 NW 55 Street, Ft. Lauderdale, FL
33309 or such other address as may be designated in writing from time to time
by Assignor, and agrees that in the event Lessor fails to send a copy of any
such notice of default to Assignor, Assignor shall have no liability to Lessor
on account of such default or breach. Lessor further agrees that no amendment,
modification, termination, extension, or renewal of the Lease entered into by
Lessor and Assignee shall be effective to increase or alter Assignor's
liability or obligations under the Lease, unless consented to by Assignor, and
that in the event Assignee exercises any right provided by the Lease to expand
the Premises or to extend or renew the term of the Lease, Assignor's
obligations and liability shall remain as if such right had not been exercised.
Date:
------------------------------------------
CB INSTITUTIONAL FUND VI, a California
Lessor: Limited Partnership
----------------------------------------
By: /s/
--------------------------------------------
Title:
-----------------------------------------
By:
--------------------------------------------
Title:
-----------------------------------------
Address: 865 South Figueroa Street, 35th Floor
---------------------------------------
Los Angeles, CA 90017-2543
- -----------------------------------------------
Telephone: 213-683-4376
-------------------------------------
2
<PAGE> 55
ANTENNA SPACE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this ______ day of ______________, 1995
by and between CB INSTITUTIONAL FUND VI, a California Limited Partnership (the
"Landlord"), having an address at 865 Figueroa Street, 35th Floor, Los Angeles,
CA 90017-2543 and Arden Technologies, Inc. a/k/a Park'N View (the "Tenant")
having an address at 3403 N.W. 55th Street, Bldg. #10, Ft. Lauderdale, FL 33309.
1. Landlord agrees and had the authority to permit tenant to utilize for
purposes provided herein, suitable space (the "Antenna Space") on the building
(the "Building") located at 3403 N.W. 55th Street, Bldg. #10, Ft. Lauderdale,
Florida 33309 as described in Exhibit A attached hereto, for the duration of the
lease.
2. Tenant may install, use and maintain on such Antenna Space equipment (the
"Equipment") as described in Exhibit B attached hereto.
3. Landlord agrees that Tenant may run cables (the "Cables") between the
Antenna Space and the Tenant's premises in the Building and that all cabling
shall be installed so as to comply with all local building codes and Section
5.02 and any other applicable sections of the above-referenced lease agreement.
4. The equipment and Cables shall remain the property of the Tenant or its
contractor. At Landlord's request, Tenant shall, at its cost, remove such
Equipment and Cables at the expiration or sooner termination of this Agreement
and restore Landlord affected facilities to their original condition.
5. Tenant and/or its contractor shall bear all expenses in connection with
the installation, use and maintenance of such Equipment and Cables and removal
of the Equipment and Cables. Tenant shall indemnify and hold Landlord harmless
from and against liability, damages, costs and expense, including reasonable
attorneys' fees incurred by Landlord, arising out of Tenant's installation, use,
and maintenance of the Equipment and Cables except for liability, damages, costs
and expenses caused by Landlord's gross negligence.
6. Tenant shall maintain in force during the term of this Agreement
comprehensive liability insurance protecting Landlord against any liability,
damage, cost or expenses in connection with the installation, use and
maintenance of the Equipment and Cables and shall supply evidence of such
insurance once annually.
7. Tenant and its contractors shall comply with all applicable laws,
regulations and building codes in connection with the installation, use and
maintenance of the Equipment and Cables.
8. Landlord agrees to permit Tenant and its contractors reasonable access to
the Antenna Space and other areas of the Building so as to facilitate the
installation, use and maintenance and the removal of Equipment and Cables.
Tenant agrees not to disturb other tenants of the property in any manner
whatsoever during installation, use, maintenance or removal of said Equipment
and Cables.
1
<PAGE> 56
9. This agreement constitutes the entire agreement between the parties
relating to its subject matter and may only be modified by an amendment signed
by duly authorized representatives of both parties hereto.
TENANT LANDLORD:
ARDEN TECHNOLOGIES, INC. CB INSTITUTIONAL FUND VI, a California
Limited Partnership
By: /s/ By: CB COMMERCIAL REAL ESTATE GROUP,
--------------------------- INC., a Delaware Corporation
Its: By: /s/
--------------------------- --------------------------------
Its:
--------------------------------
By:
--------------------------------
Its:
--------------------------------
2
<PAGE> 57
ANTENNA SPACE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this day of , 1995 by
and between CB INSTITUTIONAL FUND VI, a California Limited Partnership (the
"Landlord"), having an address at 865 Figueroa Street, 35th floor, Los Angeles,
CA 90017-2543 and Arden Technologies, Inc. a/k/a Park 'N View (the "Tenant")
having an address at 3403 N.W. 55th Street, Bldg. #10, Ft. Lauderdale, FL 33309.
1. Landlord agrees and had the authority to permit tenant to utilize for
purposes provided herein, suitable space (the "Antenna Space") on the building
(the "Building") located at 3403 N.W. 55th Street, Bldg. #10, Ft. Lauderdale,
Florida 33309 as described in Exhibit A attached hereto, for the duration of
the lease.
2. Tenant may install, use and maintain on such Antenna Space equipment (the
"Equipment") as described in Exhibit B attached hereto.
3. Landlord agrees that Tenant may run cables (the "Cables") between the
Antenna Space and the Tenant's premises in the Building and that all cabling
shall be installed so as to comply with all local building codes and Section
5.02 and any other applicable sections of the above-referenced lease agreement.
4. The Equipment and Cables shall remain the property of the Tenant or its
contractor. At Landlord's request, Tenant shall, at its cost, remove such
Equipment and Cables at the expiration or sooner termination of this Agreement
and restore Landlord affected facilities to their original condition.
5. Tenant and/or its contractor shall bear all expenses in connection with
the installation, use and maintenance of such Equipment and Cables and removal
of the Equipment and Cables. Tenant shall indemnify and hold Landlord harmless
from and against liability, damages, costs and expenses, including reasonable
attorneys' fees incurred by Landlord, arising out of Tenant's installation,
use, and maintenance of the Equipment and Cables except for liability, damages,
costs and expenses caused by Landlord's gross negligence.
6. Tenant shall maintain in force during the term of this Agreement
comprehensive liability insurance protecting Landlord against any liability,
damage, cost or expenses in connection with the installation, use and
maintenance of the Equipment and Cables and shall supply evidence of such
insurance once annually.
7. Tenant and its contractors shall comply with all applicable laws,
regulations and building codes in connection with the installation, use and
maintenance of the Equipment and Cables.
8. Landlord agrees to permit Tenant and its contractors reasonable access to
the Antenna Space and other areas of the Building so as to facilitate the
installation, use and maintenance and the removal of Equipment and Cables.
Tenant agrees not to disturb other tenants of the property in any manner
whatsoever during installation, use, maintenance or removal of said Equipment
and Cables.
1
<PAGE> 58
9. This agreement constitutes the entire agreement between the parties relating
to its subject matter and may only be modified by an amendment signed by duly
authorized representatives of both parties hereto.
TENANT: LANDLORD:
PARK 'N VIEW, INC. CB INSTITUTIONAL FUND VI, a California
Limited Partnership
By: /s/ By: CB COMMERCIAL REAL ESTATE GROUP, INC.,
-------------------------- a Delaware Corporation
Its: VP ADMIN By: /s/
------------------------- -------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
2
<PAGE> 1
Exhibit 10.15
SUBLEASE AGREEMENT AND CONSENT TO SUBLEASE
THIS SUBLEASE AGREEMENT ("Sublease") is made and entered into this 1st day
of June, 1998 by and between PARK 'N VIEW INC., a Delaware corporation
("SUBLESSOR") and SECURITY WORLD INTERNATIONAL INC., a Delaware corporation
("SUBLESSEE")
WITNESSETH:
THAT WHEREAS, CB Institutional Fund VI, L.P., a California Limited
Partnership ("Landlord") and SUBLESSOR are parties to a lease agreement dated
July 20, 1992 as amended March 29, 1996, and as further amended April 5, 1996
(collectively the "Prime Lease") for certain space consisting of approximately
11,647 square feet in building 10 consisting of all of Bays A, B, C, D, E, G, H,
and I, and a portion of Bay F, Two Prospect Park Business Center, within the
Fort Lauderdale Commerce Center, 3403 N.W. 55th Street, Fort Lauderdale,
Florida 33309 (the "Property"); and
WHEREAS, SUBLESSEE, wishes to sublease a portion of the Property
consisting of all of Bays G, H, I, J, and part of Bays E and F equating to
approximately six thousand one hundred (6,100) square feet (the "Subleased
Site"); and
WHEREAS, Landlord has consented to this Sublease and is executing this
Sublease to evidence its consent hereto.
NOW THEREFORE, for one dollar in hand paid, the mutual promises herein
contained, and other good valuable consideration, the receipt and sufficiency
of which is hereby mutually acknowledged, the parties agree as follows:
1. DEMISE: SUBLESSOR hereby subleases to SUBLESSEE, and SUBLESSEE hereby
Subleases from SUBLESSOR, the Subleased Site described on Exhibit A attached
hereto and incorporated herein by reference.
2. TERM: The term of this Sublease shall commence 60 days from the full
execution of this Sublease or upon completion of buildout, whichever comes
first, and shall expire May 31, 2001. If Landlord so elects, the termination of
the Lease by lapse of time or otherwise shall immediately cause the Sublease to
be terminated and of no further force or affect.
3. RENT: The rent due under this Sublease ("Rent") is payable, without
offset or deduction of any kind, on the first day of each calendar month as
follows:
Months 01-12.............................$8.00/sq. ft.
Months 13-24.............................$8.32/sq. ft.
Months 25-36.............................$8.65/sq. ft.
Months 37-44.............................$9.00/sq. ft.
PLUS ANY APPLICABLE TAXES
Rent for less than a full calendar month shall be pro rated on the basis of a
thirty (30) day month.
SUBLESSEE shall further be responsible for their prorata share of all
operating expense charges ("Operating Expense"), Real Estate Taxes and other
forms of additional rent payable under the Prime Lease. Such Operating Expense
is fixed and is increased at a rate of five percent (5%) a year. The 1998
Operating Expense is
1
<PAGE> 2
$3.70 per rentable square foot, which figure is exclusive of janitorial and
electric services. SUBLESSEE shall also be responsible for any State Sales Tax
on the foregoing expenses.
4. COVENANTS OF SUBLESSEE: SUBLESSEE agrees to abide by all of the terms
and conditions of the Prime Lease (all of which terms and conditions are fully
incorporated herein by reference), as though SUBLESSEE were the tenant
thereunder. The rights of SUBLESSEE hereunder are expressly subject to the
terms and conditions of the Prime Lease. SUBLESSEE acknowledges that the
Subleased Site is part of the Property and that SUBLESSOR shall have access to
the Property 24 hours a day 7 days a week, but will not have access to the
Subleased Site except to inspect the Subleased Site to ensure SUBLESSEE'S
compliance with the terms hereof. SUBLESSEE agrees to confine its business and
activities to the Subleased Site. SUBLESSOR agrees to provide SUBLESSEE a 24
hour notice prior to accessing the Subleased Site, emergencies excepted.
5. COVENANTS OF SUBLESSOR: SUBLESSOR hereby acknowledges that SUBLESSEE
shall have access to the Subleased Site 24 hours a day, 7 days a week. At or
before the time of buildout, SUBLESSEE shall construct, at its sole cost and
expense, to the specifications approved by SUBLESSOR, a demising wall to
separate the Subleased Site from the rest of the Property.
6. SUBLESSOR NOT RELEASED: It is understood that nothing contained in
this Sublease shall release SUBLESSOR from its duties and obligations contained
in the Prime Lease.
7. "AS IS" CONDITION OF SUBLEASED SITE: Upon its entry into the Subleased
Site and the commencement of this Sublease, SUBLESSEE shall be deemed to have
accepted the Subleased Site "as is." SUBLESSEE agrees at its expense to keep and
maintain the Subleased Site in good repair and in good, sanitary and safe
condition and to return the Subleased Site to SUBLESSOR at the end of the term
in as good a condition as received, normal wear and tear and casualty excepted.
8. SECURITY DEPOSIT: SUBLESSEE hereby agrees to and does now pay, or has
already paid, to SUBLESSOR and SUBLESSOR hereby acknowledges receipt from
SUBLESSEE of the sum of $5,947.50, which SUBLESSOR shall retain as security
for the performance of SUBLESSEE of each of its obligations hereunder. If
SUBLESSEE fails to perform any of its obligations hereunder, SUBLESSOR may
apply the security deposit, or so much thereof as may be required, to
compensate SUBLESSOR for SUBLESSEE's default. The security deposit shall not
bear interest for the benefit of SUBLESSEE. Any unused portion of the security
deposit shall be returned to SUBLESSEE within thirty (30) days of the
expiration of this Sublease.
9. ASSIGNMENT AND SUBLETTING: SUBLESSEE shall not assign, or further
sublet or subdemise the Subleased Site, or any part thereof, without the prior
written approval of SUBLESSOR and Landlord. This Consent and Agreement shall
not be deemed to constitute a consent to any future sublease.
10. INSURANCE: SUBLESSOR shall maintain all policies of insurance for the
Subleased Site in such amounts and with such companies as to comply with the
Prime Lease. SUBLESSOR and Landlord shall be named as additional insured in any
of such policies.
11. INDEMNIFICATION: SUBLESSEE agrees to exonerate, save harmless protect
and indemnify SUBLESSOR from and against any and all losses, damages, claims,
suits, or actions, including reasonable attorney's fees, from any damage or
injury to person or property occurring on or about the Subleased Site, except
to the extent such loss, damage, claim, suit or action is caused by the
negligence of SUBLESSOR of any of SUBLESSOR's agents, employees or invitees
other than SUBLESSEE. SUBLESSEE agrees to exonerate, save harmless, protect and
indemnify Landlord from and against any and all losses, damages, claims,
suits, or actions, including reasonable attorney's fees, from any damage or
injury to person or property occurring on or about the Subleased Site, except
to the extent such loss, damage, claim, suit or action is caused by the
negligence of SUBLESSOR or Landlord of any of SUBLESSOR's or Landlord's agents,
employees or invitees other than SUBLESSEE. The indemnity provision of this
Sublease shall survive the expiration or termination of this Sublease.
2
<PAGE> 3
12. HAZARDOUS MATERIALS: Without limiting SUBLESSEE's general
responsibility to abide by all terms and conditions of the Prime Lease,
SUBLESSEE specifically agrees not to introduce any hazardous materials onto the
Subleased Site (other than small quantities of cleaning materials) without the
express written permission of SUBLESSOR and Landlord.
13. CONDITION PRECEDENT: This Sublease is contingent upon and shall not
take effect until such time as Landlord has given its consent. SUBLESSOR and
SUBLESSEE agree to cooperate with one another in obtaining the consent of
Landlord to this Sublease. In the event that such consent has not been obtained
within sixty (60) days following the date of this Sublease, either SUBLESSOR
or SUBLESSEE may terminate this Sublease upon written notice to the other.
14. COPIES OF NOTICE: SUBLESSOR does hereby agree to forward to SUBLESSEE
a copy of any and all written notices of default by SUBLESSOR under the Prime
Lease.
15. SUBJECT AND SUBORDINATE TO PRIME LEASE: This Sublease is subject and
subordinate to the Prime Lease and SUBLESSOR purports hereby to convey, and
SUBLESSEE takes hereby, no greater rights or interests hereunder than those
granted to or taken by SUBLESSOR as tenant under the Prime Lease. The
termination or expiration of the Prime Lease shall cause a termination of this
Sublease.
16. LANDLORD OBLIGATIONS: Landlord shall not be obligated to SUBLESSEE
under any of the provisions of the Sublease.
17. USE: SUBLESSEE may use the Sublease Site for general business use,
including but not limited to, any legally permitted use consistent with the
character of an office/service building which will not increase the use of the
common areas over that originally proposed by SUBLESSOR.
18. DEFAULT: Each item listed under Article 10 of the Prime Lease,
labeled "Default: Remedies" is incorporated herein by reference. Each item
constituting a default under the Prime Lease shall in the same manner
constitute a default hereunder. SUBLESSOR shall have the same rights and
remedies under this Sublease in the event of a SUBLESSEE default as Landlord
has under the Prime Lease in the event of a default by SUBLESSOR.
19. NOTICE: Any notice or payment which shall be made hereunder shall be
in writing and (in the case of notice) shall be either (a) hand delivered, (b)
delivered by overnight courier, or (c) delivered by certified mail return
receipt requested to the following addresses:
If to SUBLESSOR: Park N' View, Inc.
11711 N.W. 39th Street
Coral Springs, FL 33065
If to SUBLESSEE: Security World International Inc.
13794 Northwest 4th Street
Suite 203
Sunrise, FL 33325
Either party may change its notice address upon ten (10) days prior written
notice to the other party. Notice shall be effective (a) upon delivery if hand
delivered, (b) the next business day if sent by overnight courier, or (c) three
business days after deposit in the U.S. Mail, certified mail, return receipt
requested.
20. BROKERS: SUBLESSEE warrants that it has only had dealings with the
Allen Morris Co., & Cushman & Wakefield and shall hold harmless Sublessor from
any other party claiming a commission or other fee pursuant to this Sublease.
SUBLESSOR warrants that it has only listed the property with Cushman &
Wakefield and
3
<PAGE> 4
the terms of its agreement with Cushman & Wakefield govern all commissions
relating to the subleased space in which Sublessor is responsible for payment of
said commissions to Cushman & Wakefield.
21. HOLDING OVER: If SUBLESSEE shall hold over after the expiration or
termination of this Sublease, SUBLESSEE shall pay rent at 150% of the rate
otherwise payable hereunder and shall be liable to SUBLESSOR for any costs,
liabilities or lost business opportunities suffered by SUBLESSOR as a result of
such holdover. SUBLESSEE shall further be liable for any costs, expenses or
liabilities that SUBLESSOR may owe LANDLORD as a result of SUBLESSEE's holding
over.
22. LIENS: SUBLESSEE shall keep the Subleased Site free and clear of all
liens arising out of any work performed, material furnished, or obligations
incurred by or on behalf of SUBLESSEE.
23. DIRECT PAYMENT: If requested by SUBLESSOR, SUBLESSEE shall make
rental payments due hereunder directly to LANDLORD.
[SIGNATURES FOLLOW]
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed the foregoing instrument
the date first above written.
SUBLESSOR:
PARK N' VIEW, INC.,
a Delaware corporation
By: /s/
--------------------------------
Title: President
Print Name:
ATTEST:
By: /s/
------------------------------
Title: VP & Secretary
[CORPORATE SEAL]
SUBLESSEE:
SECURITY WORLD INTERNATIONAL
a Delaware corporation
By: /s/ Albert F. Dumbrowski
--------------------------------
Title: Vice Chairman
Print Name: Albert F. Dumbrowski
ATTEST:
By: /s/
------------------------------
Title: Secretary
[CORPORATE SEAL]
LANDLORD:
Vice President, General Counsel CB INSTITUTIONAL FUND VI, L.P.
and Secretary a California limited partnership
By: CB COMMERCIAL REAL ESTATE GROUP, INC.
a Delaware corporation, General
Partner
By: /s/
--------------------------------
Authorized Signatory
ATTEST:
By: /s/
------------------------------
Title: Secretary
[CORPORATE SEAL]
5
<PAGE> 6
EXHIBIT A
[attach description of the Subleased Site]
6
<PAGE> 1
EXHIBIT 10.21.1
PARK 'N VIEW, INC.
SEVERANCE PROGRAM
Section 1
Purpose of the Program
Park 'N View, Inc. (the "Company") hereby establishes the Park 'N View,
Inc. Severance Program (the "Program") effective November 1, 1996, pursuant to
which the Company may, in its discretion, provide Employees of the Company with
temporary protection against economic hardship in the event of the termination
of their employment with the Company.
Section 2
Definitions
The following words and phrases shall have the meanings set forth below
where used in the Program, unless the context clearly requires otherwise:
(a) "Employee" shall mean any individual that performs services for the
Company as an employee.
(b) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(c) "Participant" shall mean an Employee that is awarded a Severance
Allowance under the Program.
(c) "Program Administrator" shall mean the individual or committee of
individuals appointed by the Company, pursuant to duly adopted
resolution of the Company's Board of Directors, to serve as the
administrator of the Program pursuant to the terms hereof. If no such
individual or committee of individuals has been so appointed, the
Company shall serve as Program Administrator.
(d) "Severance Allowance" shall mean a payment or payments as may be
provided to a Participant pursuant to this Program on account of the
termination of the Participant's employment with the Company in
consideration of the Participant's tenure and performance with the
Company and the probability that the Participant will suffer economic
hardship on account of the termination of his or her employment with
the Company and in further consideration of the execution of
<PAGE> 2
such release as shall be determined to be necessary by the Program
Administrator.
The amount of the Severance Allowance payable to a Participant may be
reduced, in the discretion of the Program Administrator, by any debt of
the Participant to the Company arising out of the employment
relationship between the Participant and the Company. The amount of any
Severance Allowance payable hereunder shall be reduced by the amount
necessary to satisfy the Company's tax withholding obligations in
connection with the payment of such Severance Allowance.
Section 3
Award of Severance Allowance
The Program Administrator, in its discretion, shall be entitled to
award a Severance Allowance to an Employee. The amount, time of payment and
other terms and conditions of a Severance Allowance shall be determined by the
Program Administrator in its discretion.
Section 4
General Provisions Governing Severance Allowances
(a) A Participant shall not be entitled, solely by reason of the
Severance Allowance or this Program, to continue to participate in any employee
benefit plans or fringe benefit programs maintained by the Company, and the
rights of a Participant to continue to participate in such other plans and
programs shall be governed solely by their terms and applicable law.
(b) In no event shall a Severance Allowance awarded to a Participant
(1) be paid over a period longer than twenty-four (24) months following the date
on which the Participant's employment with the Company terminates; (2) exceed
200% of the Participant's annual compensation during the year immediately
preceding the date on which the Participant's employment with the Company
terminates; or (3) be structured such that this Program, or award of the
Severance Allowance, constitutes an "employee pension benefit plan" within the
meaning of ERISA section 3 and the regulations thereunder.
Section 5
Administrative Information
The Program Administrator shall have the responsibility for the
administration of the Program and shall have the discretionary authority to
determine eligibility for benefits under the Program, to otherwise administer
the Program and to construe the terms of the
<PAGE> 3
Program. All decisions of the Program Administrator shall be final, conclusive
and binding on all affected parties.
Section 6
Powers and Duties of Program Administrator
In addition to any implied powers and duties that may be needed to
carry out the provisions of the Program, the Program Administrator shall have
the following specific powers and duties, which powers and duties it may
exercise in its discretion:
(a) to make and enforce such rules and regulations as it shall deem
necessary and proper for the efficient administration of the Program;
(b) to interpret the Program and to decide any and all matters arising
hereunder, including the right to interpret and remedy possible ambiguities,
inconsistencies or omissions;
(c) to determine and compute the amount of benefits that shall be
payable to any Employee, in accordance with the provisions of the Program;
(d) to appoint other persons to assume such responsibilities under the
Program as the Program Administrator may determine; and
(e) to employ one or more persons to render advice with respect to any
of its responsibilities under the Program.
Section 7
Claims Procedure
A Participant or his duly authorized representative (the "claimant")
may make a claim for benefits under the Program to the Program Administrator.
The claim shall be reviewed, and the claimant shall be notified in writing of
the Program Administrator's decision within ninety (90) days following the date
the Program Administrator receives the claim. If special circumstances are
involved, this ninety (90) day period may be extended for up to an additional
ninety (90) days. If such an extension is necessary, the claimant shall receive
written notice of the extension before the end of the initial ninety (90) day
period.
If the claim is denied, the notice shall explain the reason for the
denial, quoting the sections of the Program or other pertinent documents, if
any, used to arrive at this decision; provide a description of any additional
material or information that would be helpful to the Program Administrator in
further review of the claim and reasons why such material or
<PAGE> 4
information is necessary; and provide an explanation of the claims review
procedure.
If a claimant is not satisfied with the decision of the Program
Administrator regarding the claim, the claimant may appeal the decision of the
Program Administrator by filing a written request with the Program
Administrator. This written request must be filed with the Program Administrator
within sixty (60) days following the date the claimant receives the written
decision of the Program Administrator. The claimant may review any applicable
documents and may also submit points of disagreement or other comments in
writing.
The Program Administrator, in its discretion, may schedule a meeting
with the Participant and/or his representative within sixty (60) days after the
claimant has filed the request for review. Within sixty (60) days of the date of
the receipt of the request for review by the Program Administrator, the claimant
shall receive written notice of the Program Administrator's final decision.
However, if a hearing is held or there are other special circumstances involved,
the decision shall be given no later than one hundred and twenty (120) days
following the date the Program Administrator receives the appeal. If such an
extension of time is necessary, the claimant shall receive written notice of the
extension before it begins.
The Program Administrator shall interpret this Section 7 such that the
claims procedures applicable under the Program conform to the claims review
requirements of Part 5, Title I of ERISA.
Section 8
Amendment and Termination
The Company shall be entitled to amend or terminate this Program at any
time pursuant to duly adopted resolution of the Company's Board of Directors.
This Program is entirely voluntary on the part of the Company, and the
continuance of the Program and the benefits provided hereunder are not assumed
by the Company as a contractual obligation.
Section 9
Miscellaneous Provisions
(a) Payments hereunder shall be made from the general assets of the
Company.
(b) Service of legal process may be made upon the secretary of the
Company at the office of the Company, or upon such other person as shall be
designated by the Company.
(c) Except to the extent preempted by ERISA, the Program shall be
construed in accordance with the laws of the State of North Carolina.
<PAGE> 5
(d) Every fiduciary shall, unless exempt by ERISA, be bonded in
accordance with the requirements of ERISA. The bond shall provide protection to
the Program against any loss by reason of acts of fraud or dishonesty by the
fiduciary or in connivance with others. The cost of the bond shall be an expense
of the Company.
(e) When any person entitled to benefits under the Program is under
legal disability or, in the Program Administrator's opinion, is in any way
incapacitated so as to be unable to manage his or her affairs, the Program
Administrator may cause such person's benefits to be paid to such person's legal
representative for his or her benefit or to be applied for the benefit of such
person in any other manner that the Program Administrator may determine. Such
payments of benefits shall completely discharge the liability of the Program
Administrator or the Company for such benefits.
(f) The records of the Program shall be maintained on the basis of the
taxable year of the Company.
(g) The Program Administrator shall cause the timely filing with proper
governmental authorities and timely furnishing to all participants of all
documents required by ERISA to be so filed and furnished.
(h) Except for the right to receive any benefit payable under the
Program, no person shall have any right, title or interest in or to the assets
of the Company because of the Program.
(i) The rights of any Employee to be employed by the Company shall not
be deemed to be enlarged or diminished by reason of the establishment of the
Program, and no Employee shall have any right to be retained in the service of
the Company by way of this Program that he would not otherwise have.
(j) Nothing contained in the Program shall impose on the Program
Administrator, the Company, or any directors, officers or employees of the
Company any liability for the payment of benefits under the Program other than
liabilities resulting from willful neglect or fraud. The liability of the
Company for benefits shall be limited to the benefits provided under the
Program. Persons entitled to benefits under the plan shall look only to the
Company for payment.
(k) Where the context permits, words in the masculine gender shall
include the feminine gender and the singular shall include the plural.
(l) The headings and subheadings of the Program have been inserted for
convenience of reference and shall be disregarded in any construction of the
provisions hereof.
<PAGE> 6
(m) The Company agrees to indemnify and to defend to the fullest extent
permitted by law any employee serving as the Program Administrator or as a
member of a committee designated as Program Administrator (including any
employee or former employee who formerly served as Program Administrator or as a
member of such Committee) against all liabilities, damages, costs and expenses
(including attorney's fees and amounts paid in settlement of any claims approved
by the Employer) occasioned by any act or omission to act in connection with the
Program, if such act or omission is in good faith.
(n) If any provision of the Program shall be invalid or unenforceable
for any reason, the remaining provisions shall nevertheless be carried into
effect.
The Program is adopted this ____ day of ____________, 1996, effective
on the date specified above.
PARK 'N VIEW, INC
ATTEST: By: /s/
------------------------
Title:
/s/ -------------------
- ---------------------------
Secretary
(Corporate Seal)
<PAGE> 1
EXHIBIT 10.31
CISCO SYSTEMS
CAPITAL
[LOGO]
Master Lease No. 1226
MASTER AGREEMENT TO LEASE EQUIPMENT
THIS MASTER AGREEMENT TO LEASE EQUIPMENT (THIS "AGREEMENT") is
entered into as of August 21, 1998 by and between CISCO SYSTEMS CAPITAL
CORPORATION ("LESSOR"), having its principal place of business at 170 West
Tasman Drive, San Jose, California 95134 and PARK 'N VIEW, INC., a Florida
Corporation ("Lessee"), having a principal place of business at 11711 NW 39th
Street, Coral Springs, FL 33065.
I. THE LEASE
1.1 LEASE OF EQUIPMENT. In accordance with the terms and conditions of
this Agreement, Lessor shall lease to Lessee, and Lessee shall lease from
Lessor, the personal property, including all substitutions, replacements,
repairs, parts and attachments, improvements and accessions thereto and therein
(the "EQUIPMENT"), described in the lease schedule(s) (each, a "Lease") to be
entered into from time to time into which this Agreement is incorporated. Each
Lease shall constitute a separate, distinct, and independent lease and
contractual obligation of Lessee. Lessor or its assignee shall at all times
retain the full legal title to the Equipment, it being expressly agreed by both
parties that each Lease is an agreement of lease only.
1.2 TERM OF LEASE. The original term (the "ORIGINAL TERM") of the
Equipment shall commence on the Commencement Date and, subject to Sections 3.3
and 3.5 below, shall terminate on the date specified in the Lease.
Notwithstanding the foregoing, the Original Term for the Equipment shall
automatically extend for successive 30-day periods after its expiration (each,
an "EXTENDED TERM") unless either party gives the other party written notice,
at least thirty (30) days prior to the expiration of the Original Term or any
Extended Term, as the case may be, of its intent not to so extend the
applicable Lease. Except as specifically provided in this Section 1.2, no Lease
may be terminated by Lessor or Lessee, for any reason whatsoever, prior to the
end of the Original Term or any Extended Term (collectively, the "Lease Term").
Notwithstanding any provision to the contrary contained in this Agreement
Lessee shall be deemed to accept the Equipment on the Commencement Date (as
specified in each Lease).
1.3 RENTAL PAYMENTS. Lessee shall pay Lessor rent ("Rent") for the
Equipment in the amounts and at the times specified in the Lease. All Rent and
other amounts payable by Lessee to Lessor hereunder shall be paid to Lessor at
the address specified above, or at such other place as Lessor may designate in
writing to Lessee from time to time.
1.
<PAGE> 2
1.4 RETURN OF EQUIPMENT. Upon expiration of the Lease Term of the
Equipment, Lessee shall immediately return the Equipment to Lessor as provided
in Section 3.3 below. If Lessee fails to return any of the Equipment upon
demand therefor by Lessor, Lessee shall pay Lessor, as the measure of Lessor's
damages, the Casualty Value (as defined in the applicable Lease) of such
Equipment.
II. DISCLAIMERS AND WARRANTIES; INTELLECTUAL PROPERTY
2.1 DISCLAIMERS; WARRANTIES. Lessee represents and acknowledges that
the Equipment is of a size, design, capacity and manufacture selected by it,
and that it is satisfied that the Equipment is suitable for its purposes.
LESSOR LEASES THE EQUIPMENT AS IS, AND, NOT BEING THE MANUFACTURER OF THE
EQUIPMENT, THE MANUFACTURER'S AGENT OR THE SELLER'S AGENT, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS
FOR ANY PARTICULAR PURPOSE, DESIGN OR CONDITION OF THE EQUIPMENT. LESSOR SHALL
NOT BE RESPONSIBLE FOR ANY LOSS OR DAMAGE RESULTING FROM THE INSTALLATION,
OPERATION OR OTHER USE, OR REINSTALLATION OF THE EQUIPMENT, INCLUDING WITHOUT
LIMITATION, ANY DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE OR LOSS.
Lessee shall look solely to the manufacturer or the supplier of the Equipment
for correction of any problems that may arise with respect thereto, and,
provided no Event of Default (as defined in Section 4.1) has occurred and is
continuing, all warranties made by the manufacturer or such supplier are, to
the degree possible, hereby assigned to Lessee for the Lease Term. To the
extent any such warranty requires performance of any kind by the beneficiary of
the warranty, Lessee shall perform in accordance therewith.
2.2 INTELLECTUAL PROPERTY. Except as otherwise expressly provided in
each Lease, LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER WITH
RESPECT TO THE INTELLECTUAL PROPERTY RIGHTS, INCLUDING, WITHOUT LIMITATION, ANY
PATENT, COPYRIGHT AND TRADEMARK RIGHTS, OF ANY THIRD PARTY WITH RESPECT TO THE
EQUIPMENT, WHETHER RELATING TO INFRINGEMENT OR OTHERWISE. Lessor shall, when
requested in writing by Lessee and at Lessee's cost and expense, exercise,
rights of indemnification, if any, for patent, copyright or other intellectual
property infringement obtained from the manufacturer under any agreement for
purchase of the Equipment. If notified promptly in writing of any action
brought against Lessee based on a claim that the Equipment infringes a United
States patent, copyright or other intellectual property right, Lessor shall
promptly notify the manufacturer thereof for purposes of exercising, for the
benefit of Lessee, Lessor's rights with respect to such claim under any such
agreement.
2.
<PAGE> 3
III. COVENANTS OF LESSEE
3.1 PAYMENTS UNCONDITIONAL; TAX BENEFITS; ACCEPTANCE. EACH LEASE SHALL
BE A NET LEASE, AND LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS
THEREUNDER, AND THE RIGHTS OF LESSOR IN AND TO SUCH PAYMENTS, SHALL BE ABSOLUTE
AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION,
SETOFF, DEFENSE, COUNTERCLAIM, INTERRUPTION, DEFERMENT OR RECOUPMENT, FOR ANY
REASON WHATSOEVER. It is the intent of Lessor, and an inducement to Lessor, to
enter into each Lease, to claim all available tax benefits of ownership with
respect to the Equipment subject thereto. Lessee's acceptance of the Equipment
subject to a Lease shall be conclusively and irrevocably evidenced by Lessee
executing an Acceptance Certificate with respect to such Equipment, and upon
acceptance, such Lease shall be noncancellable for the Lease Term unless
otherwise agreed to in writing by Lessor. Any nonpayment of Rent or other
amounts payable under any Lease shall result in Lessee's obligation to promptly
pay Lessor as additional Rent on such overdue payment, for the period of time
during which it is overdue (without regard to any grace period), interest at a
rate equal to the lesser of (a) fourteen percent (14%) per annum, or (b) the
maximum rate of interest permitted by law.
3.2 USE OF EQUIPMENT. Lessee shall use the Equipment solely in the
conduct of its business, in a manner and for the use contemplated by the
manufacturer thereof, and in compliance with all laws, rules and regulations of
every governmental authority having jurisdiction over the Equipment or Lessee
and with the provisions of all policies of insurance carried by Lessee pursuant
to Section 3.6 below. Lessee shall pay all costs, expenses, fees and charges
incurred in connection with the use and operation of the Equipment.
3.3 DELIVERY; INSTALLATION; RETURN; MAINTENANCE AND REPAIR;
INSPECTION. Lessee shall be solely responsible, at its own expense, for (a) the
delivery of the Equipment to Lessee, (b) the packing, rigging and delivery of
the Equipment back to Lessor, upon expiration or termination of the Lease Term,
in good repair, condition and working order, ordinary wear and tear excepted,
at the location(s) within the continental United States specified by Lessor,
and (c) the installation, de-installation maintenance and repair of the
Equipment. During the Lease Term, Lessee shall ensure that the Equipment is
covered by a maintenance agreement, to the extent available, with the
manufacturer of the Equipment or such other party, reasonably acceptable to
Lessor. Lessee shall, at its expense, keep the Equipment in good repair,
condition and working order, ordinary wear and tear excepted, and, at the
expiration or termination of the Lease Term, or any renewal term, with respect
to any of the Equipment, have such Equipment inspected and certified acceptable
for maintenance service by the manufacturer. In the event any of the Equipment,
upon its return to Lessor, is not in good repair, condition and working order,
ordinary wear and tear excepted, Lessee shall be obligated to pay Lessor for
the out-of-pocket expenses Lessor incurs in bringing such Equipment up to such
status, but not in excess of the Casualty Value (as defined in the applicable
Lease) for such Equipment, promptly after its receipt of an invoice for such
expenses. Lessor shall be entitled to inspect the Equipment at Lessee's
location of reasonable times.
3.
<PAGE> 4
3.4 TAXES. Lessee shall be obligated to pay, and hereby indemnifies
Lessor and its successor and assigns against, and holds each of them harmless
from, all license fees, assessments, and sales, use, property, excise and other
taxes and charges, other than those measured by Lessor's net income, now and
hereafter imposed by any governmental body or agency upon or with respect to any
of the Equipment, or the possession, ownership, use or operation thereof, or any
Lease or the consummation of the transactions contemplated in any Lease or this
Agreement. Notwithstanding the foregoing, Lessor shall file all required
personal property tax returns, and shall pay all personal property taxes
payable, with respect to the Equipment, Lessee shall pay to Lessor, as
additional Rent, the amount of all such personal property taxes within fifteen
(15) days of its receipt of an invoice for such taxes.
3.5 LOSS OF EQUIPMENT. Lessee shall bear the entire risk of the
Equipment being lost, destroyed or otherwise permanently unfit or unavailable
for use from any cause whatsoever (an "EVENT OF LOSS") after it has been
delivered to common carrier for shipment to Lessee. If an Event of Loss shall
occur with respect to any item of Equipment, Lessee shall promptly notify Lessor
thereof in writing. On the rental payment date following Lessor's receipt of
such notice, Lessee shall pay to Lessor an amount equal to the rental payment or
payments due and payable with respect to such item of Equipment on or prior to
such date, plus a sum equal to the Casualty Value of such item of Equipment as
of the date of such payment as set forth in such Lease. Upon the making of such
payment by Lessee regarding any item of Equipment, the Rent for such item of
Equipment shall cease to accrue, the term of this Lease as to such item of
Equipment shall terminate and (except in the case of loss, theft or complete
destruction) Lessor shall be entitled to recover possession of such item of
Equipment in accordance with the provisions of Section 3.3 above. Provided that
Lessor has received the Casualty Value of any item of Equipment, Lessee shall be
entitled to the proceeds of any recovery in respect of such item of Equipment
from insurance or otherwise.
3.6 INSURANCE. Lessee shall obtain and maintain for the Lease Term at
its own expense, property damage and liability insurance and insurance against
loss or damage to the Equipment (including so-called extended coverage), as a
result of theft and such other risks of loss as are normally maintained on
equipment of the type leased hereunder by company's carrying on the business in
which Lessee is engaged, in such amounts, in such form and with such insurers as
shall be satisfactory to Lessor. Each insurance policy will name Lessee as
insured and Lessor as an additional insured and loss payee thereof as Lessor's
interests may appear, and shall provide that it may not be canceled or altered
without at least thirty (30) days prior written notice thereof being given to
Lessor or its successor and assigns.
4.
<PAGE> 5
3.7 INDEMNITY. Except with respect to the gross negligence or willful
misconduct of Lessor, Lessee hereby Indemnities, protects, defends and holds
harmless Lessor and its successors and assigns, from and against any and all
claims, liabilities (including negligence, tort and strict liabilities),
demands, actions, suits, and proceedings, losses, costs, expenses and damages,
including without limitation, reasonable attorneys' fees and costs
(collectively, "Claims"), arising out of, connected with, or resulting from
this Agreement, any Lease or any of the Equipment, including, without
limitation, the manufacture, selection, purchase, delivery, possession,
condition, use, operation, or return of the Equipment. Each of the parties
shall give the other prompt written notice of any Claim of which it becomes
aware. The provisions of this Section 3.7 shall survive the expiration or
termination of this Agreement or any Lease.
3.8 PROHIBITIONS RELATED TO LEASE AND EQUIPMENT. Without the prior
written consent of Lessor, which consent as it pertains to subsections (b) and
(d) below shall not be unreasonably withheld, Lessee shall not: (a) assign,
transfer, pledge, encumber, hypothecate or otherwise dispose of this Lease or
any rights or obligations thereunder; (b) sublease any of the Equipment; (c)
create or incur, or permit to exist, any lien or encumbrance with respect to
any of the Equipment, or any part thereof; (d) move any of the Equipment from
the location at which it is first installed; or (e) permit any of the Equipment
to be moved outside the continental limits of the United States.
3.9 IDENTIFICATION. Lessee shall place and maintain permanent markings
provided by Lessor on the Equipment evidencing ownership, security and other
interests therein, as specified from time to time by Lessor.
3.10 ALTERATIONS AND MODIFICATIONS. Lessee shall not make any
additions, attachments, alterations or improvements to the Equipment without
the prior written consent of Lessor. Any addition, attachment, alteration or
improvement to any item of Equipment shall belong to and become the property of
Lessor unless, at the request of Lessor, it is removed prior to the return of
such item of Equipment by Lessee. Lessee shall be, responsible for all costs
relating to such removal and shall restore such item of Equipment to its
operating condition that existed at the time it became subject to the
applicable Lease.
3.11 EQUIPMENT TO BE PERSONAL PROPERTY. Lessee acknowledges and
represents that the Equipment shall be and remain personal property,
notwithstanding the manner in which it may be attached or affixed to realty,
and Lessee shall do all acts and enter into all agreements necessary to ensure
that the Equipment remains personal property.
3.12 FINANCIAL STATEMENTS. Lessee shall promptly furnish to Lessor
such financial or other statements respecting the condition and operations of
Lessee, and information respecting the Equipment, as Lessor may from time to
time reasonably request.
5.
<PAGE> 6
3.13 LESSEE REPRESENTATIONS. Lessee hereby represents that, with
respect to this Agreement and each Lease: (a) the execution, delivery and
performance thereof by Lessee have been duly authorized by all necessary
corporate action; and (b) the individual executing such document is duly
authorized to do so; (c) such document constitutes a legal, valid and binding
obligations of Lessee, enforceable in accordance with its terms.
IV. DEFAULT AND REMEDIES
4.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" hereunder: (a) Lessee shall fail to pay any
Rent or other payment due hereunder with five (5) days after it becomes due and
payable; (b) any representation or warranty of Lessee made in this Agreement,
any Lease, or in any document furnished pursuant to the provisions of this
Agreement or otherwise, shall prove to have been false or misleading in any
material respect as of the date when it was made; (c) Lessee shall fail to
perform any covenant, condition or agreement made by it under any Lease, and
such failure shall continue for twenty (20) days after its receipt of notice
thereof; (d) bankruptcy, receivership, insolvency, reorganization, dissolution,
liquidation or other similar proceedings shall be instituted by or against
Lessee or all or any part of its property under the Federal Bankruptcy Code or
other law of the United States or of any other competent jurisdiction, and, if
such proceeding is brought against Lessee, it shall consent thereto or shall
fail to cause the same to be discharged within thirty (30) days after it is
filed; (e) Lessee shall default under any agreement with respect to the
purchase or installation of any of the Equipment; or (f) Lessee or any
guarantor of Lessee's obligations under any Lease shall default under any other
agreement with Lessor or Cisco Systems, Inc.
4.2 REMEDIES. If an Event of Default hereunder shall occur and be
continuing, Lessor may exercise any one or more of the following remedies: (a)
terminate any or all of the Leases and Lessee's rights thereunder; (b) proceed,
by appropriate court action or actions, to enforce performance by Lessee of the
applicable covenants of any or all of the Leases or to recover damages for the
breach thereof; (c) recover from Lessee an amount equal to the sum of (i) all
accrued and unpaid Rent and other amounts due under any or all of the Leases
(ii) as liquidated damages for loss of a bargain and not as a penalty, the
present value of (A) the balance of all Rent and other amounts under any or all
of the Leases discounted at a rate of five percent (5%) per annum, and (B)
Lessor's estimated fair market value of the Equipment at the expiration of the
Original Term (d) personally, or by its agents, take immediate possession of
any or all of the Equipment from Lessee and, for such purpose, enter upon
Lessee's premises where any of the Equipment is located with or without notice
or process of law and free from all claims by Lessee; and (e) require the
Lessee to assemble the Equipment and deliver the Equipment to Lessor at a
location which is reasonably convenient to Lessor and Lessee. The exercise of
any of the foregoing remedies by Lessor shall not constitute a termination of
any Lease or this Agreement unless Lessor so notifies Lessee in writing.
6.
<PAGE> 7
4.3 DISPOSITION OF EQUIPMENT. In the event, upon the occurrence of an
Event of Default, Lessor repossesses any of the Equipment, Lessor may sell or
lease any or all of such Equipment, at one or more public or private sales. The
proceeds of (i) any rental of the Equipment for the balance of the Original
Term (discounted to present value at the rate of five percent (5%) per annum or
(ii) any sale of the Equipment shall be applied to the payment of (A) all costs
and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Lessor in retaking possession of, and removing, storing, repairing,
refurbishing and selling or leasing such Equipment and (B) the obligations of
Lessee to Lessor pursuant to this Agreement. Lessee shall remain liable to
Lessor for any deficiency.
V. MISCELLANEOUS
5.1 PERFORMANCE OF LESSEE'S OBLIGATIONS. Upon Lessee's failure to pay
Rent (or any other sum due hereunder) or perform any obligation hereunder when
due, Lessor shall have the right, but shall not be obligated, to pay such sum
or perform such obligation, whereupon such sum or cost of such performance
shall immediately become due and payable hereunder as additional Rent, with
interest thereon at the highest legal rate from the date such payment or
performance was made.
5.2 QUIET ENJOYMENT. So long as no Event of Default shall have
occurred and be continuing, neither Lessor nor its assignee shall interfere
with Lessee's right of quiet enjoyment and use of the Equipment.
5.3 FURTHER ASSURANCES. Lessee shall, upon the request of Lessor, from
time to time, execute and deliver such further documents and do such further
acts as Lessor may reasonably request in order fully to effect the purpose of
any Lease and Lessor's rights thereunder. Lessor is authorized to file a
financing statement, signed only by Lessor in accordance with the Uniform
Commercial Code or signed by Lessor as Lessee's attorney in fact, with respect
to any of the Equipment.
5.4 RIGHT AND REMEDIES. Each and every right and remedy granted to
Lessor under any Lease shall be cumulative and in addition to any other right
or remedy therein specifically granted or now or hereafter existing in equity,
at law, by virtue of statute or otherwise, and may be exercised by Lessor from
time to time concurrently or independently and as often and in such order as
Lessor may deem expedient. Any failure or delay on the part of Lessor in
exercising any such right or remedy, or abandonment or discontinuance of steps
to enforce the same, shall not operate as a waiver thereof or affect Lessor's
right thereafter to exercising the same. Waiver of any right or remedy on one
occasion shall not be deemed to be a waiver of any other right or remedy or of
the same right or remedy on any other occasion.
7.
<PAGE> 8
5.5 NOTICES. Any notice, request, demand, consent, approval or other
communication provided for or permitted hereunder shall be in writing and shall
be conclusively deemed to have been received by a party hereto on the day it is
delivered to such party at its address set forth above (or at such other
addresses such party shall specify to the other party in writing), or if sent
by registered or certified mail, return receipt requested, on the fifth day
after the day on which it is mailed, postage prepaid, addressed to such party.
5.6 SECTION HEADINGS; COUNTERPARTS. Section headings are inserted for
convenience of reference only and shall not affect any construction or
interpretation of this Agreement. This Agreement and each Lease may be executed
in counterparts, and when so executed each counterpart shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument.
5.7 ENTIRE LEASE. This Agreement and each Lease constitute the entire
agreement between Lessor and Lessee with respect to the lease of the Equipment.
No amendment of, or any consent with respect to, any provision of this Agreement
or any Lease shall bind either party unless set forth in a writing, specifying
such waiver, consent, or amendment, signed by both parties. TO THE EXTENT
PERMITTED BY APPLICABLE LAW AND NOT OTHERWISE SPECIFICALLY PROVIDED TO LESSEE IN
THIS AGREEMENT, LESSEE HEREBY WAIVES ANY AND ALL RIGHTS OR REMEDIES CONFERRED
UPON A LESSEE UNDER THE CALIFORNIA COMMERCIAL CODE, AND ANY OTHER APPLICABLE
SIMILAR CODE OR STATUTES OF ANOTHER JURISDICTION, WITH RESPECT TO A DEFAULT BY
LESSOR UNDER THIS AGREEMENT OR ANY LEASE.
5.8 SEVERABILITY. Should any provision of this Agreement or any Lease
be or become invalid, illegal, or unenforceable under applicable law, the other
provisions of this Agreement and such Lease shall not be affected and shall
remain in full force and effect.
5.9 ATTORNEYS' FEES. Should either party institute any action or
proceeding to enforce this Agreement or any Lease prevailing party shall be
entitled to receive from the other party all reasonable out-of-pocket costs and
expenses, including, without limitation, attorneys' fees.
5.10 GOVERNING LAW AND JURISDICTION. THIS LEASE SHALL BE GOVERNED IN
ALL RESPECTS BY THE LAWS OF THE STATE OF CALIFORNIA WITH RESPECT TO AGREEMENTS
ENTERED INTO, AND TO BE PERFORMED, ENTIRELY IN CALIFORNIA. LESSOR AND LESSEE
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM THIS AGREEMENT
OR ANY LEASE. LESSEE CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
COURTS OF CALIFORNIA, AND THE FEDERAL COURTS SITTING IN THE STATE OF
CALIFORNIA, FOR THE RESOLUTION OF ANY DISPUTES HEREUNDER.
8.
<PAGE> 9
5.11 SURVIVAL. All obligations of Lessee to make payments to Lessor
under any Lease or to indemnify Lessor, pursuant to Section 3.4 or 3.7 above,
with respect to a Lease, and all rights of Lessor hereunder with respect to a
Lease, shall survive the termination of such Lease.
LESSEE, BY THE SIGNATURE BELOW OF ITS AUTHORIZED REPRESENTATIVE, ACKNOWLEDGES
THAT IT HAS READ THIS LEASE, UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS.
LESSOR: LESSEE:
CISCO SYSTEMS CAPITAL PARK 'N VIEW, INC
CORPORATION
By: /s/ SAM ZAIDINS By: /s/ R. MICHAEL BREWER
-------------------------------- ---------------------------
(Authorized Signature) (Authorized Signature)
SAM ZAIDINS
MANAGER, CUSTOMER SERVICE & OPERATIONS
CISCO SYSTEMS CAPITAL R. MICHAEL BREWER CFO
- ----------------------------------- ------------------------------
(Name/Title) (Legal Name/Title)
9/3/98 8/25/98
- ----------------------------------- ------------------------------
(Date) (Date)
9.
<PAGE> 10
SCHEDULE NO. 001-000
MASTER AGREEMENT NO. 1226
THIS SCHEDULE NO. 001-000 (this "Lease") dated as of November 19, 1998, between
CISCO SYSTEMS CAPITAL CORPORATION ("Lessor"), having a principal place of
business at 170 W. Tasman Drive, San Jose, California 95134-1706, and PARK 'N
VIEW, ("Lessee"), having a principal place of business at 11711 NW 39th Street,
Coral Springs, FL 33065, supplements that certain Master Agreement to Lease
Equipment dated as of August 21, 1998, between Lessor and Lessee.
1. EQUIPMENT DESCRIPTION:
<TABLE>
<CAPTION>
Equipment Cost
Manufacturer Unit ------------------
Qty. or Vendor Description Model New/Used Per Unit Total
---- --------- ----------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
(SEE EXHIBIT A ATTACHED HERETO)
2. EQUIPMENT LOCATION:
<TABLE>
<CAPTION>
Unit Description Street Address City County State Zip
---------------- -------------- ---- ------ ----- ---
<S> <C> <C> <C> <C> <C>
</TABLE>
{THE APPLICABLE EQUIPMENT LOCATIONS SHALL BE DESIGNATED "SHIP TO"
ADDRESS ON EACH INVOICE INCLUDED WITHIN EXHIBIT A ATTACHED HERETO.)
3. EQUIPMENT COST: The Cisco Hardware Cost leased equals $1,871,364.10.
The Maintenance Cost leased equals $566,463.12.
4. PAYMENT: Based on the Cisco Hardware Cost above and the Lease payment
factor of .02743, the monthly payment is $51,331.52. Based on the
Maintenance cost above and the Lease payment factor of .02778, the
monthly payment is $15,736.35.
5. LEASE TERM: The "Lease Term" of each Unit shall commence on the
Commencement Date (hereinafter defined) and shall consist of an
"Original Term" equal to Thirty-six (36) months. The "Commencement
Date" of this Lease shall be the earlier to occur of (i) the
Acceptance Certificate Execution Date specified in the Certificate of
Acceptance, or (ii) thirty (30) days after the date of shipment of the
Equipment. Notwithstanding any provision to the contrary contained in
the Master Agreement to Lease Equipment, Lessee shall be deemed to
accept the Equipment on the Commencement Date.
5A. Commencement Date for this Lease shall be: November 30, 1998.
6. RENT: The Rent for each Unit during the Original Term shall be payable
in Thirty-six (36) consecutive, equal monthly payments, in advance, on
the first day of each month, commencing on the first day of the month
immediately following the Commencement Date (unless the Commencement
Date is the first day of the month, in which case the first Rent
payment shall be due on such date). Lessor acknowledges and agrees
that no Rent shall be payable for the period commencing on the
Commencement Date (provided such date is not the first day of the
month) until, but not including, the first day of the month
immediately following the Commencement Date. The aggregate Rent
payment shall be in an amount equal to $67,067.86 plus any and all
applicable taxes.
The Rent for each Unit for any Automatic Extension shall be payable
monthly, in advance, and shall be in an amount equal to the Unit Rent
specified above, or its monthly equivalent if the Rent for such Unit
is specified for a period greater than one month.
6. FAIR MARKET PURCHASE OPTION: Provided that this Lease has not been
terminated earlier and no Incipient Default or Event of Default has
occurred and is continuing, not earlier than 90 days and not later
than 30 days before the end of the Lease Term, or in the event such
Lease Term has been extended before the end of any period for which
this Lease has been extended ("Renewal Term"), Lessee may as to all,
but not less than all, the Units deliver to Lessor a notice
tentatively electing to purchase such Units at the end of the Lease
Term, or Renewal Term, as the case may be, for an amount equal to the
Fair Market Value (as defined below) of each such Unit at the end of
such period. If no such notice is delivered by Lessee to Lessor within
such period, Lessee shall be deemed to have waived any right to
purchase such Units. Fair Market Value shall mean the value which
would obtain in an arm's-length transaction between an informed and
willing buyer-user (other than a lessee currently in possession or a
used equipment dealer) under no compulsion to buy, and an informed and
willing seller under no compulsion to sell and, in such determination,
costs of removal from the location of current use shall not be a
deduction from such value. Fair Market Value shall be determined by
the mutual agreement of Lessor and Lessee in accordance with the
preceding sentence. If Lessee and Lessor cannot agree within
C-1
<PAGE> 11
SCHEDULE NO. 001-000
30 days after Lessee's notice of tentative election, Fair Market Value
shall be determined by a qualified independent equipment appraiser
mutually satisfactory to Lessee and Lessor. If Lessee and Lessor fail
to agree upon a satisfactory independent equipment appraiser within 10
days following the end of the 30-day period referred to above, Lessee
and Lessor shall each within 5 days appoint a qualified independent
equipment appraiser and such appraisers shall jointly determine the
Fair Market Value of such Units. If, within 15 days after the
appointment of the last of these two appraisers, the appraisers cannot
agree upon the Fair Market Value of such Units, the two appraisers
shall, within 10 days, appoint a third appraiser and the Fair Market
Value of such Units shall be determined by the three appraisers, who
shall make their appraisals within 15 days following the appointment
of the third appraiser and the average of their three determinations
so made shall be deemed to be the Fair Market Value of such Units and
shall be conclusive and binding upon Lessor and Lessee. If either
party shall have failed to appoint an appraiser, the determination of
the Fair Market Value of such Units of the single appraiser appointed
by the other party shall be final.
At any time within the 15-day period following the determination of
the Fair Market Value of such Units, Lessee may deliver to Lessor a
further notice finally electing to purchase such Units. If no such
further notice is delivered by Lessee to Lessor within such period,
Lessee shall be deemed to have waived any right to purchase such
Units. At the end of the Lease Term or Renewal Terms, as appropriate,
if Lessee has finally elected to purchase such Units, Lessee shall
purchase from Lessor, and Lessor shall sell to Lessee, each such Unit
for a cash consideration equal to the Fair Market Value of such Unit,
and Lessor shall transfer title to each such Unit to Lessee without
recourse or warranty, except that Lessor shall represent and warrant
that it owns such Unit free and clear of any Lessor's Lien. All
appraisal fees and expenses shall be borne by Lessee.
8. TECHNOLOGY MIGRATION: After the 12th payment has been made (and
provided all payments are current), Lessee may, with 90-day notice to
Lessor, replace all or part of the leased Cisco-manufactured
equipment. In addition, a new Fair Market Value Lease must be executed
by Lessee at a value of at least 100% of the replaced equipment's
original cost. To effect this migration, Lessee will pay a "Technology
Migration Fee," which is reflected as a percentage of the replaced
equipment's original cost. The Technology Migration Fee may be
refinanced in the new lease or paid to the Lessor in one lump sum upon
signing a new lease. The Technology Migration Fee is as follows:
AFTER TECHNOLOGY AFTER TECHNOLOGY MIGRATION
PAYMENT MIGRATION FEE PAYMENT FEE
------- ------------- ------- --------------------
12 46.00 25 12.00
13 43.00 26 9.00
14 41.00 27 8.00
15 38.00 28 3.00
16 35.00 29 NONE
17 33.00 30 NONE
18 30.00 31 NONE
19 28.00 32 NONE
20 25.00 33 NONE
21 22.00 34 NONE
22 20.00 35 NONE
23 17.00 36 NONE
24 14.00
9. TERMS OF SCHEDULE: Lessor and Lessee agree that this Lease shall
constitute a lease of each Unit described in Section 1 of this Lease,
upon the Commencement Date with respect to such Unit in the form of
Annex B to this Lease. Each such Unit shall be subject to the terms and
conditions of is Lease, the Master Agreement to Lease Equipment, the
Casualty Value Table attached hereto as Annex A, and the standard Cisco
Terms and Conditions of Sale and Software License, the terms and
conditions of each of which are hereby incorporated by reference in
full in this Lease and made a part of this Lease to the same extent as
if such terms and conditions were set forth herein. Capitalized terms
used in this Lease which are not otherwise defined herein shall have
the meanings set forth in the Master Agreement to Lease Equipment
identified above.
C-2
<PAGE> 12
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed by their authorized representatives as of the date first above
written.
CISCO SYSTEMS CAPITAL CORPORATION, Lessor PARK 'N VIEW, Lessee
By: /s/ SAM ZAIDINS By: /s/ R. Michael Brewer
------------------------------------ --------------------------
Title: MANAGER, CUSTOMER SERVICE & OPERATIONS
CISCO SYSTEMS CAPITAL Title: CFO
---------------------------------- -----------------------
Date: 11/25/98 Date: 11/24/98
---------------------------------- -----------------------
C-3
<PAGE> 13
ANNEX A
TO SCHEDULE NO. 001-000
CASUALTY VALUE TABLE
The Casualty Value of any Unit shall be an amount equal to the product of the
Equipment Cost of such Unit times the percentage below corresponding to the
number of the last Rent payment received by Lessor, plus any unpaid Rent with
respect to the Rent payment period during which the applicable Event of Loss
occurred.
After Rent Percentage After Rent Percentage
Payment No. Payment No.
1 108.55% 19 64.94%
2 106.23% 20 62.40%
3 103.90% 21 59.85%
4 101.55% 22 57.29%
5 99.20% 23 64.71%
6 96.83% 24 52.12%
7 94.45% 25 49.51%
8 92.06% 26 46.90%
9 89.65% 27 44.27%
10 87.24% 28 41.62%
11 84.81% 29 38.97%
12 82.37% 30 36.30%
13 79.92% 31 33.62%
14 77.45% 32 30.92%
15 74.98% 33 28.21%
16 72.49% 34 25.49%
17 69.98% 35 22.75%
18 67.47% 36 20.00%
<PAGE> 14
ANNEX B
CERTIFICATE OF ACCEPTANCE
TO
SCHEDULE NO. 001-000
CERTIFICATE OF ACCEPTANCE NO. 1 (this "Acceptance Certificate") UNDER SCHEDULE
NO. 001-000 DATED AS OF November 19, 1998, TO MASTER AGREEMENT TO LEASE
EQUIPMENT DATED AS OF August 21, 1998 BETWEEN CISCO SYSTEMS CAPITAL CORPORATION,
Lessor, and PARK 'N VIEW, Lessee.
This Acceptance Certificate is issued pursuant to the Master Agreement to Lease
Equipment and Schedule designated above. Lessee acknowledges that each Unit
specified on Exhibit A(i) has been delivered to, inspected by, and accepted as
of this date for lease by Lessee, (ii) is of a size, design, capacity and
manufacture acceptable to Lessee and suitable for Lessee's purposes, (iii) is
in good working order, repair and condition, and (iv) has been installed to
Lessee's satisfaction or located, as the case may be, at the location specified
on Exhibit A.
Lessee confirms and agrees that (i) no Event of Default under any Lease entered
into pursuant to the Master Agreement to Lease Equipment has occurred and is
continuing and (ii) the representations and warranties in the Schedule
designated above are correct and complete as though made on and as of the date
hereof and shall continue to be correct and complete throughout the Lease Term
of each Unit accepted hereby.
The person signing this Acceptance Certificate on behalf of Lessee hereby
certifies that such person has read and acknowledges all terms and conditions
of the Lease, and is duly authorized to execute this Acceptance Certificate on
behalf of Lessee.
The terms used in this Acceptance Certificate shall have the same meanings
defined in the Master Agreement to Lease Equipment and the Schedule designated
above.
PARK 'N VIEW (Lessee)
By: /s/ R. Michael Brewer
---------------------------------
(Authorized Signature)
Name: R. Michael Brewer
-------------------------------
Title: CFO
-------------------------------
Acceptance Certificate Execution Date: 11/24/98
-------------------------------
BILLING INFORMATION:
ADDRESS: 11711 N.W. 39th Street
------------------------------
CORAL SPRINGS, FL 33065
- --------------------------------------
ATTENTION: R. MICHAEL BREWER
----------------------------
PHONE: 954-745-7800 EXT. 7943
--------------------------------
<PAGE> 15
EXHIBIT A
TO
CERTIFICATE OF ACCEPTANCE NO. 1, to Schedule No. 001-000 dated November 19,
1998, to Master Agreement to Lease Equipment, dated August 21, 1998 between
CISCO SYSTEMS CAPITAL CORPORATION, Lessor and PARK 'N VIEW, Lessee.
<TABLE>
<CAPTION>
Periodic
Primary Cost
Equipment Unit Rent (in I.D. or per
Qty. Mfg. or Vendor Description Model Term Dollars) New/Used Location Ser. No. Unit
- ---- -------------- ----------- ----- ---- -------- -------- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
{SEE ATTACHED INVOICES)
Cisco Hardware Cost leased equals ...................$1,871,364.10.
Maintenance Cost leased equals ......................$566,463.12.
A-1
<PAGE> 16
ANNEX C
TO
SCHEDULE NO. 001-000
CISCO SYSTEMS, INC. TERMS AND CONDITIONS OF SALE AND SOFTWARE LICENSE
The Terms and Conditions of Sale and Software License Agreement ("Agreement")
contained herein constitute the entire agreement between Cisco Systems, Inc.
("Cisco") and you ("Customer"). Cisco will not be bound by any terms of
Customer's order. No form of acceptance except Cisco's written acknowledgment
mailed to Customer, or Cisco's commencement of performance shall constitute
valid acceptance of Customer's order. Any such acceptance is expressly
conditioned on assent to the terms hereof and the exclusion of all other terms.
Customer shall be deemed to have assented to the terms hereof, whether or not
previously received, upon accepting delivery of anything shipped by Cisco. If
tender of these terms is deemed an offer, acceptance is expressly limited to
the terms hereof.
1. PRODUCTS
1.1 "Products" shall mean any hardware or software products identified on:
(a) Cisco's then current applicable price list; (b) any of Cisco's
proposals or quotations; or (c) any of Cisco's invoices.
1.2 Alterations to any Product which Cisco deems necessary to comply with
specifications, changed safety standards or governmental regulations,
to make a Product noninfringing with respect to any patent, copyright
or other proprietary interest, or to otherwise improve a Product may
be made at any time by Cisco without prior notice to or consent of
Customer and such altered Product shall be deemed fully conforming.
2. ORDERS
Customer shall purchase Products by issuing a written purchase order
signed by an authorized representative, indicating specific Products,
quantity, price, total purchase price, shipping instructions,
requested delivery dates, bill-to and ship-to addresses, tax exempt
certifications, if applicable, and any other special instructions. Any
contingencies contained on such order are not binding upon Cisco.
Cisco will accept or reject orders according to its then-current
process. All orders are subject to acceptance by Cisco at its
corporate headquarters.
3. SHIPPING AND DELIVERY
3.1 Shipping dates will be established by Cisco upon receipt of orders
from Customer.
3.2 Customer has the right to defer Product shipment for no more than (30)
days from the scheduled shipping date, provided written notice is
received by Cisco at least fifteen (15) days before the originally
scheduled shipping date.
3.3 Canceled orders, rescheduled deliveries or Product configuration
changes made by Customer within ten (10) days of the original shipping
date will be subject to (a) acceptance by Cisco, and (b) a charge of
fifteen percent (15%) of the total Invoice amount. Cisco reserves the
right to reschedule delivery in cases of configuration changes made
within ten (10) days of scheduled shipment.
3.4 Shipping terms are FOB Origin (or, for international shipments, FCS
Origin (INCOTERMS 1990)) San Jose, California, or such other Cisco
designated shipping location. Risk of loss and title shall pass from
Cisco to Customer upon delivery to the carrier or Customer's
representative at the FOB (or FCA) point. Delivery shall be deemed
made upon transfer of possession to the carrier. Customer shall be
responsible for all freight, handling and insurance charges. Unless
given written instruction, Cisco shall select the carrier. In no event
shall Cisco have any liability in connection with shipment, nor shall
the carrier be deemed to be an agent of Cisco. Cisco shall not be
liable for damage or penalty for delay in delivery or for failure to
give notice of any delay.
3.5 Customer grants Cisco a security interest in Products purchased under
this Agreement to secure payment for those Products purchased. If
requested by Cisco, Customer agrees to execute financing statements to
perfect this security interest.
4. PRICES AND PAYMENT
4.1 Prices for Products shall be those specified in Cisco's then-current
applicable price list, as updated periodically by Cisco, less any
applicable discounts agreed upon by Cisco in writing. All prices are
FOB Origin (or, for international shipments, FCA Origin (INCOTERMS
19901) San Jose, California, or such other Cisco designated shipping
location.
4.2 All stated prices are exclusive of any taxes, fees and duties or other
amounts, however designated, and including without limitation, value
added and withholding taxes which are levied or based upon such
charges, or upon this Agreement. Any taxes related to Products
purchased or licensed pursuant to this Agreement shall be paid by
Customer or Customer shall present an exemption certificate acceptable
to the taxing authorities. Applicable taxes shall be billed as a
separate item on the invoice, to the extent possible.
4.3 Upon credit approval by Cisco, payment terms shall be net thirty (30)
days from date of shipment. All payments shall be made in U.S.
currency. If at any time Customer is delinquent in the payment of any
invoice or is otherwise in breach of this Agreement, Cisco may, at its
discretion, withhold shipment (including partial shipments) of any
order or may, at its option, require Customer to pre-pay for further
shipments. Any sum not paid by Customer when due shall bear interest
until paid at a rate of 1.5% per month (18% per annum), or the maximum
rate permitted by law, whichever is less.
C-1
<PAGE> 17
5. SOFTWARE LICENSE
5.1 (a) If you are an end user customer, Cisco grants to Customer a
nonexclusive and nontransferable license to use the Cisco software
("Software") in object code form, and the supporting documentation,
solely on a single central processing unit owned or leased by Customer
or otherwise embedded In equipment provided by Cisco.
(b) If you are an authorized Cisco distributor, Cisco grants to
Customer a nonexclusive and nontransferable license to distribute,
only in the territory approved in writing by Cisco, directly to end
users, the Software features licensed, in object code form, and the
supporting documentation, solely for use on a single central
processing unit owned or leased by the end user or otherwise embedded
in equipment provided by Cisco.
(c) Customer may make one (1) archival copy of the Software provided
Customer affixes to such copy all copyright, confidentiality and
proprietary notices that appear on the original. Customer may not
sublicense, lease, rent or lend to any person its rights to use or
distribute, as applicable, the Software.
5.2 Cisco and its suppliers retain all title to, and, except as expressly
licensed herein, all rights to the Software, all copies thereof and
all related documentation and materials, and all of Cisco's service
marks, trademarks, trade names or any other designations. Any invoices
of Cisco purporting to cover such items do not convey title to, or
patent rights, copyrights or any other proprietary interest in, such
items to Customer.
5.3 Customer agrees, except as otherwise expressly authorized herein, not
to: (a) copy, in whole or in part, any Software or documentation; (b)
reverse compile or engineer the Products; or (c) remove any product
identification or notices of any proprietary or copyright restrictions
from the Products.
5.4 Customer agrees that aspects of the licensed materials, including the
specific design and structure of individual programs, constitute trade
secrets and/or copyrighted material of Cisco. Customer agrees not to
disclose, provide, or otherwise make available such trade secrets or
copyrighted material in any form to any third party without the prior
written consent of Cisco. Customer agrees to implement reasonable
security measures to protect such trade secrets and copyrighted
material.
5.5 Restricted Rights. Cisco's software is provided to non-DOD agencies
with RESTRICTED RIGHTS, and its supporting documentation is provided
with LIMITED RIGHTS. Use, duplication, or disclosure by the U.S.
Government is subject to the restrictions as set forth in subparagraph
(c) of the Commercial Computer Software - Restricted Rights clause at
FAR 52.227-19. In the event the sale is to a DOD agency, the U.S.
Government's rights in software, supporting documentation, and
technical data are governed by the restrictions in the Technical Data
Commercial Items clause at DFARS 252.227-7015 and DFARS 227.7202.
6. LIMITED WARRANTY
6.1 Notwithstanding any other provision hereof, Cisco's sole and exclusive
warranty obligations for the Products sold hereunder are set forth in
Cisco's Limited Warranty Statement delivered with the Product. If
Customer is an authorized Cisco distributor, Customer shall not make
any warranty commitment, whether written or oral, on Cisco's behalf.
6.2 CISCO DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE.
6.3 In no event shall Cisco's or its suppliers' liability to Customer,
whether in contract, tort (including negligence), or otherwise, exceed
the price paid by Customer under this Agreement. The foregoing
limitations shall apply even if the above-stated warranty fails of its
essential purpose.
6.4 IN NO EVENT WILL CISCO OR ITS SUPPLIERS BE LIABLE FOR ANY LOST
REVENUE, PROFIT, OR DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, OR PUNITIVE DAMAGES HOWEVER CAUSED AND REGARDLESS OF THE
THEORY OF LIABILITY ARISING OUT OF THE USE OF OR INABILITY TO USE THE
PRODUCT EVEN IF CISCO OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6.5 In all cases of Cisco direct U.S. purchase of Product, where a Product
is returned to Cisco, Customer shall call and obtain a Return Material
Authorization ("RMA") number from Cisco's customer service department.
For all nondirect international or multinational purchases, Customer
must contact the place from which the Product was purchased to obtain
its remedy.
6.6 For Product returned to Cisco, Customer is responsible for: (a) proper
packing of parts being shipped to Cisco, including description of the
failure and written specification of any other changes or alteration
of the Product, such as hardware or firmware updates; (b) insurance of
all packages for replacement cost; (c) shipment FOB Cisco's Repair
Center; (d) return of defective hardware to Cisco within ten (10) days
after issuance of the RMA number, or the list price of advanced
replacement hardware will be charged to Customer; and (e) compliance
with Cisco's RMA procedure for all shipments to Cisco, as follows: (i)
each request to Cisco for an RMA number must specify the number, type,
and serial number for each part to be replaced; Cisco will provide the
local RMA shipment address upon request; and (ii) Product sent back to
Cisco must agree exactly in the number, type, and serial numbers
associated with the RMA transaction.
7. PATENT AND COPYRIGHT INDEMNITY
7.1 Cisco will defend any claim, suit or proceeding brought against
Customer so far as it is based on a claim that any Product supplied
hereunder infringes a United States copyright or an existing United
States patent (as of the effective date of this Agreement), if
notified promptly in writing of the claim and given full authority,
information, and assistance for the defense. If such claim has
occurred, or in Cisco's opinion is likely to occur, Customer agrees to
permit Cisco, at its option and expense, either to procure for
Customer the right to continue using the Product or to replace or
modify the same so that it becomes noninfringing, or, if neither of
the foregoing alternatives is reasonably available, remove the Product
and refund Customer the price thereof as depreciated or amortized by
an equal annual amount over the lifetime of the Product as established
by Cisco.
7.2 Cisco has no liability for any claim based upon the combination,
operation, or use of any Product supplied hereunder with equipment,
devices, or software not supplied by Cisco, or for any claim based
upon alteration or modification of any Product supplied hereunder.
7.3 Customer shall defend and hold Cisco harmless against any expense,
judgment or loss for alleged infringement of any patents, copyrights
or other proprietary rights which result from Cisco's compliance with
Customer's designs, specifications or instructions.
C-2
<PAGE> 18
7.4 Notwithstanding any other provisions hereof, Cisco shall not be
liable for any claim based on Customer use of the Products as shipped
after Cisco has informed the Customer of modifications or changes in
the Products required to avoid such claims and offered to implement
those modifications or changes, if such claim would have been avoided
by implementation of Cisco's suggestions.
7.5 THE FOREGOING STATES THE ENTIRE OBLIGATION OF CISCO WITH RESPECT TO
INFRINGEMENT OF PROPRIETARY RIGHTS. THE FOREGOING IS GIVEN TO
CUSTOMER SOLELY FOR ITS BENEFIT AND IN LIEU OF, AND CISCO DISCLAIMS,
ALL WARRANTIES OF NONINFRINGEMENT WITH RESPECT TO THE PRODUCTS.
8. EXPORT RESTRICTIONS
Customer shall obtain all licenses, permits and approvals required by
any government and shall comply with all applicable laws, rules,
policies and procedures of the U.S. Government. Customer will
indemnify and hold harmless Cisco for any violation or alleged
violation by Customer of such laws, rules, policies or procedures.
Customer shall not transmit, directly or indirectly, the Products or
any technical data (including processes and services) received from
Cisco, nor the direct product thereof, outside of the United States
without prior authorization of the U.S. Government if such
authorization is required.
9. CONFIDENTIAL INFORMATION
Customer shall hold confidential and shall not use or permit others
to use any confidential information identified as, such in writing
or orally by Cisco or information which Customer knows or has reason
to know is confidential, proprietary or trade secret information of
Cisco.
10. LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING ELSE HEREIN, EXCEPT FOR CLAIMS OF PERSONAL
INJURY OR DEATH, ALL LIABILITY OF CISCO AND ITS SUPPLIERS UNDER THIS
AGREEMENT OR OTHERWISE SHALL BE LIMITED TO MONEY PAID TO CISCO UNDER
THIS AGREEMENT AND IN THE CASE OF DAMAGES RELATING TO ANY ALLEGEDLY
DEFECTIVE OR INFRINGING PRODUCT, SHALL, UNDER ANY LEGAL OR EQUITABLE
THEORY, BE FURTHER LIMITED TO THE PURCHASE PRICE PAID BY CUSTOMER FOR
SUCH PRODUCT.
11. CONSEQUENTIAL DAMAGES WAIVER
IN NO EVENT SHALL CISCO OR ITS SUPPLIERS BE LIABLE FOR ANY LOSS OF
USE, INTERRUPTION OF BUSINESS, LOST PROFITS, OR LOST DATA, OR
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, EVEN IF CISCO
OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
12. GENERAL TERMS
12.1 The validity, interpretation, and performance of this Agreement shall
be controlled by and construed under the laws of the State of
California, United States of America, as if performed wholly within
the state and without giving effect to the principles of conflict of
law. The parties specifically disclaim the UN Convention on
Contracts for the International Sale of Goods.
12.2 Cisco shall not be liable for any delay or failure in performance
whatsoever due to acts of God, earthquakes, shortage of supplies,
transportation difficulties, labor disputes, riots, war, fire,
epidemics, and similar occurrences beyond Cisco's reasonable control.
12.3 No waiver of rights under this Agreement by either party shall
constitute a subsequent waiver of this or any other right under this
Agreement.
12.4 Neither this Agreement nor any rights under this Agreement, other
than monies due or to become due, shall be assigned or otherwise
transferred by Customer (by operation of law or otherwise) without
the prior written consent of Cisco. This Agreement shall bind and
inure to the benefit of the successors and permitted assigns of the
parties.
12.5 In the event that any of the terms of this Agreement become or are
declared to be illegal by any court of competent jurisdiction, such
terms shall be null and void and shall be deemed deleted from this
Agreement. All remaining terms of this Agreement shall remain in full
force and effect.
12.6 In the event of a breach of this Agreement, the breaching party shall
pay to the other party any reasonable attorneys' fees and other costs
and expenses incurred by the nonbreaching party in connection with
the enforcement of any provisions of this Agreement.
12.7 Neither party has the right or authority to, and shall not, assume or
create any obligation of any nature whatsoever on behalf of the other
party or bind the other party in any respect whatsoever.
12.8 This Agreement, including the Product warranty referenced herein,
constitutes the entire agreement between the parties hereto
concerning the subject matter of this Agreement, and there are no
conditions, understandings, agreements, representations or
warranties, expressed or implied, which are not specified herein.
This Agreement may only be modified by a written document executed by
authorized representatives of Cisco and Customer.
C-3
<PAGE> 19
Schedule 001-000 Final
[LOGO] Cisco Systems Capital Corporation
PARK 'N VIEW
MLA# 1226
11/19/98
- --------
<TABLE>
<CAPTION>
Cust S.O. Invoice Equipment Shipping/ Invoice City-State
PO# P.O. Amount # Invoice # Date Description Qty Subtotal Taxes Handling Amount Location
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
821981 $3,791,807.00 n/a 8093D00319 9/30/98 Cisco 3620 150 $1,209,471.00 $0.00 $0.00 $1,209,471.00 Coral Springs, FL
Cisco MC3810 167
IGX32 1
n/a 8D92400439 9/24/98 Cisco 3620 50 $481,526.00 $0.00 $0.00 $461,526.00 Coral Springs, FL
Cisco 7204 1
Cisco MC3810 50
PIX Firewall 2
n/a 8D92901426 9/29/98 Invoice for $160,509.60 $0.00 $0.00 $160,509.60 Coral Springs, FL
New Installation
821981A $19,857.50 n/a 8102900843 10/29/98 Cisco 3640 1 $19,857.50 $0.00 $0.00 $19,857.50 Coral Springs, FL
--------------------------------------------
TOTAL $1,871,364.10 $0.00 $0.00 $1,871,364.10
============================================
</TABLE>
INVOICE 3283187:
<TABLE>
<CAPTION>
Ship-
ping/
Cust Maintenance Hand- Invoice City-State
PO# P.O. Amount Description Qty Subtotal Taxes ling Amount Location
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PVN00000D00001160 $568,630.62 CON-SNT-2620 Contract: 1130588, 600 $260,100.00 $0.00 $0.00 $260,100.00 Coral
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001 Springs, FL
CON-SNT-MC3810 Contract: 1130588, 651 $282,208.50 $0.00 $0.00 $282,208.50
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001
CON-SNT-IGX32 Contract: 1130588, 3 $10,065.87 $0.00 $0.00 $10.065.87
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001
CON-SNT-7204 Contract: 1130588, 3 $5,418.75 $0.00 $0.00 $5,418.75
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001
CON-SNT-PIX Contract: 1130588, 6 $6,502.50 $0.00 $0.00 $6,502.50
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001
CON-SNT-3640 Contract: 1130588, 3 $2,167.50 $0.00 $0.00 $2,167.50
START DATE: 29-DEC-1998 END DATE: 28-DEC-2001
----------------------------------------
Maintenance Total $566,463.12 $0.00 $0.00 $566.463.12
========================================
Lease Payments:
-------------
Equipment $1,871,364.10 X LRF .02743*= $51,331.52/MO $2,437,827.22
=============
Maintenance $566,463.12 X LRF .02778 = $15,736.35/MO
TOTAL $67,067.86
*After H.15 adjustment
Commencement date: 11/30/98
</TABLE>
Page 1
<PAGE> 20
SCHEDULE NO. 002-000
MASTER AGREEMENT NO. 1226
THIS SCHEDULE NO. 002-000 (this "Lease") dated as of January 5,1999, between
CISCO SYSTEMS CAPITAL CORPORATION ("Lessor"), having a principal place of
business at 170 W. Tasman Drive, San Jose, California 95134-1706, and PARK 'N
VIEW , ("Lessee"), having a principal place of business at 11711 NW 39th Street
Coral Springs, FL 33065, supplements that certain Master Agreement to Lease
Equipment dated as OF August 21, 1998, between Lessor and Lessee.
EQUIPMENT DESCRIPTION:
<TABLE>
<CAPTION>
Equipment Cost
Manufacturer Unit ---------------------
Qty. or Vendor Description Model New/Used Per Unit Total
---- --------- ----------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
{SEE EXHIBIT A ATTACHED HERETO}
2. EQUIPMENT LOCATION:
<TABLE>
<CAPTION>
Unit Description Street Address City County State Zip
---------------- -------------- ---- ------ ----- ---
<S> <C> <C> <C> <C> <C>
</TABLE>
(THE APPLICABLE EQUIPMENT LOCATIONS SHALL BE DESIGNATED "SHIP TO"
ADDRESS ON EACH INVOICE INCLUDED WITHIN EXHIBIT A ATTACHED HERETO.)
3. EQUIPMENT COST: The Cisco Hardware Cost leased equals $896,577.00.
4. PAYMENT: Based on the Cisco Hardware Cost above and the Lease payment
factor of .02763, the monthly payment is $24,772.42
5. LEASE TERM: The "Lease Term" of each Unit shall commence on the
Commencement Date (hereinafter defined) and shall consist of an
"Original Term" equal to Thirty-six (36) months (which Original Lease
Term shall automatically be extended ("Automatic Extension") on a
month to month basis unless Lessee shall notify Lessor not later than
30 days prior to the end of the Lease Term or any extension thereof
of its election to terminate such lease term or extended term). The
"Commencement Date" of this Lease shall be the earlier to occur of
(i) the Acceptance Certificate Execution Date specified in the
Certificate of Acceptance, or (ii) thirty (30) days after the date of
shipment of the Equipment. Notwithstanding any provision to the
contrary contained in the Master Agreement to Lease Equipment, Lessee
shall be deemed to accept the Equipment on the Commencement Date.
5A. Commencement Date for this Lease shall be: 1/1/99.
6. RENT: The Rent for each Unit during the Original Term shall be
payable in Thirty-six (36) consecutive, equal monthly payments, in
advance, on the first day of each month, commencing on the first day
of the month immediately following the Commencement Date (unless the
Commencement Date is the first day of the month, in which case the
first Rent payment shall be due on such date). Lessor acknowledges
and agrees that no Rent shall be payable for the period commencing on
the Commencement Date (provided such date is not the first day of the
month) until, but not including, the first day of the month
immediately following the Commencement Date. The aggregate Rent
payment shall be in an amount equal to $24,772.42 plus any and all
applicable taxes.
The Rent for each Unit for any Automatic Extension shall be payable
monthly, in advance, and shall be in an amount equal to the Unit Rent
specified above, or its monthly equivalent if the Rent for such Unit
is specified for a period greater than one month.
C-1
<PAGE> 21
SCHEDULE NO. 002-000
7. FAIR MARKET PURCHASE OPTION: Provided that this Lease has not been
terminated earlier and no Incipient Default or Event of Default has
occurred and is continuing, not earlier than 90 days and not later
than 30 days before the end of the Lease Term, or in the event such
Lease Term has been extended before the end of any period for which
this Lease has been extended ("Renewal Term"), Lessee may as to all,
but not less than all, the Units deliver to Lessor a notice
tentatively electing to purchase such Units at the end of the Lease
Term, or Renewal Term, as the case may be, for an amount equal to the
Fair Market Value (as defined below) of each such Unit at the end of
such period. If no such notice is delivered by Lessee to Lessor within
such period, Lessee shall be deemed to have waived any right to
purchase such Units. Fair Market Value shall mean the value which
would obtain in an arm's-length transaction between an informed and
willing buyer-user (other than a lessee currently in possession or a
used equipment dealer) under no compulsion to buy, and an informed and
willing seller under no compulsion to sell and, in such determination,
costs of removal from the location of current use shall not be a
deduction from such value. Fair Market Value shall be determined by
the mutual agreement of Lessor and Lessee in accordance with the
preceding sentence. If Lessee and Lessor cannot agree within
30 days after Lessee's notice of tentative election, Fair Market Value
shall be determined by a qualified independent equipment appraiser
mutually satisfactory to Lessee and Lessor. If Lessee and Lessor fail
to agree upon a satisfactory independent equipment appraiser within 10
days following the end of the 30-day period referred to above, Lessee
and Lessor shall each within 5 days appoint a qualified independent
equipment appraiser and such appraisers shall jointly determine the
Fair Market Value of such Units. If, within 15 days after the
appointment of the last of these two appraisers, the appraisers cannot
agree upon the Fair Market Value of such Units, the two appraisers
shall, within 10 days, appoint a third appraiser and the Fair Market
Value of such Units shall be determined by the three appraisers, who
shall make their appraisals within 15 days following the appointment
of the third appraiser and the average of their three determinations
so made shall be deemed to be the Fair Market Value of such Units and
shall be conclusive and binding upon Lessor and Lessee. If either
party shall have failed to appoint an appraiser, the determination of
the Fair Market Value of such Units of the single appraiser appointed
by the other party shall be final.
At any time within the 15-day period following the determination of
the Fair Market Value of such Units, Lessee may deliver to Lessor a
further notice finally electing to purchase such Units. If no such
further notice is delivered by Lessee to Lessor within such period,
Lessee shall be deemed to have waived any right to purchase such
Units. At the end of the Lease Term or Renewal Terms, as appropriate,
if Lessee has finally elected to purchase such Units, Lessee shall
purchase from Lessor, and Lessor shall sell to Lessee, each such Unit
for a cash consideration equal to the Fair Market Value of such Unit,
and Lessor shall transfer title to each such Unit to Lessee without
recourse or warranty, except that Lessor shall represent and warrant
that it owns such Unit free and clear of any Lessor's Lien. All
appraisal fees and expenses shall be borne by Lessee.
8. TECHNOLOGY MIGRATION: After the 12th payment has been made (and
provided all payments are current), Lessee may, with 90-day notice to
Lessor, replace all or part of the leased Cisco-manufactured
equipment. In addition, a new Fair Market Value Lease must be executed
by Lessee at a value of at least 100% of the replaced equipment's
original cost. To effect this migration, Lessee will pay a "Technology
Migration Fee," which is reflected as a percentage of the replaced
equipment's original cost. The Technology Migration Fee may be
refinanced in the new lease or paid to the Lessor in one lump sum upon
signing a new lease. The Technology Migration Fee is as follows:
AFTER TECHNOLOGY AFTER TECHNOLOGY MIGRATION
PAYMENT MIGRATION FEE PAYMENT FEE
------- ------------- ------- ---
12 46.00 25 12.00
13 43.00 26 9.00
14 41.00 27 8.00
15 38.00 28 3.00
16 35.00 29 NONE
17 33.00 30 NONE
18 30.00 31 NONE
19 28.00 32 NONE
20 25.00 33 NONE
21 22.00 34 NONE
22 20.00 35 NONE
23 17.00 36 NONE
24 14.00
9. TERMS OF SCHEDULE: Lessor and Lessee agree that this Lease shall
constitute a lease of each Unit described in Section 1 of this Lease,
upon the Commencement Date with respect to such Unit in the form of
Annex B to this Lease. Each such Unit shall be subject to the terms and
conditions of this Lease, the Master Agreement to Lease Equipment, the
Casualty Value Table attached hereto as Annex A, and the standard Cisco
Terms and Conditions of Sale and Software License, the terms and
conditions of each of which are hereby incorporated by reference in
full in this Lease and made a part of this Lease to the same extent as
if such terms and conditions were set forth herein. Capitalized terms
used in this Lease which are not otherwise defined herein shall have
the meanings set forth in the Master Agreement to Lease Equipment
identified above.
C-2
<PAGE> 22
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed by their authorized representatives as of the date first above
written.
CISCO, SYSTEMS CAPITAL CORPORATION, Lessor PARK 'N VIEW, Lessee
By: /s/ By: /s/ R. Michael Brewer
------------------------------------ --------------------------
Title:
Title: CEO
---------------------------------- -----------------------
Date: Date: 11/13/99
---------------------------------- -----------------------
C-3
<PAGE> 23
ANNEX A
TO SCHEDULE NO. 002-000
CASUALTY VALUE TABLE
The Casualty Value of any Unit shall be an amount equal to the product of the
Equipment Cost of such Unit times the percentage below corresponding to the
number of the last Rent payment received by Lessor, plus any unpaid Rent with
respect to the Rent payment period during which the applicable Event of Loss
occurred.
After Rent After Rent
Payment No. Percentage Payment No. Percentage
----------- ---------- ----------- ----------
1 108.55% 19 64.94%
2 106.23% 20 62.40%
3 103.90% 21 59.85%
4 101.55% 22 57.29%
5 99.20% 23 54.71%
6 96.83% 24 52.12%
7 94.45% 25 49.51%
8 92.06% 26 46.90%
9 89.65% 27 44.27%
10 87.24% 28 41.62%
11 84.81% 29 38.97%
12 82.37% 30 36.30%
13 79.92% 31 33.62%
14 77.45% 32 30.92%
15 74.98% 33 28.21%
16 72.49% 34 25.49%
17 69.98% 35 22.75%
18 67.47% 36 20.00%
<PAGE> 24
ANNEX B
CERTIFICATE OF ACCEPTANCE
TO
SCHEDULE NO. 002-000
CERTIFICATE OF ACCEPTANCE NO. 1 (this "Acceptance Certificate") UNDER SCHEDULE
NO. 002-000 DATED AS OF January 5, 1999, TO MASTER AGREEMENT TO LEASE
EQUIPMENT DATED AS OF August 21,1998 BETWEEN CISCO SYSTEMS CAPITAL CORPORATION,
Lessor, and PARK 'N VIEW, Lessee.
This Acceptance Certificate is issued pursuant to the Master Agreement to Lease
Equipment and Schedule designated above. Lessee acknowledges that each Unit
specified on Exhibit A (i) has been delivered to, inspected by, and accepted as
of this date for lease by Lessee, (ii) is of a size, design, capacity and
manufacture acceptable to Lessee and suitable for Lessee's purposes, (iii) is
in good working order, repair and condition, and (iv) has been installed to
Lessee's satisfaction or located, as the case may be, at the location specified
on Exhibit A.
Lessee confirms and agrees that (i) no Event of Default under any Lease entered
into pursuant to the Master Agreement to Lease Equipment has occurred and is
continuing and (ii) the representations and warranties in the Schedule
designated above are correct and complete as though made on and as of the date
hereof and shall continue to be correct and complete throughout the Lease Term
of each Unit accepted hereby.
The person signing this Acceptance Certificate on behalf of Lessee hereby
certifies that such person has read and acknowledges all terms and conditions
of the Lease, and is duly authorized to execute this Acceptance Certificate on
behalf of Lessee.
The terms used in this Acceptance Certificate shall have the same meanings
defined in the Master Agreement to Lease Equipment and the Schedule designated
above.
PARK 'N VIEW (Lessee)
By: /s/ R. Michael Brewer
---------------------------------
(Authorized Signature)
Name: R. Michael Brewer
-------------------------------
Title: CFO
-------------------------------
Acceptance Certificate Execution Date: 1/13/99
-------------------------------
BILLING INFORMATION:
ADDRESS: 11711 N.W. 39th Street
------------------------------
CORAL SPRINGS, FL 33065
- --------------------------------------
ATTENTION: R. MICHAEL BREWER
----------------------------
PHONE: 954-745-7800 EXT. 7943
--------------------------------
<PAGE> 25
EXHIBIT A
TO
CERTIFICATE OF ACCEPTANCE NO. 1, to Schedule No. 002-000 dated
January 5, 1999, to Master Agreement to Lease Equipment, dated August 21,
1998 between CISCO SYSTEMS CAPITAL CORPORATION, Lessor and PARK 'N VIEW,
Lessee.
<TABLE>
<CAPTION>
Periodic
Primary Cost
Equipment Unit Rent (in I.D. or per
Qty. Mfg. or Vendor Description Model Term Dollars) New/Used Location Ser. No. Unit
- ---- -------------- ----------- ----- ---- -------- -------- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
{SEE ATTACHED SIEMENS INVOCIE NUMBER 8113000029)
Cisco Hardware Cost leased equals ...................$896,577.00.
A-1
<PAGE> 26
ANNEX C
TO
SCHEDULE NO. 002-000
CISCO SYSTEMS, INC. TERMS AND CONDITIONS OF SALE AND SOFTWARE LICENSE
The Terms and Conditions of Sale and Software License Agreement ("Agreement")
contained herein constitute the entire agreement between Cisco Systems, Inc.
("Cisco") and you ("Customer"). Cisco will not be bound by any terms of
Customer's order. No form of acceptance except Cisco's written acknowledgment
mailed to Customer, or Cisco's commencement of performance shall constitute
valid acceptance of Customer's order. Any such acceptance is expressly
conditioned on assent to the terms hereof and the exclusion of all other terms.
Customer shall be deemed to have assented to the terms hereof, whether or not
previously received, upon accepting delivery of anything shipped by Cisco. If
tender of these terms is deemed an offer, acceptance is expressly limited to
the terms hereof.
1. PRODUCTS
1.1 "Products" shall mean any hardware or software products identified on:
(a) Cisco's then current applicable price list; (b) any of Cisco's
proposals or quotations; or (c) any of Cisco's invoices.
1.2 Alterations to any Product which Cisco deems necessary to comply with
specifications, changed safety standards or governmental regulations,
to make a Product noninfringing with respect to any patent, copyright
or other proprietary interest, or to otherwise improve a Product may
be made at any time by Cisco without prior notice to or consent of
Customer and such altered Product shall be deemed fully conforming.
2. ORDERS
Customer shall purchase Products by issuing a written purchase order
signed by an authorized representative, indicating specific Products,
quantity, price, total purchase price, shipping instructions,
requested delivery dates, bill-to and ship-to addresses, tax exempt
certifications, if applicable, and any other special instructions. Any
contingencies contained on such order are not binding upon Cisco.
Cisco will accept or reject orders according to its then-current
process. All orders are subject to acceptance by Cisco at its
corporate headquarters.
3. SHIPPING AND DELIVERY
3.1 Shipping dates will be established by Cisco upon receipt of orders
from Customer.
3.2 Customer has the right to defer Product shipment for no more than (30)
days from the scheduled shipping date, provided written notice is
received by Cisco at least fifteen (15) days before the originally
scheduled shipping date.
3.3 Canceled orders, rescheduled deliveries or Product configuration
changes made by Customer within ten (10) days of the original shipping
date will be subject to (a) acceptance by Cisco, and (b) a charge of
fifteen percent (15%) of the total invoice amount. Cisco reserves the
right to reschedule delivery in cases of configuration changes made
within ten (10) days of scheduled shipment.
3.4 Shipping terms are FOB Origin (or, for international shipments, FCA
Origin (INCOTERMS 1990)) San Jose, California, or such other Cisco
designated shipping location. Risk of loss and title shall pass from
Cisco to Customer upon delivery to the carrier or Customer's
representative at the FOB (or FCA) point. Delivery shall be deemed
made upon transfer of possession to the carrier. Customer shall be
responsible for all freight, handling and insurance charges. Unless
given written instruction, Cisco shall select the carrier. In no event
shall Cisco have any liability in connection with shipment, nor shall
the carrier be deemed to be an agent of Cisco. Cisco shall not be
liable for damage or penalty for delay in delivery or for failure to
give notice of any delay.
3.5 Customer grants Cisco a security interest in Products purchased under
this Agreement to secure payment for those Products purchased. If
requested by Cisco, Customer agrees to execute financing statements to
perfect this security interest.
4. PRICES AND PAYMENT
4.1 Prices for Products shall be those specified in Cisco's then-current
applicable price list, as updated periodically by Cisco, less any
applicable discounts agreed upon by Cisco in writing. All prices are
FOB Origin (or, for international shipments, FCA Origin (INCOTERMS
1990)) San Jose, California, or such other Cisco designated shipping
location.
4.2 All stated prices are exclusive of any taxes, fees and duties or other
amounts, however designated, and including without limitation, value
added and withholding taxes which are levied or based upon such
charges, or upon this Agreement. Any taxes related to Products
purchased or licensed pursuant to this Agreement shall be paid by
Customer or Customer shall present an exemption certificate acceptable
to the taxing authorities. Applicable taxes shall be billed as a
separate item on the invoice, to the extent possible.
4.3 Upon credit approval by Cisco, payment terms shall be net thirty (30)
days from date of shipment. All payments shall be made in U.S.
currency. If at any time Customer is delinquent in the payment of any
invoice or is otherwise in breach of this Agreement, Cisco may, at its
discretion, withhold shipment (including partial shipments) of any
order or may, at its option, require Customer to pre-pay for further
shipments. Any sum not paid by Customer when due shall bear interest
until paid at a rate of 1.5% per month (18% per annum), or the maximum
rate permitted by law, whichever is less.
C-1
<PAGE> 27
5. SOFTWARE LICENSE
5.1 (a) If you are an end user customer, Cisco grants to Customer a
nonexclusive and nontransferable license to use the Cisco software
("Software") in object code form, and the supporting documentation,
solely on a single central processing unit owned or leased by Customer
or otherwise embedded in equipment provided by Cisco.
(b) If you are an authorized Cisco distributor, Cisco grants to
Customer a nonexclusive and nontransferable license to distribute,
only in the territory approved in writing by Cisco, directly to end
users, the Software features licensed, in object code form, and the
supporting documentation, solely for use on a single central
processing unit owned or leased by the end user or otherwise embedded
in equipment provided by Cisco.
(c) Customer may make one (1) archival copy of the Software provided
Customer affixes to such copy all copyright, confidentiality and
proprietary notices that appear on the original. Customer may not
sublicense, lease, rent or lend to any person its rights to use or
distribute, as applicable, the Software.
5.2 Cisco and its suppliers retain all title to, and, except as expressly
licensed herein, all rights to the Software, all copies thereof and
all related documentation and materials, and all of Cisco's service
marks, trademarks, trade names or any other designations. Any invoices
of Cisco purporting to cover such Items do not convey title to, or
patent rights, copyrights or any other proprietary interest in, such
items to Customer.
5.3 Customer agrees, except as otherwise expressly authorized herein, not
to: (a) copy, in whole or in part, any Software or documentation; (b)
reverse compile or engineer the Products; or (c) remove any product
identification or notices of any proprietary or copyright restrictions
from the Products.
5.4 Customer agrees that aspects of the licensed materials, including the
specific design and structure of individual programs, constitute trade
secrets and/or copyrighted material of Cisco. Customer agrees not to
disclose, provide, or otherwise make available such trade secrets or
copyrighted material in any form to any third party without the prior
written consent of Cisco. Customer agrees to implement reasonable
security measures to protect such trade secrets and copyrighted
material.
5.5 Restricted Rights. Cisco's software is provided to non-DOD agencies
with RESTRICTED RIGHTS, and its supporting documentation is provided
with LIMITED RIGHTS. Use, duplication, or disclosure by the U.S.
Government is subject to the restrictions as set forth in subparagraph
(c) of the Commercial Computer Software - Restricted Rights clause at
FAR 52.227-19. In the event the sale is to a DOD agency, the U.S.
Government's rights in software, supporting documentation, and
technical data are governed by the restrictions in the Technical Data
Commercial Items clause at DFARS 252.227-7015 and DFARS 227.7202.
6. LIMITED WARRANTY
6.1 Notwithstanding any other provision hereof, Cisco's sole and exclusive
warranty obligations for the Products sold hereunder are set forth in
Cisco's Limited Warranty Statement delivered with the Product. If
Customer is an authorized Cisco distributor, Customer shall not make
any warranty commitment, whether written or oral, on Cisco's behalf.
6.2 CISCO DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE.
6.3 In no event shall Cisco's or its suppliers' liability to Customer,
whether in contract, tort (including negligence), or otherwise, exceed
the price paid by Customer under this Agreement. The foregoing
limitations shall apply even if the above-stated warranty fails of its
essential purpose.
6.4 IN NO EVENT WILL CISCO OR ITS SUPPLIERS BE LIABLE FOR ANY LOST
REVENUE, PROFIT, OR DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, OR PUNITIVE DAMAGES HOWEVER CAUSED AND REGARDLESS OF THE
THEORY OF LIABILITY ARISING OUT OF THE USE OF OR INABILITY TO USE THE
PRODUCT EVEN IF CISCO OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6.5 In all cases of Cisco direct U.S. purchase of Product, where a Product
is returned to Cisco, Customer shall call and obtain a Return Material
Authorization ("RMA") number from Cisco's customer service department.
For all nondirect international or multinational purchases, Customer
must contact the place from which the Product was purchased to obtain
its remedy.
6.6 For Product returned to Cisco, Customer is responsible for: (a) proper
packing of parts being shipped to Cisco, including description of the
failure and written specification of any other changes or alteration
of the Product, such as hardware or firmware updates; (b) insurance of
all packages for replacement cost; (c) shipment FOB Cisco's Repair
Center; (d) return of defective hardware to Cisco within ten (10) days
after issuance of the RMA number, or the list price of advanced
replacement hardware will be charged to Customer; and (e) compliance
with Cisco's RMA procedure for all shipments to Cisco, as follows: (i)
each request to Cisco for an RMA number must specify the number, type,
and serial number for each part to be replaced; Cisco will provide the
local RMA shipment address upon request; and (ii) Product sent back to
Cisco must agree exactly in the number, type, and serial numbers
associated with the RMA transaction.
7. PATENT AND COPYRIGHT INDEMNITY
7.1 Cisco will defend any claim, suit or proceeding brought against
Customer so far as it is based on a claim that any Product supplied
hereunder infringes a United States copyright or an existing United
States patent (as of the effective date of this Agreement), if
notified promptly in writing of the claim and given full authority,
information, and assistance for the defense. If such claim has
occurred, or in Cisco's opinion is likely to occur, Customer agrees to
permit Cisco, at its option and expense, either to procure for
Customer the right to continue using the Product or to replace or
modify the same so that it becomes noninfringing, or, if neither of
the foregoing alternatives is reasonably available, remove the Product
and refund Customer the price thereof as depreciated or amortized by
an equal annual amount over the lifetime of the Product as established
by Cisco.
7.2 Cisco has no liability for any claim based upon the combination,
operation, or use of any Product supplied hereunder with equipment,
devices, or software not supplied by Cisco, or for any claim based
upon alteration or modification of any Product supplied hereunder.
7.3 Customer shall defend and hold Cisco harmless against any expense,
judgment or loss for alleged infringement of any patents, copyrights
or other proprietary rights which result from Cisco's compliance with
Customer's designs, specifications or instructions.
C-2
<PAGE> 28
7.4 Notwithstanding any other provisions hereof, Cisco shall not be
liable for any claim based on Customer use of the Products as shipped
after Cisco has informed the Customer of modifications or changes in
the Products required to avoid such claims and offered to implement
those modifications or changes, if such claim would have been avoided
by implementation of Cisco's suggestions.
7.5 THE FOREGOING STATES THE ENTIRE OBLIGATION OF CISCO WITH RESPECT TO
INFRINGEMENT OF PROPRIETARY RIGHTS. THE FOREGOING IS GIVEN TO
CUSTOMER SOLELY FOR ITS BENEFIT AND IN LIEU OF, AND CISCO DISCLAIMS,
ALL WARRANTIES OF NONINFRINGEMENT WITH RESPECT TO THE PRODUCTS.
8. EXPORT RESTRICTIONS
Customer shall obtain all licenses, permits and approvals required by
any government and shall comply with all applicable laws, rules,
policies and procedures of the U.S. Government. Customer will
indemnify and hold harmless Cisco for any violation or alleged
violation by Customer of such laws, rules, policies or procedures.
Customer shall not transmit, directly or indirectly, the Products or
any technical data (including processes and services) received from
Cisco, nor the direct product thereof, outside of the United States
without prior authorization of the U.S. Government if such
authorization is required.
9. CONFIDENTIAL INFORMATION
Customer shall hold confidential and shall not use or permit others
to use any confidential information identified as such in writing
or orally by Cisco or information which Customer knows or has reason
to know is confidential, proprietary or trade secret information of
Cisco.
10. LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING ELSE HEREIN, EXCEPT FOR CLAIMS OF PERSONAL
INJURY OR DEATH, ALL LIABILITY OF CISCO AND ITS SUPPLIERS UNDER THIS
AGREEMENT OR OTHERWISE SHALL BE LIMITED TO MONEY PAID TO CISCO UNDER
THIS AGREEMENT AND IN THE CASE OF DAMAGES RELATING TO ANY ALLEGEDLY
DEFECTIVE OR INFRINGING PRODUCT, SHALL, UNDER ANY LEGAL OR EQUITABLE
THEORY, BE FURTHER LIMITED TO THE PURCHASE PRICE PAID BY CUSTOMER FOR
SUCH PRODUCT.
11. CONSEQUENTIAL DAMAGES WAIVER
IN NO EVENT SHALL CISCO OR ITS SUPPLIERS BE LIABLE FOR ANY LOSS OF
USE, INTERRUPTION OF BUSINESS, LOST PROFITS, OR LOST DATA, OR
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, EVEN IF CISCO
OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
12. GENERAL TERMS
12.1 The validity, interpretation, and performance of this Agreement shall
be controlled by and construed under the laws of the State of
California, United States of America, as if performed wholly within
the state and without giving effect to the principles of conflict of
law. The parties specifically disclaim the UN Convention on
Contracts for the International Sale of Goods.
12.2 Cisco shall not be liable for any delay or failure in performance
whatsoever due to acts of God, earthquakes, shortage of supplies,
transportation difficulties, labor disputes, riots, war, fire,
epidemics, and similar occurrences beyond Cisco's reasonable control.
12.3 No waiver of rights under this Agreement by either party shall
constitute a subsequent waiver of this or any other right under this
Agreement.
12.4 Neither this Agreement nor any rights under this Agreement, other
than monies due or to become due, shall be assigned or otherwise
transferred by Customer (by operation of law or otherwise) without
the prior written consent of Cisco. This Agreement shall bind and
inure to the benefit of the successors and permitted assigns of the
parties.
12.5 In the event that any of the terms of this Agreement become or are
declared to be illegal by any court of competent jurisdiction, such
terms shall be null and void and shall be deemed deleted from this
Agreement. All remaining terms of this Agreement shall remain in full
force and effect.
12.6 In the event of a breach of this Agreement, the breaching party shall
pay to the other party any reasonable attorneys' fees and other costs
and expenses incurred by the nonbreaching party in connection with
the enforcement of any provisions of this Agreement.
12.7 Neither party has the right or authority to, and shall not, assume or
create any obligation of any nature whatsoever on behalf of the other
party or bind the other party in any respect whatsoever.
12.8 This Agreement, including the Product warranty referenced herein,
constitutes the entire agreement between the parties hereto
concerning the subject matter of this Agreement, and there are no
conditions, understandings, agreements, representations or
warranties, expressed or implied, which are not specified herein.
This Agreement may only be modified by a written document executed by
authorized representatives of Cisco and Customer.
C-3
<PAGE> 29
Schedule 002-000 Final
[LOGO] Cisco Systems Capital Corporation
PARK 'N VIEW
MLA# 1226
1/6/99
- ------
<TABLE>
<CAPTION>
Cust S.O. Invoice Equipment Shipping/ Invoice City-State
PO# P.O. Amount # Invoice # Date Description Qty Subtotal Taxes Handling Amount Location
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
821981 $896,577.00 n/a 8113000029 11/30/98 Cisco-3620 30 $896,577.00 $0.00 $0.00 $896,577.00 Coral Springs, FL
--------------------------------------------
TOTAL $896,577.00 $0.00 $0.00 $896,577.00
============================================
Lease Payments:
Equipment $896.577.00 X LRF .02763*= $24,772.42/MO
TOTAL $24,772.42
*After H.15 adjustment
Commencement date: 1/1/99
</TABLE>
<PAGE> 1
Exhibit 10.33
AMENDMENT TO AT&T CONTRACT TARIFF ORDER FORM
BETWEEN AT&T CORP. AND PARK N VIEW, INC.
The AT&T Contract Tariff Order Form between AT&T Corp. ("AT&T") and PARK N
VIEW, INC ("Customer"), dated July 13, 1998 (the "Agreement"), whereby Customer
ordered certain telecommunications services ("Services") from AT&T pursuant to
AT&T Contract Tariff No. 10019 (the "CT"), is hereby amended as set forth below:
1. The CT shall be revised consistent with the contract tariff revisions
attached hereto as Exhibit A. The revisions to the CT are indicated by
letter symbols on the margins of Exhibit A, or by a notation at the top
of a page that all material on that page is new.
2. AT&T will file with the Federal Communications Commission (the "FCC")
revisions to the CT consistent with Exhibit A.
3. This Amendment shall be subject to the filing and effectiveness with
the FCC of the revisions to the CT. Upon such filing and effectiveness,
Services shall be furnished under the CT, as revised.
4. Each party, by signing below, acknowledges that it has read,
understands and agrees to the provisions of this Amendment. Each
individual signing below represents that such individual is duly
authorized to sign this Amendment on behalf of the party for whom such
individual is signing.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
fully executed below.
AT&T Corp. PARK N VIEW, INC.
By: /s/ By: /s/ Stephen L. Conkling
----------------------------- -----------------------------
Stephen L. Conkling, President
- --------------------------------- ---------------------------------
(Printed Name and Title) (Printed Name and Title)
Date: 2/19/99 Date: 2/19/99
- --------------------------------- ---------------------------------
<PAGE> 2
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs Original Title Page
Bridgewater, NJ 08807
Issued: July 21, 1998 Effective: July 22, 1998
** All material on this page is new. **
CONTRACT TARIFF NO. 10019
TITLE PAGE
This Contract Tariff applies to AT&T Private Line Services; AT&T InterSpan
Frame Relay Service and AT&T Local Channel Services for interstate or foreign
communications in accordance with the Communications Act of 1934, as amended.
Telecommunication services provided under this Contract Tariff are furnished by
means of wire, radio, satellite, fiber optics or any suitable technology or
combination of technologies.
Printed in U.S.A.
<PAGE> 3
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 1
Bridgewater, NJ 08807 Cancels Original Page 1
Issued: March 5, 1999 Effective: March 6, 1999
CONTRACT TARIFF NO. 10019
CHECK SHEET
The Title Page and Pages 1 through 10 inclusive of this tariff are effective as
of the date shown. Original and revised pages as named below contain all
changes from the original tariff pages that are in effect on the date shown.
Number of Revision Number of Revision
Page Except as Indicated Page Except as Indicated
---- ------------------- ---- -------------------
1 1st* 9 1st*
4 1st* 10 1st*
6 1st*
7 1st*
8 1st*
*New or revised page
TABLE OF CONTENTS
Page
----
Check Sheet ........................................................ 1
List of Concurring, Connecting and Other Participating Carriers .... 1
Explanation of Symbols - Coding of Tariff Revisions ................ 1
Trademarks and Service Marks ....................................... 2
Explanation of Abbreviations ....................................... 2
General Provisions ................................................. 2
Contract Summary ................................................... 4
LIST OF CONCURRING, CONNECTING AND OTHER PARTICIPATING CARRIERS
Concurring Carriers - NONE
Connecting Carriers - NONE
Other Participating Carriers - NONE
EXPLANATION OF SYMBOLS - Coding of Tariff Revisions
Revisions to this tariff are coded through the use of symbols. These symbols
appear in the right margin of the page. The symbols and their meanings are:
R - to signify reduction.
I - to signify increase.
C - to signify changed regulation.
T - to signify a change in text but no change in rate
or regulation.
S - to signify reissued matter.
M - to signify matter relocated without change.
N - to signify new rate or regulation.
D - to signify discontinued rate or regulation.
Z - to signify a correction.
Other marginal codes are used to direct the tariff reader to a footnote for
specific information. Codes used for this purpose are lower case letters of the
alphabet, e.g., x, y and z. These codes may appear beside the page revision
number in the page header or in the right margin opposite specific text.
Printed in U.S.A.
<PAGE> 4
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs Original Page 2
Bridgewater, NJ 08807
Issued: July 21, 1998 Effective: July 22, 1998
** All material on this page is new. **
TRADEMARKS AND SERVICE MARKS - The following marks, to the extent, if any,
used throughout this tariff, are trademarks and service marks of AT&T Corp.
Trademarks Service Marks
---------- -------------
None ACCUNET
DATAPHONE
InterSpan
EXPLANATION OF ABBREVIATIONS
Adm. - Administrator
ASDS - ACCUNET Spectrum of Digital Access
GDA - Generic Digital Access
kbps - kilobits per second
Mbps - Megabits per second
GENERAL PROVISIONS
I. Customer's Initial Service Date - The date on which the term of this
Contract Tariff begins is referred to as the Customer's Initial Service Date
(CISD). The rates and discounts specified in this Contract Tariff will apply
commencing at the CISD. The CISD is the date that the Customer begins service
under this Contract Tariff.
Printed in U.S.A.
<PAGE> 5
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs Original Page 3
Bridgewater, NJ 08807
Issued: July 21, 1998 Effective: July 22, 1998
** All material on this page is new. **
GENERAL PROVISIONS (continued)
II. Detariffing - If during the term of this Contract Tariff, the AT&T Tariffs
referenced herein ("Applicable AT&T Tariffs") are detariffed in whole or in
part pursuant to a statutory change, order or requirement of a governmental or
judicial authority of competent jurisdiction, then following such detariffing:
(i) the terms and conditions for the Services Provided will remain the same as
those in this Contract Tariff, except that the relevant terms and conditions
contained in the Applicable AT&T Tariffs will remain the same as those in
effect as of the date AT&T detariffs in whole or in part those Applicable AT&T
Tariff provisions, and will be incorporated as part of this Contract Tariff, and
(ii) the rates for the Services Provided will be:
(a) to the extent Applicable AT&T Tariff provisions remain filed and
effective, those rates specified in such Applicable AT&T Tariff
provisions, as amended from time to time; and
(b) to the extent that this Contract Tariff contains specific rates or
rate schedules that would apply in lieu of (or in addition to) the
rates or rate schedules in Applicable AT&T Tariffs, such specific
Contract Tariff rates and rate schedules; and
(c) to the extent Applicable AT&T Tariff provisions are detariffed,
and (b) preceding does not apply, those rates specified in the
applicable AT&T Price Lists, as amended from time to time.
In all cases (a, b or c), the applicable rates shall continue to be subject to
any discounts, waivers, credits, and restrictions on rate changes that may be
contained in this Contract Tariff. Where rates and rate changes (both increases
and decreases) would have been calculated by reference to a tariff rate that
has been detariffed, rates and rate changes shall instead be calculated during
the term of this Contract Tariff by reference to applicable AT&T Price Lists
and (to the extent changes to tariff rates were permitted under this Contract
Tariff) AT&T shall have the right to change its Price Lists from time to time.
All references to the AT&T Tariffs in this Contract Tariff shall be construed
to mean the AT&T Tariffs specified herein, as well as the documents which will
replace those tariffs, including the AT&T Price Lists, when AT&T cancels those
tariffs.
Printed in U.S.A.
<PAGE> 6
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 4
Bridgewater, NJ 08807 Cancels Original Page 4
Issued: March 5, 1999 Effective: March 6, 1999
CONTRACT TARIFF NO. 10019
1. Services Provided:
A. AT&T Private Line Services (AT&T Tariff F.C.C. No. 9)
B. AT&T InterSpan Frame Relay Service (FRS) (AT&T Tariff F.C.C. No. 4)
C. AT&T Local Channel Services (AT&T Tariff F.C.C. No. 11)
2. Contract Term, Renewal Options - For the AT&T Private Line Services, AT&T
Switched Digital Services and AT&T Local Channel Services provided under this
Contract Tariff (CT), the term is 3 years beginning with a Customer's Selected
Date (CSD) which shall be no more than 7 months following the Customer's
Initial Service Date (CISD). The rates and discounts specified in this Contract
Tariff will apply commencing at the CISD. The CISD for the above services is
the date that the Customer begins service under this Contract Tariff. This CT
may be renewed in its entirety for an additional 1 year period, provided AT&T
receives, in writing, the Customer's order to renew at least 45 days prior to
the last day of the initial term.
3. Minimum Commitments/Charges
A. AT&T Private Line, AT&T InterSpan Frame Relay and AT&T Local Channel
Services - The combined Data Minimum Annual Revenue Commitment (DMARC) for the
AT&T Private Line, FRS and AT&T Local Channel Services provided under this CT
is as follows:
CT TERM YEAR YEAR 1 YEAR 2 YEAR 3
DMARC $5,100,000 $7,700,000 $7,700,000
The DMARC will be satisfied by the undiscounted recurring charges for
Multi-Service Volume Pricing Plan (MSVPP)-eligible service components as
specified in AT&T Tariff F.C.C. Nos. 9 and 11, as amended from time to time, by
the undiscounted Frame Relay Volume Pricing Plan (FRVPP)-Eligible FRS Charges,
as specified in AT&T Tariff F.C.C. Nos. 4, as amended from time to time, and by
the Terrestrial 1.544 Mbps as specified in section 5.D., following for AVP only
for the Services Provided under this CT. If, on any anniversary of the CISD,
the Customer has failed to satisfy the DMARC for the preceding year, the
Customer will be billed a shortfall charge in an amount equal to the difference
between the DMARC and the sum of: (1) the total of the actual undiscounted
recurring Charges for the MSVPP-eligible service components in service for that
year under this CT, (2) the total of the actual undiscounted FRVPP-Eligible FRS
Charges for the FRS components in service for that year under this CT, and (3)
the actual undiscounted recurring Charges for the Terrestrial 1.544 Mbps as
specified in 5.D., following for AVP only.
Printed in U.S.A.
<PAGE> 7
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 5
Bridgewater, NJ 08807 Cancels Original Page 5
Issued: March 5, 1999 Effective: March 6, 1999
4. Contract Price
A. The Contract Price for the AT&T Services provided under this CT is the
same as the undiscounted Recurring and Nonrecurring Rates and Charges specified
in AT&T Tariffs listed in Section 1., preceding, as amended from time to time,
except for those Rates in Section 7., following.
5. Discounts - The following discounts are the only discounts that apply to
the Services Provided under this CT.
A. AT&T Private Line Services - The Customer will receive the following
discounts, each month, in lieu of the MSVPP/ABMVPP discounts. These discounts
will be applied to the Services listed below, and to the associated MSVPP
eligible service components, in the same manner as the MSVPP discounts as
specified in AT&T Tariff F.C.C. No. 9, as amended from time to time.
MONTHLY DISCOUNTS
- -------------------------------------------------------------------------------
ASDS at ASDS at
speeds speeds
of of 128
64 kbps kbps ACCUNET ACCUNET ACCUNET ACCUNET ABMVPP-
and and T1.5 T32 T45 Fractional eligible
below below Service Service Service T45 Service DDS components
- ----- ----- ------- ------- ------- ----------- --- ----------
12.0% 29.0% 46.0% 0.0% 0.0% 0.0% 22.0% N/A
B. AT&T InterSpan Frame Relay Services - The Customer will receive a discount
of 45.0% each month, in lieu of the FRVPP discounts. This discount will be
applied to the sum of the FRVPP-Eligible FRS Charges in the same manner as the
FRVPP discounts as specified in AT&T Tariff F.C.C. No. 4, as amended from time
to time.
C. AT&T Local Channel Services - The Customer will receive the following
discounts, each month, in lieu of the MSVPP discounts. These discounts will be
applied to the Services listed below, and to the associated MSVPP eligible
service components, in the same manner as the MSVPP discounts as specified in
AT&T Tariff F.C.C. No. 11, as amended from time to time. The discount listed in
this Section does not apply to AT&T Terrestrial 1.544 Mbps Local Channel
Services listed in Section 5.D., following.
MONTHLY DISCOUNTS
- -----------------------------------------------------------------------------
AT&T 9.6 kbps Digital 56/64 kbps
9.6/56/64 kbps Terrestrial Data Local Digital
ACCUNET Generic 1.544 Mbps Channel and Voice Data Local
Digital Access Local Channel Grade Local Channel
(GDA) Services Services Channel Services Services
- -------------- ------------- ----------------- ----------
0.0% 0.0% 0.0% 0.0%
Printed in U.S.A.
<PAGE> 8
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs Original Page 6
Bridgewater, NJ 08807
Issued: July 21, 1998 Effective: July 22, 1998
** All material on this page is new. **
5. Discounts (continued)
D. AT&T Terrestrial 1.544 Mbps Local Channel Services - The Customer will
receive the following discounts, each month, on the Monthly Recurring Charges
for AT&T Terrestrial 1.544 Mbps Local Channels and the associated Access
Coordination Functions. The discounts provided in this section are in lieu of
any discounts specified in AT&T Tariff F.C.C. No. 11, as amended from time to
time, for the same service components. Additionally, the discounts listed in
this Section do not apply to AT&T Terrestrial 1.544 Mbps Local Channel Services
listed in Section 5.C., preceding.
Service Components Discount
---------------------------- --------
Access Value Arrangement (AVA) with the Universal 48.0%
Terrestrial 1.544 Mbps Local Channels Access
Arrangement (AVA/UTA)* and associated Access
Coordination Functions.
24 Channel Terrestrial 1.544 Mbps Local Channels under 20.0%
an Access Value Plan (AVP)** and associated Access
Coordination Functions.
* An AVA with the Universal T1 Access (AVA/UTA) Arrangement is available to
Customers that connect their AT&T Terrestrial 1.544 Mbps Local Channel service
to an AT&T Switched Service or multiplexor provided under this CT. An AVA/UTA
Arrangement under this CT allows AT&T to terminate the Customer's AT&T switched
network minutes on the AVA/UTA Arrangement. The Customer must make available
for AT&T use, at each AVA location, a minimum of an average of four DSO
channels for each Terrestrial 1.544 Mbps Local Channel in use at that location.
The term "AT&T switched network minutes" does not apply to nodal services using
the local channel services as an access facility for services obtained at the
AVA location nor to any switched network minutes billed to the Customer's AVA
location, other than LDMTS minutes associated with collect or credit card calls.
** An AVP is available to Customers that connect their AT&T Terrestrial 1.544
Mbps Local Channel service to an AT&T Switched Service or multiplexor provided
under this Contract Tariff. An AVP allows the Customer the use of all of the 24
channels in an AT&T Terrestrial 1.544 Mbps Local Channel.
Printed in U.S.A.
<PAGE> 9
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 7
Bridgewater, NJ 08807 Cancels Original Page 7
Issued: March 5, 1999 Effective: March 6, 1999
6. Classifications, Practices and Regulations
A. Except as otherwise provided in this CT, the rates and regulations that
apply to the Services Provided specified in Section 1., preceding, are as set
forth in the AT&T Tariffs that are referenced in Section 1., preceding, as such
tariffs are amended from time to time.
B. Monitoring Conditions - None
C. Promotions, Credits and Waivers - The following credits and waivers will
be applied to the Customer's bill subject to the following limitations: (1) all
credits and waivers apply only to the Services Provided under this CT and as
specified below; (2) any waiver not applied by the end of the CT will be
declared null and void; (3) installation and monthly charge waivers apply only
to new service components (unless otherwise specified below) and do not apply
to service components disconnected and reconnected after the CISD; (4) the
service components must remain in service for a minimum period of 18 months
(unless otherwise specified below); and (5) the credits/waivers under this
section do not apply to Bandwidth Manager Service (BMS/BMS-E), Access
Protection Service (APC) and Network Protection Services (NPC). If any of the
installed services components are disconnected prior to the end of the minimum
retention period, AT&T will bill the Customer for the amount of the charges
that had been waived under this section for each service component
disconnected. Any such bill must be paid by the Customer within 30 day.
1. The following charges, as specified in AT&T Tariffs listed in Section 1.,
preceding, as amended from time to time, are waived.
(a) Nonrecurring Charges
I. The Installation Charges for AT&T Private Line Services
MSVPP-eligible-service components and associated Function Connections.
II. The Installation Charges for FRVPP-Eligible FRS Components.
III. The Installation Charges for AT&T Local Channel Services
MSVPP-eligible service components (excluding AT&T Terrestrial 1.544 Mbps Local
Channels subscribed to under an Access Value Arrangement (AVA) or an Access
Value Plan (AVP)), but including those Local Channels specified in Section
5.D., preceding.
Printed in U.S.A.
<PAGE> 10
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 8
Bridgewater, NJ 08807 Cancels Original Page 8
Issued: March 5, 1999 Effective: March 6, 1999
6.C.1. Promotions, Credits and Waivers (continued)
(b) Recurring Charges
I. The recurring Monthly Charges for each ACCUNET T1.5 Access
Connections, ACCUNET T1.5 M-24 Multiplexing Office Functions and ASDS Access
Connection as specified in AT&T Tariff F.C.C. No. 9, as amended from time to
time, and Access Coordination Functions as specified in AT&T Tariff F.C.C. No.
11, as amended from time to time, associated with AT&T Terrestrial 1.544 Mbps
and 56/64 Kpbs ACCUNET GDA Local Channel Services provided under this CT,
provided such service components are associated directly with the Services
Provided under this CT. There is no minimum retention period associated with
this waiver.
D. Discontinuance - In lieu of any Discontinuance With or Without Liability
provisions that are specified in the AT&T Tariffs referenced in Section 1.,
preceding, the following provisions shall apply.
1. If the Customer discontinues this CT for any reason between the CISD and
the CSD, the Customer will be billed an amount equal to 35% of the DMARC under
this CT for each year of the CT Term plus an amount equal to any nonrecurring
installation charge waivers, as specified in Section 6.C., preceding, that the
Customer has received. If this CT is not discontinued under this Condition, the
Conditions specified in 2 and/or 3, following, apply.
2. The Customer may discontinue this CT prior to the end of the CT Term,
provided the Customer replaces this CT with other AT&T Tariffed Interstate
Services or another AT&T CT for AT&T Tariffed Interstate Services having: (1)
equal or greater new DMARCs, and (ii) a new term equal to or greater than the
remaining term, but not less than 3 years. However, the customer will be billed
a shortfall charge equal to the sum of the differences between : (1) each of
the prorated DMARCs for the year in which the Customer discontinues, and (2)
the total of the actual undiscounted recurring charges and/or the
FRVPP-Eligible FRS Charges used to satisfy the corresponding DMARC for that
year under this CT, provided the amount in (2) is less than the amount in (1).
3. If the Customer discontinues this CT for any reason other than specified
above, prior to the expiration of the CT Term, a Termination Charge will apply.
The Termination Charge will be an amount equal to 35% of the sum of the
unsatisfied DMARCs for the year in which the Customer discontinues this CT and
35% of the sum of the DMARCs for each year remaining in the CT Term.
Printed in U.S.A.
<PAGE> 11
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 9
Bridgewater, NJ 08807 Cancels Original Page 9
Issued: March 5, 1999 Effective: March 6, 1999
6. Classifications, Practices and Regulations (continued)
E. Other Requirements - Not Applicable.
F. Availability - This CT is available only to Customers who: (1) will order
this CT only once, either by the Customer or any Affiliate of the Customer,
which is any entity that owns a controlling interest in either the Customer or
an Affiliate of the Customer, or any entity in which a controlling interest is
owned by either the Customer or an Affiliate of the Customer; (2) do not have
an existing AT&T Private Line MSVPP with more than 23 months remaining in the
plan; (3) do not have an AT&T Local Channel MSVPP with more than 23 months
remaining in the plan; (4) do not have an ACCUNET Bandwidth Manager Volume
Pricing Plan with more than 23 months remaining in the plan; (5) do not have a
commitment for AT&T Tariff F.C.C. Nos. 9 and 11 services with more than 23
months remaining in the term and (6) order service within 30 days after March 6,
1999, for initial installation of the Services Provided under this CT within 30
days after the date ordered.
Printed in U.S.A.
<PAGE> 12
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 10019
Adm. Rates and Tariffs 1st Revised Page 10
Bridgewater, NJ 08807 Cancels Original Page 10
Issued: March 5, 1999 Effective: March 6, 1999
7. Rates
B. AT&T InterSpan Frame Relay Services - The below rates are stabilized for
the CT Term.
1. Ports
Port Charges Table
------------------
Domestic
Port Port Port
Speed Monthly Installation
kbps Charge Charge
- ---- ------ ------
128 $500.00 $500.00
C. AT&T Local Channel Services - The below rates are stabilized for the CT
Term.
1. ACCUNET T1.5 Local Channel
MONTHLY
-------------------------- INSTALLATION
MILEAGE FIXED PER MILE CHARGE
------- ----- -------- ------------
0 $769.00 N/A $1,500.00
over 0 $769.00 N/A $1,500.00
Printed in U.S.A.
<PAGE> 1
EXHIBIT 10.34
PAY TELEPHONE TELECOMMUNICATIONS SERVICE AGREEMENT
THIS PAY TELEPHONE TELECOMMUNICATIONS SERVICE AGREEMENT (this
"Agreement") is entered into this 24nd day of February, 1999, by and between
Park 'N View, Inc., a Delaware corporation ("PNV"), with its headquarters at
11711 NW 39th Street, Coral Springs, Florida 33065 and CfL, LLC, a South Dakota
limited liability company d/b/a CfL Payphones ("CfL"), with its headquarters at
725 North Derby Lane, P. O. Box 1550, North Sioux City, South Dakota 57049.
WHEREAS, PNV has designed and developed the concept and equipment ("the
System") to provide various telecommunications services at truckstops with which
PNV has (or from time to time will) entered into contracts (the "Truckstops"),
including coin and coinless phones inside the Truckstops (collectively the
"Telecommunications Services"); and
WHEREAS, PNV desires to engage CfL to install certain equipment
included in the System at certain Truckstops and to perform certain services as
provided in this Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, PNV and CfL (hereinafter collectively being referred to as the
"Parties"), intending to be legally bound, hereby mutually agree as follows:
1. Purpose. The Parties hereby agree that PNV shall enter into
contracts with the owners of Truckstops from time to time and that CfL shall,
subject to the terms and conditions of this Agreement, (i) install equipment
(the "Equipment") of the type and in the quantities requested by PNV in writing
with respect to each Truckstop identified by PNV to CfL in writing from time to
time; and (ii) provide the services (the "CfL Services") requested by PNV in
writing at each Truckstop identified by PNV to CfL in writing from time to time.
Within thirty (30) days of CfL's receipt of and consent to PNV's written request
regarding the installation of the Equipment and provisions of the CfL Services
at a Truckstop, CfL will complete the installation of the Equipment requested by
PNV with respect to the Truckstop and will commence provision of the requested
CfL Services at the Truckstop, provided that, necessary long distance and local
exchange carrier facilities are available at each such Truckstop. Upon entering
into a contract with the owner of a Truckstop(s), PNV shall provide CfL with a
letter agreement (the "Letter Agreement") setting forth among other things: (i)
the buildout schedule; (ii) the Equipment to be installed; (iii) the Truckstop's
rights, if any, to purchase the Equipment; (iv) the Truckstop's rights to
terminate the contract; and (v) any other appropriate provisions. Upon execution
of the Letter Agreement, CfL shall install the Equipment and provide the CfL
Services pursuant to the terms of the Letter Agreement and this Agreement. CfL
will, in all instances, install the Equipment in a high quality, workmanlike and
efficient manner, with the least interference possible with the business
operations of each Truckstop. During the installation period, unless otherwise
permitted by PNV, CfL will use its best efforts to ensure that no more than
fifty percent (50%) of the existing equipment currently in place will be removed
until the Equipment has been installed and the System is operational.
1
<PAGE> 2
2. Installation of Equipment.
(a) CfL will, at its sole cost and expense, and in the manner
herein provided and in accordance with accepted industry standards, install and
continually maintain the Equipment at each Truckstop at which the Equipment is
requested to be installed by PNV and at which the requested CfL Services are to
be provided; provided, however, the Parties mutually agree that PNV will use its
best efforts not to require CfL to install any Equipment at any Truckstop in any
area in which Flex ANI has not been deployed (such that reimbursement for dial
around compensation ("DAC") is not possible), provided that, CfL shall be
required to install the Equipment if required by the Truckstop pursuant to its
contract with PNV. PNV and CfL shall mutually agree on the revenue and expense
allocation for such location. PNV reserves the right to determine the Equipment
to be installed at any Truckstop. In addition all equipment, systems and
procedures used by CfL will meet all legal and technical requirements of any
governing agency of local, state or federal jurisdiction. CfL will update and
modernize the Equipment from time to time as reasonably necessary such that the
System and the Equipment perform in a manner consistent with accepted industry
standards. CfL will on a timely basis secure, and continuously maintain in full
force and effect, all licenses, permits and approvals required by governmental
authorities with respect to the installation, operation and maintenance of the
Equipment and providing the CfL Services.
(b) PNV will make available (or cause to be made available) to
CfL sufficient areas at each applicable Truckstop in which to install the
Equipment (collectively, the "Equipment Area"), which PNV will designate to CfL
in writing with respect to each Truckstop at which the Equipment is to be
installed from time to time. Upon reasonable prior notice to PNV, PNV will cause
CfL to be entitled to have continued access to the Equipment Area for purposes
of installing, repairing and monitoring the Equipment and providing the CfL
Services.
(c) Prior to commencement of installation of the Equipment at
any Truckstop, CfL will obtain PNV's written approval of the methods and
materials to be used by CfL with respect to the installation of the Equipment.
CfL will repair any damage to the Truckstop which is caused by CfL. However, CfL
will not be responsible for any existing defects or deficiencies or the normal
wear and tear to the Truckstop. CfL will provide PNV written notice of any
defects or deficiencies discovered by CfL during installation of the Equipment.
(d) Within three (3) business days of completion of the
installation of the Equipment at a Truckstop, CfL will provide PNV with written
notice of such completion including the list of each ANI pursuant to Section
4(b).
3. Rights and Duties of The Parties With Respect To The Equipment.
The Equipment will remain the sole property of CfL, provided
that owners of Truckstops may enter into contracts with PNV which may grant such
Truckstops rights to purchase the phone enclosures pursuant to the terms of such
contracts which shall be set forth in Letter Agreements to be entered into
between PNV and CfL from time to time. Except as otherwise provided herein, CfL
will pay all taxes or other fees related to ownership and operation of the
Equipment. The Parties acknowledge that the terms of the Letter Agreements, the
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<PAGE> 3
contracts with Truckstop owners and certain aspects of the System, the
Telecommunication Services, the Equipment, the CfL Services and the manner of
their respective operation and installation are proprietary to PNV and/or CfL.
Accordingly, PNV and CfL will use this best effort to insure that the terms of
the Letter Agreements, the contracts with Truckstop owners and all material
confidential information and data concerning the System, the Telecommunication
Services, the Equipment and the CfL Services will not be divulged, and (except
in the case of emergency) that access to the System and the Equipment will not
be given to any person or persons other than personnel authorized by PNV and
CfL. The Parties agree that the obligations imposed under this Section 3 will
apply to all confidential information, except where such confidential
information: (i) is or becomes public knowledge or publicly available to CfL or
PNV through no fault of CfL or PNV; (ii) is learned by CfL or PNV from a third
party entitled to disclose it; (iii) was already known to CfL or PNV as
evidenced by prior written records; (iv) is shown by CfL or PNV to have been
independently developed by CfL or PNV as evidenced by written records; or (v) is
or becomes publicly available as a result of issuance of a patent or publication
of a foreign pending patent application.
4. CfL Services to Be Provided by CfL and Financial Terms.
(a) Coin and Coinless Phones. Unless otherwise requested by
PNV, CfL will install coin and coinless phones and enclosures at Truckstops
pursuant to Section 1 of this Agreement on the following terms:
1. Equipment, Installation and Maintenance. CfL will
purchase, install and maintain all coin and coinless phones inside the
Truckstops as set forth below. Each phone will be connected to PNV's phone
switch or PNV's designated alternative switch. CfL will provide phone enclosures
as per PNV's written specifications.
a. Coin phones will consist of or provide
for: (i) either Intellicall smart phones or some other mutually agreeable
phones; (ii) a dedicated phone line for each phone where required; (iii) a
pass-through to trunk lines if switch not functioning; and (iv) 1+ calls routed
through a T-1 line. The minimum standard per Truckstop will be 10 coinphones in
an airport style sit-down booth or wall mount as per the specifications set
forth in each Letter Agreement, or in such other amounts and per such other
specifications as CfL and PNV may mutually agree from time to time to
effectively manage costs depending upon traffic patterns to a truckstop.
b. Coinless phones will be trim-line phones
(or other mutually agreed upon equipment) and have one dedicated phone line for
every two phones, unless otherwise required to comply with federal, state or
local regulations. Each phone will also have a data port. The minimum standard
per Truckstop will be 1 phone with a data port for each driver area restaurant
booth and a quantity of cordless phones to be determined by PNV, or in such
other amounts as CfL and PNV may mutually agree from time to time to effectively
manage costs depending upon traffic patterns to a Truckstop.
c. The Parties acknowledge and agree that
(i) the Parties anticipate that coin phones will generate an average of
approximately $100.00 of gross revenue
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<PAGE> 4
per month; and (ii) if the Parties mutually agree that the coin phones are not
generating anticipated gross revenues, the Parties may mutually agree to
substitute coinless phones for such coin phones.
CfL will track the usage of all coin phones via answer supervision software
resident in each pay phone and provide PNV with a monthly statement of sales
generated by each pay phone and verified by coin deposits containing the
information required by each Letter Agreement or such other information as may
be reasonably requested by PNV from time to time. Upon PNV's request, CfL will
collect coins from the coin phones. If CfL collects coins from the coin phones,
CfL will provide PNV with a monthly summary of such collections, in electronic
form and containing the information required by each Letter Agreement or such
other information as may be reasonably requested by PNV from time to time. If
PNV or any third party contracted by either PNV or a PNV customer collects coins
from the coin phones, PNV will provide CfL with a monthly summary of such
collections, in electronic form and containing the information required by each
Letter Agreement or such other information as may be reasonably requested by CfL
from time to time. CfL will provide PNV with a quarterly summary statement, in
electronic form and containing the information set forth on Exhibit B hereto or
such other information as may be reasonably requested by PNV from time to time,
of DAC charges from coin and coinless phones located at the Truckstops.
PNV members, holders of Frequent Fueler Cards issued by PNV and/or
third parties with whom PNV has entered into a contract relating to the issuance
of such cards, and holders of prepaid phone cards issued by PNV and/or third
parties with whom PNV has entered into a contract relating to the issuance of
such cards will be exempt from DAC charges from coin and coinless phones located
at the Truckstops. The number and location of coin and coinless phones at each
Truckstop will be mutually agreed upon by PNV and CfL.
2. Financial Terms. CfL will collect DAC charges and,
subject to the terms and conditions of this Agreement, coins from coin phones.
Except as provided in Section 4(c) below or in a Letter Agreement, CfL will pay
to PNV, 50% of gross revenues collected from: (i) DAC charges; and (ii) coin
phones, less (a) $40.00 per visit to a Truckstop by CfL (or its third party
vendor) for the purposes of collecting coins and (b) the amount of coins
collected and deposited by the Truckstop. CfL will pay PNV 20% of the remaining
50% of gross revenue collected from: (i) DAC charges; and (ii) coin phones,
after reduction from such gross revenue for: (a) line charges; (b) taxes; and
(c) 1+ charges. All commission checks from CfL will be sent to PNV together with
a summary statement including such information as may be reasonably requested by
PNV. All commissions are due by the 15th day of each month, following the
commission cycle. Subject to Section 14, delays in payment will be grounds for
termination of this Agreement.
(b) 0+ Calls. CfL will provide to PNV a list of each ANI
(i.e., reported phone number) in a form reasonably satisfactory for PNV to
submit such list to any provider of 0+ calls for payment to PNV of any
applicable commissions or allowances.
(c) Additional Matters Relating to DAC Charges.
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<PAGE> 5
1. CfL will collect DAC charges for other nonrelated
pay telephone ANI's on behalf of PNV. CfL will pay 90% of gross collected
revenues related to such DAC charges to PNV not later than fifteen (15) days
immediately after receipt by CfL.
2. Provided that not more than ten percent (10%) of
all dial around calls are redirected over the System (after inclusion of all
calls which are routed by PNV from the parking lot to incur DAC charges), PNV
shall not incur any charge to CfL for such calls. If the volume of such calls
exceeds ten percent (10%) of all dial around calls (after inclusion of all calls
which are routed by PNV from the parking lot to incur DAC charges), then PNV and
CfL shall mutually agree upon some reasonable compensation to CfL. PNV further
agrees to notify CfL of any exempt phone numbers.
5. Maintenance of the Equipment.
(a) Except as otherwise provided herein, CfL will maintain the
Equipment in a manner consistent with applicable industry standards. If a
problem arises with the Equipment, PNV will notify CfL by telephone and will
inform CfL of the nature of the problem, the location of the affected Truckstop
and the name of the Truckstop General Manager to be contacted by CfL, if
requested by PNV. There will be one point of contact for all repair calls at
888-221-1549 or such other toll free number as CfL may advise PNV to use from
time to time.
(b) If requested by PNV, CfL will respond by telephone to the
Truckstop General Manager within four (4) hours of the problem being reported by
PNV. Except as otherwise provided herein, with respect to all problems
determined by PNV to be a Major Outage (as defined below): (i) CfL will use its
best efforts to correct such Major Outage within twelve (12) hours of the
problem being reported by PNV; and (ii) in any event, CfL will correct such
Major Outage within twenty-four (24) hours of the problem being reported by PNV.
Except as otherwise provided herein, with respect to all problems determined by
PNV to be a Minor Outage (as defined below): (i) , CfL will use its best efforts
to correct such Minor Outage within thirty-six (36) hours of the problem being
reported by PNV and (ii) in any event, CfL will correct such Minor Outages
within forty-eight (48) hours of the problem being reported by PNV. CfL will be
deemed to have corrected a Major Outage if the problem is resolved to the extent
that such problem constitutes a Minor Outage and CfL continues to use its best
efforts to correct such resulting Minor Outage as soon as possible and, in any
event corrects such original problem within sixty (60) hours of the problem
being reported by PNV. PNV acknowledges and agrees that CfL may contact a
designated repair technician or dispatch a designated repair technician to
complete any necessary repairs to the Equipment. All other problems which do not
constitute either Major or Minor Outages, shall be resolved by CfL pursuant to
regularly scheduled maintenance calls within ten (10) days.
(c) Charges for repairs under Section 5(b) will be billed
directly to CfL and paid by CfL.
(d) For the purposes of this Agreement, the term "Major
Outage" means any interruption that causes a fifty percent (50%) or greater
reduction in the usual and customary level of coin and coinless phone service
provided at the affected Truckstop.
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<PAGE> 6
(e) For the purposes of this Agreement, the term "Minor
Outage" means any interruption that causes less than a fifty percent (50%) and
greater than ten percent (10%) reduction in the usual and customary level of
coin and coinless phone service provided at the affected Truckstop.
(f) For the purposes "repairs" of the System will include, but
not be limited to, telephone service, equal access problems, local and/or
carrier lines, customer complaints, malfunctioning equipment, condition of
equipment and call quality.
6. Responsibilities of PNV With Respect to The System.
(a) PNV will operate the System at the Truckstops at which the
Equipment is installed in a manner such that the Equipment will, upon
installation, remain connected to the System.
(b) PNV will provide (or cause the provision of) the necessary
telephone jacks (either adjacent to PNV equipment located at the Truckstop or at
the demarcation point for the local telephone service) sufficient for the
configuration of coin and coinless phones as contemplated by Section 4(a)(1).
(c) PNV will be solely responsible for payment of all
commission payments due to PNV customers, including, without limitation 0+
commissions.
7. Term. Subject to Section 14, the term of this Agreement, will be for
a period of four (4) years commencing on February 24, 1999 and terminating on
February 23, 2003 (the "Term").
8. Representations and Warranties of PNV.
(a) PNV is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full power and
authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by PNV has been duly authorized by all necessary action of PNV. This Agreement
and each of the other documents to be executed and delivered by PNV pursuant to
this Agreement have been duly executed and delivered by PNV and are the valid
and binding obligations of PNV enforceable in accordance with their respective
terms, subject only as to enforceability affected by bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and by general
equitable principles. The execution, delivery and performance of this Agreement
and the other documents to be executed, delivered and performed by PNV pursuant
to this Agreement will not: (i) conflict with or violate any provision of PNV's
organizational documents, or any law, ordinance or regulation or any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against PNV; or (ii) result in any
breach of or default under or cause the acceleration of performance of any
mortgage, contract,
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<PAGE> 7
agreement, indenture or other instrument which is either binding upon or
enforceable against PNV.
(c) PNV will obtain the approval, consent or waiver of any
other person or entity required for the execution, delivery or performance of
this Agreement.
(d) All of the information contained in the representations
and warranties of PNV set forth in this Agreement or in any of the documents
delivered or to be delivered herewith or after the execution hereof as set forth
in any provision of this Agreement is true, accurate and complete.
9. Representations and Warranties of CfL.
(a) CfL is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of South Dakota and
has full power and authority: (i) to enter into this Agreement; and (ii) to
carry out the other transactions and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by CfL has been duly authorized by all necessary action of CfL. This Agreement
and each of the other documents to be executed and delivered by CfL pursuant to
this Agreement have been duly executed and delivered by CfL and are the valid
and binding obligations of CfL enforceable in accordance with their respective
terms, subject only as to enforceability affected by bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and by general
equitable principles. The execution, delivery and performance of this Agreement
and the other documents to be executed, delivered and performed by CfL pursuant
to this Agreement will not: (i) conflict with or violate any provision of CfL's
organizational documents, or any law, ordinance or regulation or any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against CfL; or (ii) result in any
breach of or default under or cause the acceleration of performance of any
mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against CfL.
(c) CfL will obtain the approval, consent or waiver of any
other person or entity required for the execution, delivery or performance of
this Agreement.
(d) All of the information contained in the representations
and warranties of CfL set forth in this Agreement or in any of the documents
delivered or to be delivered herewith or after the execution hereof as set forth
in any provision of this Agreement is true, accurate and complete.
10. Right of First Refusal.
(a) CfL represents and warrants to PNV that neither CfL nor
any member of
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<PAGE> 8
CfL is currently subject to any right of first refusal in favor of any third
party with respect to any sale of any Equity Securities (as defined below), any
sale of CfL's assets, any merger or consolidation with any other entity which,
after such merger or consolidation, results in the current members of CfL owning
less than seventy percent (70%) of the membership interest in the merged or
consolidated entity, and/or any other similar transaction or series of
transactions that would have such effects.
(b) If CfL desires to: (i) sell or redeem any Equity
Securities (as defined below) resulting in a Change in Control (as defined
below), (ii) sell all or substantially all of its assets, (iii) merge or
consolidate with any other entity which, after such merger or consolidation,
results in the current members of CfL owning less than seventy percent (70%) of
the membership interest in the merged or consolidated entity, (iv) sell any
assets (including, without limitation, any Equipment) installed at any Truckstop
and/or assets reasonably necessary for the provision of CfL Services and/or
Telecommunications Services at such Truckstops, and/or (v) enter into any other
similar transaction (or any transactions or series of transactions that, during
any period of twelve (12) consecutive months, would have such an effect), CfL
will comply with the following:
(i) CfL will first deliver to PNV written notice (the
"Sales Notice") which (A) describes the proposed transaction, the name of the
third party with which CfL proposes to enter into such proposed transaction, the
form of consideration payable to CfL or its members pursuant to such proposed
transaction, and the payment terms pursuant to the such proposed transaction
(the "Third Party Transaction"); and (B) specifies the book value (as calculated
based upon straight line depreciation over five (5) years) of all of CfL's
assets (including, without limitation, any Equipment) installed at any Truckstop
and/or reasonably necessary for the provision of CfL Services and/or
Telecommunications Services at such Truckstops (the "CfL/PNV Assets"),
including, without limitation, descriptions of such CfL/PNV Assets, the
Truckstops at which such CfL/PNV Assets are located, the original purchase price
of such CfL/PNV Assets, and the date of the original purchase of such CfL/PNV
Assets. CfL will promptly provide PNV and its representatives with such
information regarding the Third Party Transaction and the CfL/PNV Assets and
access to the CfL/PNV Assets located at such Truckstops as PNV may reasonably
request to permit PNV to evaluate the Third Party Transaction, the CfL/PNV
Assets, and the information contained in the Sales Notice.
(ii) If, within thirty (30) days immediately after
PNV's receipt of the Sales Notice, PNV notifies CfL in writing (the "PNV
Notice") of its interest in purchasing the CfL/PNV Assets and no agreement
regarding the fair market value (the "Fair Market Value") of the CfL/PNV Assets
is obtained within the thirty (30) days following CfL's receipt of the PNV
Notice, PNV and CfL together will appoint an appraiser (the "Agreed Appraiser")
within ten (10) days following such thirty (30) day period, and such Agreed
Appraiser will then determine the Fair Market Value of the CfL/PNV Assets and
the related income stream, such determination as to the Fair Market Value to be
binding upon all parties. The Agreed Appraiser will have the right, during
regular business hours, to audit the books and records of CfL relating to the
CfL/PNV Assets for the sole purpose of determining the Fair Market Value of the
CfL/PNV Assets. Such determination by the Agreed Appraiser will be provided to
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<PAGE> 9
PNV and CfL in a written report within twenty (20) days following the
appointment of such Agreed Appraiser. The fees and expenses of the Agreed
Appraiser will be paid one-half by PNV and one-half by CfL.
(iii) Within thirty (30) days after determination of
the Fair Market Value either by agreement of PNV and CfL or by the Agreed
Appraiser as provided in the preceding paragraph, PNV may elect to either (A)
enter into a transaction with CfL on the terms of the Third Party Transaction,
or (B) purchase the CfL/PNV Assets at the Fair Market Value. If PNV elects to
purchase the CfL/PNV Assets, the purchase price of such CfL/PNV Assets will be
paid in cash at the closing. PNV may assign its rights pursuant to this Section
10 to any parent, subsidiary or affiliate of PNV.
(iv) If PNV fails to exercise its option by written
notice as provided in the preceding paragraph, then CfL may proceed with the
Third Party Transaction described in the Sales Notice with the third party
specified in the Sales Notice; provided, however, CfL must consummate such Third
Party Transaction within ninety (90) days after the end of the thirty (30) day
period described in the preceding paragraph or provide another Sales Notice to
PNV with respect to the transaction.
(v) As used herein, the term "Equity Securities" will
mean any membership interest in CfL of any class or series and any securities
which upon conversion or exercise would entitle the holder to receive any
membership interest in CfL, including, without limitation, any option, warrant
or convertible debt. As used herein, the term "Change in Control" will mean any
acquisition, issuance, redemption or sale of Equity Securities such that,
immediately after such acquisition, issuance, redemption, or sale, a holder of
the Equity Securities of CfL (and such holder's affiliates) holds a majority of
the Equity Securities of CfL.
11. Risk of Loss and Insurance; Indemnification.
(a) CfL will bear the risk of loss and hereby indemnifies and
holds harmless PNV for injury to persons or damage to property arising from the
existence, installation, operation or repair of, or otherwise in any way related
to, the Equipment and CfL Services (except to the extent such damage is
occasioned by the gross negligence or willful misconduct of PNV, its employees,
contractors or agents).
(b) PNV will be responsible for the maintenance, repair or
replacement of the Equipment resulting from damage or destruction caused by the
gross negligence or willful misconduct of PNV, its employees, contractors or
agents.
(c) CfL will maintain during the Term of this Agreement (or
any renewal term), at its sole cost and expense, comprehensive public liability
insurance in the minimum amount of $1,000,000 providing coverage at each
Truckstop at which the Equipment is installed against any claims covered under
Sections 11 (a) or (b) and will ensure that each Party is named as an additional
insured in respect of such insurance or is otherwise covered as its interest may
appear. CfL will provide PNV with evidence of insurance and thirty (30) days
prior written notice of cancellation or amendment to CfL's insurance policies.
-9-
<PAGE> 10
12. Force Majeure. Neither party will have any liability for the
failure to perform or a delay in performing any of its obligations if such
failure or delay is the result of any legal restriction, labor dispute, strike,
boycott, flood, fire, public emergency, revolution, insurrection, riot, war,
unavoidable mechanical failure, interruption in the supply of electrical power
or any other cause, not resulting from mechanical or system failures, beyond the
control of any party acting in a reasonable business-like manner, whether
similar or dissimilar to the causes enumerated above ("Force Majeure
Conditions"). If any Force Majeure Condition occurs, the affected Party will
give immediate notice to the other Party, and, if the Force Majeure Condition
continues for ninety (90) days, such other Party may elect, at its sole option,
to either to terminate the rights and obligations of each Party pursuant to this
Agreement with respect to the affected Truckstop(s) by written notice to the
affected Party.
13. Assignment.
CfL may, with the prior written consent of PNV, such consent not to be
unreasonably withheld, sell, assign, transfer or otherwise dispose of its
interest in this Agreement provided that said acquiror will: (i) not be the
owner or operator of a truckstop; (ii) assume all of CfL's rights and
obligations hereunder; and (iii) will be bound by the terms of this Agreement.
14. Breach.
(a) In the event that either party will fail in any material
respect to perform any obligation under this Agreement, the other party may in
writing notify the non-performing party that such failure constitutes a breach.
If the breach is not remedied or cured within thirty (30) days following receipt
of the notice of breach, without limiting any other remedy which may be
available, the non-breaching party may terminate this Agreement by notice to the
breaching party.
(b) Subject to the terms of Section 12, if CfL fails to
correct in a timely manner (pursuant to Section 5(b) of this Agreement) five (5)
Major Outages or ten (10) Minor Outages at a Truckstop during any twelve (12)
consecutive calendar months, then PNV may terminate the rights and obligations
of each Party pursuant to this Agreement with respect to all Truckstop(s) by
providing thirty (30) days prior written notice to CfL. For purposes of this
Agreement, if a Major Outage is not cured within the initial twenty-four (24)
hour period provided for in Section 5(b), each additional twenty-four (24) hour
period during which such Major Outage is not cured shall count as an additional
Major Outage for purposes of this Section 14(b). For example, if more than fifty
percent (50%) of any one of the Telecommunications Services are down at a single
Truckstop for forty-eight (48) hours, it shall count as two (2) Major Outages.
In addition, if a Truckstop terminates all or any portion of its contract with
PNV for any reason, PNV may terminate this Agreement as it relates to such
Truckstop(s).
(c) Subject to the terms of Section 12, if CfL fails to
correct, within the time period specified in Section 5(b) of this Agreement,
twenty-five (25) Minor Outages during any twelve (12) consecutive calendar
months, then PNV may terminate the rights and obligations of each Party pursuant
to this Agreement by thirty (30) days prior written notice to CfL. For purposes
of this Agreement, if a Minor Outage is not cured within the initial forty-eight
(48) hour
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<PAGE> 11
period during which such Minor Outage is not cured shall count as an additional
Minor Outage for purposes of this Section 14(c). For example, if less than fifty
percent (50%) but more than ten percent (10%) of any one of the
Telecommunications Services are down at a single Truckstop for seventy-two (72)
hours, it shall count as two (2) Minor Outages.
(d) CfL will be in breach under this Agreement if: (i) CfL
fails to pay any indebtedness to third persons when due and such failure
continues beyond any applicable grace period; (ii) proceedings in bankruptcy, or
for reorganization of CfL under the Bankruptcy Code, as amended, or under any
other laws, whether state or federal, for the relief of insolvent debtors, now
or hereafter existing, commences against CfL and is not discharged within sixty
(60) days of its commencement; or (iii) a receiver, custodian or trustee under
the Bankruptcy Code shall be appointed for CfL or for any substantial part of
its assets, or any proceedings shall be instituted for the dissolution or the
full or partial liquidation of CfL, and such receiver, custodian or trustee
shall not be discharged within ninety (90) days of his appointment, or such
proceedings shall not be discharged within ninety (90) days of their
commencement, or CfL shall discontinue business or materially change the nature
of its business.
15. PNV's Right to Purchase CfL/PNV Assets. If CfL breaches this
Agreement or this Agreement is terminated pursuant to the terms hereof, PNV
shall have the right to purchase the CfL/PNV Assets (at all Truckstops in the
case of breach and at all affected Truckstops in the case of termination) at
Fair Market Value (as determined by agreement of PNV and CfL or by an Agreed
Appraiser pursuant to the procedures described in Section 10(b)(ii) of this
Agreement); provided, however, that the purchase price of any phone enclosures
included among such CfL/PNV Assets will be the then book value (calculated based
upon straight line depreciation over a four (4) year period) of such phone
enclosures.
16. Ownership and Confidentiality. CfL recognizes and agrees that,
except as otherwise provided herein, PNV will, during the term of this Agreement
and thereafter, retain sole ownership of the System. CfL recognizes the
proprietary nature of the concept and the design of the System and the CfL
Services. Accordingly, except as otherwise provided herein, CfL and PNV agree to
maintain and cause each of its employees and agents to maintain and keep
strictly confidential the terms and provisions of this Agreement, and all
confidential information it obtains or receives in conjunction with the
operation of the System or the Telecommunication Services. CfL further agrees
that the "Park N' View" name and logo will be and remain the property of PNV and
all references by CfL to the System or the Telecommunication Services will
incorporate and/or refer to PNV by its full name (Park N' View), whether in
literature, electronic or print displays, articles, advertising, billboards,
banners or otherwise. The name, Park 'N View, is, or will be, a registered
service mark of PNV and to the extent required by PNV, CfL will execute a no
cost limited license agreement for the use of such service mark.
17. General Provisions.
(a) Notices. All notices required or permitted hereunder will
be in writing and, may either be delivered by overnight courier, transmitted by
facsimile, or delivered by the United
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<PAGE> 12
States Mail, postage prepaid, addressed as follows:
To PNV: Steve Conkling
President
Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Fax Number: (954) 745-7899
With a copy to: James M. O'Connell, Esq.
Kilpatrick Stockton LLP
4101 Lake Boone Trail,
Suite 400
Raleigh, North Carolina 27607
Fax Number: (919) 420-1800
To CfL: Tim Jones
CfL, LLC
725 North Derby Lane
North Sioux City, South Dakota 57049
Fax Number: 605-232-3534
With a copy to: Ted Kessner, Esq.
Crosby, Guenzel, Davis, Kessner & Kuester
Lincoln Benefit Building
134 South 13th Street, Suite 1400
Lincoln, Nebraska 68508-1981
Fax Number: 402-434-7300
All notices will be deemed delivered only upon actual receipt. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to the terms of this Section 16(a).
(b) Expenses. Each party agrees to pay, without right of
reimbursement from any other party, its costs relating to the preparation of
this Agreement and the performance of its obligations hereunder, including
without limitation, fees and disbursements of counsel, accountants and
consultants employed by such party in connection herewith.
(c) Books, Records and Payments. The books and records of CfL
and PNV pertinent to the revenue expenses and taxes with respect to the sale of
the CfL Services for any calendar month will be open for inspection and audit by
a third party representative of either CfL or PNV upon five (5) business days
notice to said party. Except as otherwise provided herein, all monies due to or
from either Party hereunder will be paid to the receiving Party on or before the
15th day of the month following the receipt of the same by the paying Party.
(d) Actions; Further Assurances. Subject to the terms and
conditions of this
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<PAGE> 13
Agreement, each party agrees to: (i) take or cause to be taken as promptly as
practicable all actions and obligations arising herein; and (ii) do or cause to
be done all things to fulfill and comply with its obligations or the obligations
of the other parties to consummate the transactions contemplated herein.
(e) Press Releases. PNV and CfL will consult with each other
as to the form and content of all press releases and other public disclosures of
matters relating to this Agreement, the System, the Equipment and the CfL
Services. Nothing in this section will prohibit PNV or CfL from making any
disclosure which its legal counsel deems necessary or advisable to fulfill such
party's disclosure obligations under applicable law. All public disclosures will
be transmitted by telecopier to the other party or its counsel for approval
prior to publication or dissemination.
(f) Section Headings. The section headings in this Agreement
are for convenience of reference only and will not be deemed to alter or affect
any provision hereof.
(g) Applicable Law. This Agreement will be governed by the
laws of the State of Florida.
(h) Schedules. The Schedules attached to this Agreement are
integral parts of this Agreement and all references to this Agreement will
include the Schedules.
(i) Modification. This Agreement will not be modified or
amended except by an instrument in writing executed by the Parties to this
Agreement.
(j) Successors And Assigns. This Agreement will apply to, and
be binding upon, the parties and their respective successors and permitted
assigns (as determined under Section 13).
(k) Severability. If any part or sub-part of this Agreement is
found or held to be invalid, the Parties will mutually agree to such changes as
are reasonably necessary such that the part or sub-part of this Agreement found
or held to be invalid is valid; provided, however, that if any such reasonably
necessary changes do not permit a Party to perform its obligations pursuant to
this Agreement such that such Party's revenues and/or expenses are reasonably
consistent with anticipated revenues and/or expenses, then such Party may
terminate this Agreement.
(l) Arbitration. Any controversy, dispute or question arising
out of, or in connection with, or in relation to this Agreement or the
interpretation, performance or non-performance or any breach thereof will be
determined by arbitration conducted in New York, NY or the home office of the
party not bringing the claim in accordance with the then existing rules of the
American Arbitration Association. PNV and CfL will each select one arbitrator,
and the two arbitrators will select a third with the same qualifications. Any
decision rendered will be binding upon the Parties, however, the arbitrators
will have no authority to grant any relief that is inconsistent with this
Agreement. The expense of arbitration will be shared equally by the Parties.
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<PAGE> 14
(m) Integration; Entire Agreement. This Agreement (including
Exhibits, Schedules, documents and instruments referenced herein) constitutes
the entire agreement among the Parties and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matters hereof.
(n) Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed will be deemed to be an
original and all of which together will constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 15
IN WITNESS WHEREOF, CfL and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
PARK 'N VIEW, INC., a
Delaware corporation
By: /s/
----------------------------
Steve Conkling, President
CfL, LLC, a South Dakota limited
liability company
By: /s/
----------------------------
Tim Jones
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<PAGE> 1
EXHIBIT 10.40
MARKETING AND ADVERTISING AGREEMENT
THIS MARKETING AND ADVERTISING AGREEMENT (this "Agreement") is entered
into this 26th day of April, 1999, by and between Park 'N View, Inc., a Delaware
corporation ("PNV"), with its headquarters at 11711 NW 39th Street, Coral
Springs, Florida 33065 and Volvo Trucks North America, Inc., a Delaware
corporation ("Volvo"), with its headquarters at 7825 National Service Road,
Greensboro, NC 27409.
WHEREAS, PNV has designed and developed the concept and equipment ("the
System") to provide certain telecommunications, data transmission and cable TV
and other services (the "Television and Telecommunications Services") and is in
the process of developing Internet access services (together with the Television
and Telecommunications Services, the "Services") at truckstops with which PNV
has (or from time to time will have) entered into contracts (the "Truckstops");
and
WHEREAS, Volvo desires to promote Volvo Products and the products of
certain third parties which Volvo and PNV shall mutually agree upon (including
Cummins engine products) (collectively, "Volvo Products") to PNV customers by
marketing the Volvo Products to PNV customers and PNV desires to promote its
Services to Volvo customers by marketing the Services to Volvo customers.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, Volvo and PNV (hereinafter collectively being referred to as
the "Parties"), intending to be legally bound, hereby mutually agree as follows:
1. Volvo Advertising.
(a) Broadcast Advertising.
(i) PNV hereby agrees to broadcast on its television DEN
channel (the "DEN Channel") certain advertisements for the Volvo Products (the
"Volvo Ads") which shall be supplied by Volvo to PNV at Volvo's sole expense and
shall be the sole property of Volvo, provided that PNV shall not broadcast Volvo
Ads for third party products if the broadcast of such Volvo Ads would violate
broadcast exclusivity rights PNV has granted or grants to other persons. If PNV
deems the Volvo Ads to be in poor taste or otherwise unsuitable for broadcast on
the DEN Channel, PNV shall inform Volvo and thereafter PNV and Volvo shall
cooperate to revise the content of the Volvo Ads so that the Volvo Ads are
suitable for broadcast on the DEN Channel. The terms "Volvo Products" and "Volvo
Ads" shall include ads for products or services placed by subsidiaries and
affiliates (both wholly-owned and partially-owned) of Volvo.
(ii) During each two (2) hour loop of taped video broadcast
transmitted on the DEN Channel by PNV, PNV agrees to broadcast up to
thirty-three minuets of Volvo Ads
<PAGE> 2
which shall be provided by Volvo in its sole discretion; provided that, during
the first year of the Term (as defined below), if PNV shall increase the length
of the loop of taped video broadcast, it shall play such additional Volvo Ads
that Volvo shall provide to PNV such that for every additional fifteen (15)
minutes of taped video broadcast, PNV shall play four (4) additional minutes of
Volvo Ads.
(iii) During the first year of the Term, PNV shall not accept
advertising or enter into any agreement to advertise products or services of
Volvo's competitors, defined as any other manufacturer of class 4-8 trucks, on
the DEN Channel. Thereafter, unless the Parties agree to extend this period of
exclusivity as provided in (iv) below, PNV may allow any person, corporation,
partnership or other entity in any trade category to advertise on the DEN
Channel.
(iv) Subject to Section 3, Volvo may elect to extend the
period of exclusivity through the second year of the Term, provided that Volvo
gives written notice to PNV of such election ninety (90) days prior to the first
anniversary of the date upon which this Agreement commences. If Volvo elects to
extend its period of exclusivity, its exclusive right to place banner
advertisements on PNV's Website (as defined below), as provided in subsection
(c) shall be likewise extended through the second year of the Term
(b) PNV Connections Magazine Advertising.
(i) During the Term, PNV hereby agrees to place in PNV
Connections Magazine, a monthly periodical published by PNV, the following
advertisements: (i) One (1) full-page advertisement for Volvo Products on the
back cover of PNV Connections Magazine; (ii) one (1) full page advertisement to
be placed inside PNV Connections Magazine; and (iii) four (4) advertisements
sized one-quarter of one magazine page to be placed in the program guide section
of PNV Connections Magazine (collectively, the "PNV Magazine Ads"). Except as
provided above, the placement of the PNV Magazine Ads in PNV Connections
Magazine shall be determined by the staff of PNV Connections Magazine. Volvo's
right to advertise Volvo Products in PNV Connections Magazine shall not be
exclusive. PNV shall not publish Volvo-placed advertisements for third-party
products in PNV Connections Magazine if the placement of such advertisements
would violate exclusivity rights PNV has granted or grants to other persons.
(ii) Volvo shall supply the PNV Magazine Ads in camera-ready
form to PNV at Volvo's sole expense and the PNV Magazine Ads shall be the sole
property of Volvo. If PNV deems the PNV Magazine Ads to be in poor taste or
otherwise unsuitable for publication in PNV Connections Magazine, PNV shall
inform Volvo and thereafter PNV and Volvo shall cooperate to revise the content
of the PNV Magazine Ads so that the PNV Magazine Ads are suitable for
publication in PNV Connections Magazine.
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<PAGE> 3
(c) Internet Advertising.
(i) PNV will provide banner space on pages of PNV's World Wide
Web site, www.ParkNView.com (the "PNV Website"), to Volvo for the Volvo
Products, provided that PNV shall not place advertisements on the PNV Website
for Volvo Products which are third party products if the placement of such
advertisements would violate exclusivity rights PNV has granted or grants to
other persons. The Volvo banner advertising shall appear on the top half of the
home page of PNV. Volvo may revise the content of the banner advertising at any
time, provided that it does not revise the banner more than one (1) time per
month.
(ii) During the first year of the Term, Volvo shall be the
only advertiser of Class 4 through 8 trucks on the top half of the above the
fold space on PNV's home page (i.e., the page located at the internet address
www.ParkNView.com). Thereafter, unless the Parties agree to extend the period of
exclusivity as provided in subsection (a) above, PNV may allow any person,
corporation, partnership or other entity in any trade category to place banner
advertisements on PNV's home page or otherwise on the PNV Website. Except as set
forth in this subsection(c), PNV shall have the right to allow any person,
corporation, partnership or other entity in any trade category to advertise
anywhere on PNV's Website.
(d) Voice Response Unit Advertising.
(i) At Volvo's option, PNV will include ten (10) second spots
on the messages PNV plays on its voice response unit ("VRU") which promote the
Volvo Ads on the DEN Channel. Such spots shall be included on any truck driver's
VRU messages no more than two (2) times per month.
2. Marketing PNV Services.
(a) Volvo may purchase twelve (12) month memberships for the Services
for resale to Volvo customers which shall consist of the level of services set
forth on Schedule A hereto. Volvo shall pay a fee of $15 per month for each such
membership, which shall be payable monthly in arrears on or prior to the tenth
day of the next succeeding month.
(b) If a Volvo customer is in breach of its agreement with Volvo, Volvo
may terminate such customer's membership at any time. Volvo shall provide PNV
five (5) days prior written notice that it intends to terminate such customer's
membership. Upon such termination, Volvo shall be relieved of its monthly
membership fee obligation to PNV.
(c) In connection with the sale of Volvo Class 8 trucks, PNV shall
allow Volvo dealers to purchase one (1) year memberships for the Services for
purchasers of Volvo Class 8 trucks at a fee of $250 per year per membership,
which shall be payable by the Volvo dealer to PNV at the time of the purchase of
the membership. The level of services to be provided in such membership is set
forth on Schedule A hereto.
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<PAGE> 4
d) PNV agrees that the Playboy channel and/or other adult entertainment
channels will not be offered or included in PNV's basic level of services.
3. Consideration.
In consideration of the foregoing, Volvo shall pay to PNV $600,000
during the Term, which amount shall be paid quarterly, payable on the first day
of each quarter, commencing on the date this Agreement commences. If Volvo
elects to extend its period of exclusivity, as provided in Section 2, for
advertising on the DEN Channel and the PNV Website during the second year of the
Term, Volvo shall pay to PNV an additional $300,000, which amount shall be paid
quarterly (in addition to other amounts payable to PNV), payable on the first
day of each quarter, commencing on the first anniversary of the date upon which
this Agreement commences.
4. Trademarks and Service Marks.
(a) The parties acknowledge that "Park 'N View" [or other mark to be
used that we have registered used] and "Volvo" [or any other registered mark we
will use] are registered trademarks or otherwise owned by PNV and Volvo
respectively.
(b) This Agreement shall not convey to PNV or Volvo any ownership
rights or right to use trademarks, service marks, trade names or logos ("Marks")
owned or used by the other party other than as permitted in the performance of
its obligations under this Agreement. Nothing shall give PNV or Volvo any right,
title or interest in or to any such Marks other than use pursuant to this
Agreement.
(c) All use of the parties' Marks hereunder shall inure to the sole
benefit of the owner of those Marks. The parties agree not to take any action
that would impair or challenge the other party's ownership or rights in and to
those Marks.
5. Term. The term of this Agreement, shall be for a period of two (2)
years (the "Term") commencing on June 1, 1999 unless the parties mutually agree
in writing that this Agreement shall commence at a later date; provided,
however, that this Agreement shall commence no later than July 1, 1999.
(a) In the event the average number of PNV's member activations falls
below 160,000 per month for three consecutive months, Volvo reserves the right
to terminate this Agreement. In the event of such termination, both parties will
be relieved of any further obligations contemplated by this Agreement. Volvo
shall have the right, upon reasonable advance notice, to audit PNV's books and
records to determine or verify activation or subscription rates.
6. Indemnification. Volvo shall be responsible for the contents of all
advertising provided by it, and agrees to indemnify and hold harmless PNV for
all claims, actions and suits arising therefrom. PNV shall be responsible for
the contents of all advertising provided
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<PAGE> 5
by it, and agrees to indemnify and hold harmless Volvo for all claims, actions
and suits arising therefrom.
7. Assignment. Each party may, with the prior written consent of the
other Party, such consent not to be unreasonably withheld, sell, assign,
transfer or otherwise dispose of its interest in this Agreement provided that
the said acquiror will (i) assume all of such Party's rights and obligations
hereunder; and (ii) will be bound by the terms of this Agreement.
Volvo shall also have the option during the first year of the Term,
without assigning its rights under this Agreement, to sell or transfer any
advertising services on the DEN Channel to Volvo's advertising partners,
provided that, (i) the price for such advertising services shall be the price
set forth on the then current rate card on the DEN Channel, unless PNV, it its
sole discretion allows the price to be less than the current rate card to
facilitate Volvo's key strategic partnerships or projects, (ii) such advertising
services notably feature Volvo Products, and (iii) the advertising services do
not violate broadcast exclusivity rights PNV has granted or grants to other
persons. During the second year of the Term, if Volvo does not have sufficient
advertising content to fill the time allotted for Volvo's broadcast
advertisements on the DEN Channel, Volvo shall first offer to sell such
advertising services on the DEN Channel to PNV on terms to be mutually agreed
upon by the parties. If PNV does not purchase such advertising services within
45 days of receiving such offer, Volvo may sell such advertising services to its
advertising partners provided that it complies with clauses (i) through (iii) of
the first sentence of this paragraph. Notwithstanding the foregoing, Volvo may,
with the prior written consent of PNV, which consent shall not to be
unreasonably withheld, sell a limited number of advertising services, as shall
be agreed upon by PNV and Volvo, on the DEN Channel which do not notably feature
Volvo products.
8. Breach. In the event that either party shall fail in any material
respect to perform any obligation under this Agreement, the other party may in
writing notify the non-performing party that such failure constitutes a breach.
If the breach is not remedied or cured within thirty (30) days following receipt
of the notice of breach, without limiting any other remedy which may be
available, the non-breaching party may terminate this Agreement by notice to the
breaching party.
9. Ownership and Confidentiality. Volvo recognizes and agrees that,
except as otherwise provided herein, PNV shall, during the term of this
Agreement and thereafter, retain sole ownership of the System. Volvo recognizes
the proprietary nature of the concept and the design of the System and the
Services. Accordingly, except as otherwise provided herein, Volvo and PNV agree
to maintain and cause each of its employees and agents to maintain and keep
strictly confidential the terms and provisions of this Agreement, and all
confidential information it obtains or receives in conjunction with the
operation of the System or the Services.
-5-
<PAGE> 6
10. General Provisions.
(a) Notices. All notices required or permitted hereunder shall
be in writing and, may either be delivered by overnight courier, transmitted by
facsimile, or delivered by the United States Mail, postage prepaid, addressed as
follows:
To PNV: Steve Conkling
President
Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Fax Number: (954) 745-7899
With a copy to: James M. O'Connell, Esq.
Kilpatrick Stockton LLP
P.O. Box 300004
Raleigh, North Carolina 27622
Fax Number: (919) 420-1800
To Volvo: Mike Delaney
Volvo Trucks North America, Inc.
7900 National Service Road
Greensboro, NC 27409
Fax Number: (336) 393-2277
With a copy to: General Counsel
Volvo Trucks North America, Inc.
7900 National Service Road
Greensboro, NC 27409
Fax Number: (336) 393-2009
All notices shall be deemed delivered only upon actual receipt. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to the terms of this Section 10(a).
(d) Actions; Further Assurances. Subject to the terms and
conditions of this Agreement, each party agrees to: (i) take or cause to be
taken as promptly as practicable all actions and obligations arising herein; and
(ii) do or cause to be done all things to fulfill and comply with its
obligations or the obligations of the other parties to consummate the
transactions contemplated herein.
(e) Press Releases. PNV and Volvo shall consult with each
other as to the form and content of all press releases and other public
disclosures of matters relating to this Agreement, the System and the Services.
Nothing in this section shall prohibit PNV or Volvo from making any disclosure
which its legal counsel deems necessary or advisable to fulfill such
-6-
<PAGE> 7
party's disclosure obligations under applicable law. All public disclosures
shall be transmitted by telecopier to the other party for approval prior to
publication or dissemination.
(f) Section Headings. The section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
(g) Applicable Law. This Agreement shall be governed by the
laws of the State of Florida.
(h) Schedules. The Schedules attached to this Agreement are
integral parts of this Agreement and all references to this Agreement shall
include the Schedules.
(i) Modification. This Agreement shall not be modified or
amended except by an instrument in writing executed by the Parties to this
Agreement.
(j) Successors And Assigns. This Agreement shall apply to, and
be binding upon, the parties and their respective successors and permitted
assigns (as determined under Section 7).
(k) Severability. If any part or sub-part of this Agreement is
found or held to be invalid, that invalidity shall not affect the enforceability
and binding nature of any other part of this Agreement.
(l) Arbitration. Any controversy, dispute or question arising
out of, or in connection with, or in relation to this Agreement or the
interpretation, performance or non-performance or any breach thereof may, by
mutual agreement, be determined by arbitration conducted in the home office of
the party not bringing the claim in accordance with the then existing rules of
the American Arbitration Association. PNV and Volvo shall each select one
arbitrator, and the two arbitrators shall select a third with the same
qualifications. Any decision rendered shall be binding upon the Parties,
however, the arbitrators shall have no authority to grant any relief that is
inconsistent with this Agreement. The expense of arbitration shall be shared
equally by the Parties.
(m) Integration; Entire Agreement. This Agreement (including
Schedules, documents and instruments referenced herein) constitutes the entire
agreement among the Parties and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matters hereof.
(n) Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Volvo and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
-7-
<PAGE> 8
WITNESSES:
PARK 'N VIEW, INC., a
Delaware corporation
_______________________________
_______________________________ By: /s/ Steve Conkling
-----------------------------------
Steve Conkling, President
VOLVO TRUCKS NORTH
AMERICA, INC.
_____________________________
_____________________________ By: /s/ Mike Delaney
-----------------------------------
Name: Mike Delaney
Title: VP - Marketing
-8-
<PAGE> 9
SCHEDULE A
PNV-VOLVO MEMBERSHIP DETAILS
The following Cable TV stations (or Comparable Stations):
================================================================================
Channel # Program
- --------------------------------------------------------------------------------
04 HBO
- --------------------------------------------------------------------------------
05 HBO2
- --------------------------------------------------------------------------------
06 HBO3
- --------------------------------------------------------------------------------
07 DISCOVERY
- --------------------------------------------------------------------------------
08 ESPN 2
- --------------------------------------------------------------------------------
09 FOX
- --------------------------------------------------------------------------------
10 DEN
- --------------------------------------------------------------------------------
11 CNN HN
- --------------------------------------------------------------------------------
12 WEATHER
- --------------------------------------------------------------------------------
13 ESPN
- --------------------------------------------------------------------------------
14 NBC
- --------------------------------------------------------------------------------
15 ABC
- --------------------------------------------------------------------------------
16 A&E
- --------------------------------------------------------------------------------
17 CBS
- --------------------------------------------------------------------------------
18 TNN
- --------------------------------------------------------------------------------
19 TNT
- --------------------------------------------------------------------------------
20 WGN
- --------------------------------------------------------------------------------
21 PNV
================================================================================
Long-distance Telephone Services:
15 minutes per month free
-9-
<PAGE> 1
EXHIBIT 10.41
VOLPE BROWN WHELAN & COMPANY, LLC
INVESTMENT BANKERS
One Maritime Plaza, San Francisco, CA 94111
(415) 274-4400 FAX (415) 986-6754
PERSONAL & CONFIDENTIAL
- -----------------------
May 12, 1999
Robert P. May
CEO
PNV.Net, Inc.
11711 NW 39th Street
Coral Springs, FL 33065
Dear Bob:
We are pleased to confirm the understanding and agreement under which
Volpe Brown Whelan & Company, LLC, a Delaware limited liability company
("VBW&C"), is engaged by PNV.Net, Inc., a Delaware corporation (the "Company").
1. ENGAGEMENT.
A. SCOPE OF ENGAGEMENT. The Company hereby engages VBW&C as the
Company's exclusive placement agent in connection with the proposed
offering by private placement of securities of the Company (the
"Offering") and as the Company's financial advisor in connection
with a possible Combination Transaction. For purposes of this
engagement letter, the term "Combination Transaction" shall mean any
transaction or series of related transactions whereby, directly or
indirectly, 50% or more of the voting stock of the Company is, or
all or substantially all of the business or assets of the Company
are, acquired in a purchase or exchange of stock or assets, or a
merger, consolidation or similar transaction.
It is currently understood that the final terms of the Offering will
be negotiated between the Company and the investors who purchase
securities (the "Stock") in the Offering, and will depend on a
variety of factors, including without limitation general economic
and market conditions existing at the time of the Offering. VBW&C
hereby accepts such engagement on a "best efforts" basis; this
engagement letter shall not give rise to any commitment by VBW&C to
purchase any of the Stock.
VBW&C shall not act as an agent of fiduciary and shall have no
authority to bind the Company.
B. SERVICES PROVIDED BY VBW&C. To the extent required or desirable in
connection with the Offering, the services provided by VBW&C to the
Company shall consist of the following:
i. Consulting with the Company's management regarding the form of
private placement memorandum, including any amendments or
supplements thereto, to be used in connection with the Offering
(the "Offering Memorandum");
ii. Identifying potential investors to participate in the Offering;
iii. Assisting the Company in structuring and negotiating the terms
of the Offering; and
iv. Performing certain other appropriate and customary placement
activities.
<PAGE> 2
PNV.Net, Inc.
May 12, 1999
Page 2
In addition, to the extent requested by the Company and required or
desirable in connection with a Combination Transaction, the services
provided by VBW&C to the Company will include:
v. Reviewing with the Board of Directors and members of management
the Company's financial plans, strategic plans, and business
alternatives;
vi. Assisting the Company in preparing an information memorandum for
distribution and presentation to potential purchasers and merger
candidates (collectively, "Potential Acquirors");
vii. Assisting the Company in the screening of interested Potential
Acquirors;
viii. Assisting the Company in structuring and negotiating the
financial aspects of the Combination Transaction;
ix. Performing certain other appropriate and customary financial
advisory services in connection with a Combination Transaction;
and
x. Being available to meet with the Company's Board of Directors.
C. CONFIDENTIALITY OF ADVICE. Any written or oral advice provided by VBW&C
to the Company in connection with VBW&C's engagement hereunder is
exclusively for the information of the Board of Directors and
management of the Company, and may not be disclosed to or relied upon
by any other party without the prior written consent of VBW&C. For
purposes of the preceding sentence, written or oral advice shall not
include any offering or other marketing materials intended for
distribution to third parties. Any description of or reference to VBW&C
in the Offering Memorandum or other materials provided to prospective
investors or other third parties must be approved by VBW&C prior to its
use, which approval will not be unreasonably withheld.
D. OTHER DISCUSSIONS AND NEGOTIATIONS. During the term of VBW&C's
engagement hereunder, the Company will notify VBW&C promptly following
any discussion with any party regarding any transaction similar to the
Offering or Combination Transaction or any transaction that, if
consummated, could have a material effect on the consummation of the
Offering or Combination Transaction. Furthermore, as part of this
engagement with VBW&C, the Company agrees to notify VBW&C of any
currently existing discussions with third parties regarding any
transaction that, if consummated, could have a material effect on the
consummation of the Offering or Combination Transaction. During the
term of VBW&C's engagement hereunder, the Company will promptly inform
VBW&C of any inquiry received by the Company from any party regarding
any transaction similar to the Offering or Combination Transaction,
that, if consummated, could have a material effect on the consummation
of the Offering or Combination Transaction. It is understood and agreed
that at all times, the Company shall have the right to approve or
disapprove the terms and conditions of the Offering, any Combination
Transaction or any other transaction.
E. OTHER ACTIVITIES OF VBW&C. VBW&C and its affiliates are engaged in
investment banking, financial advisory services, securities trading and
brokerage activities. In the ordinary course of business, subject to
compliance with applicable law, VBW&C or its affiliates may at any time
hold long or short positions, and may trade or otherwise effect
transactions, for their own accounts or the accounts of others, in
securities of a potential investor, a potential acquiror or any other
entity. Following the public announcement of the proposed Offering or
Combination
<PAGE> 3
PNV.Net, Inc.
May 12, 1999
Page 3
Transaction, VBW&C may place advertisements in financial and other
newspapers and publications at its own expense describing its services
to the Company hereunder.
2. COMPENSATION AND EXPENSES.
A. FEES. As compensation for the services provided by VBW&C hereunder,
the Company shall pay the following fees ("Fees") to VBW&C:
i. Upon execution of this engagement letter, an initial Fee of
$50,000, it being understood and agreed that such initial Fee
will be credited against any other compensation due VBW&C under
Section 2.A.ii;
ii. Upon each closing of the Offering, a Fee equal to 6.0% (six
percent) of the total value of the consideration received by
the Company (including without limitation the amount of bridge
loans or other indebtedness of the Company converted into
Stock) in such closing ("Gross Proceeds");
iii. Upon the closing of a Combination Transaction during the term
of VBW&C's engagement hereunder or at any time within twelve
(12) months following the termination of such engagement, an
additional fee based upon the Aggregate Value of the
Combination Transaction, as set forth below, it being
understood and agreed that (i) the payment of such fee shall be
made a condition to the closing of the Combination Transaction,
which condition shall be for the benefit of VBW&C and shall not
be waived by the Company and (ii) in no event shall such fee be
less than $750,000.
AGGREGATE VALUE OF COMBINATION
TRANSACTION
(IN MILLIONS) FEE PERCENTAGE
---------------------------------- -------------------------
up to $200 1.25 %
plus, for amounts > $200 and <$400 1.0 %
plus, for amounts >$400 0.75 %
"Aggregate Value" shall mean the value, at the date of the
closing of the Combination Transaction, of all cash, securities
and other property to be received by the Company or its
stockholders in connection with the Combination Transaction,
including the total amounts received by holders of warrants,
convertible securities, options or stock appreciation rights of
the Company, whether vested or unvested, and all amounts paid
to holders of any debt of the Company. Aggregate Value shall
also include any indebtedness for money borrowed that is
assumed in connection with the Combination Transaction, as well
as any earnout or contingent payment. The earnout or contingent
payment will be valued at closing based on the basecase
financial plan put forth by the Company. In calculating
Aggregate Value, the value of any securities that are freely
tradeable in an established public market will be determined on
the basis of the average of the closing prices of such
securities for the five trading days ending on the third
trading day prior to the closing date, and the value of any
other securities will be determined based on the fair market
value of such securities on the closing date, as determined in
good faith and upon mutual agreement of VBW&C and the Company.
In the event that the Combination Transaction is the result of
a combination or series of transactions, the Aggregate Value of
all such transactions shall be determined and the applicable
fee paid on the first closing date of the series of
transactions. All present value calculations will utilize a
discount rate equal to the prime rate announced in THE WALL
STREET JOURNAL on the third business day preceding the closing
date.
<PAGE> 4
PNV.Net, Inc.
May 12, 1999
Page 4
All such amounts shall be payable by check or wire transfer of
immediately available funds to VBW&C. The amounts due VBW&C hereunder
shall not be reduced as a result of any obligation the Company may now
or hereafter incur to any other financial advisor, broker or finder.
In addition, in connection with any other private financing that is not
the subject of a separate engagement letter with VBW&C and which is
engaged in by the Company at any time within eighteen (18) months
following the completion of a private placement and termination of
VBW&C's engagement hereunder or within 3 months following a termination
by VBW&C where a private placement had not been completed, VBW&C will
receive a Fee determined in accordance with Section 2.A.ii with respect
to securities purchased by investors who invested in a private
placement completed during the term of VBW&C's engagement or with whom
VBW&C had contact during the term of VBW&C's engagement hereunder.
All of the above compensation shall be payable when due by check or
wire transfer of immediately available funds to VBW&C. The amounts due
VBW&C hereunder shall not be reduced as a result of any obligation the
Company may or hereafter incur to any other placement agent, broker or
finder.
B. WARRANTS. Upon each closing of the Offering, the Company will issue to
VBW&C warrants to purchase shares of Stock at the price of the shares
issued in the Offering with an aggregate strike price totaling 3.0% of
the Gross Proceeds for an offering of up to or equal to $10.0 million,
2.5% of the Gross Proceeds for an offering of greater than $10 and less
than or equal to $20.0 million, and 2.0% of the Gross Proceeds for an
offering of greater than $20 million received by the Company. Such
warrants will have a term of five (5) years, will have the same
registration rights as are granted with respect to the Stock sold in
the closing, will be exercisable in whole or in part for cash or by net
exercise. In addition, in connection with any other private financing
that is not the subject of a separate engagement letter with VBW&C and
which is engaged in by the Company at any time within eighteen (18)
months following the completion of a private placement and termination
of VBW&C's engagement hereunder or within 3 months following a
termination by VBW&C where a private placement had not been completed,
VBW&C will receive a Fee determined in accordance with Section 2.A.ii
with respect to securities purchased by investors who invested in a
private placement completed during the term of VBW&C's engagement or
with whom VBW&C had contact during the term of VBW&C's engagement
hereunder.
C. EXPENSES. Whether or not the Offering or any Combination Transaction is
consummated, the Company will reimburse VBW&C for all reasonable
out-of-pocket costs and expenses incurred by VBW&C in connection with
the services to be rendered by VBW&C hereunder, including without
limitation fees and expenses of legal counsel and other professional
advisors and travel expenses; provided, however, that in no event shall
such expenses exceed an aggregate of $20,000 without prior approval of
the Company. In addition, if VBW&C or any of its personnel becomes
involved in any judicial, administrative or other action, suit,
hearing, investigation or similar proceeding in connection with the
Offering or VBW&C's engagement hereunder other than a proceeding for
which reimbursement is provided under the indemnification provisions
hereof, the Company will reimburse VBW&C for all reasonable
out-of-pocket costs and expenses incurred in connection therewith, and
will also pay to VBW&C a per diem charge of $2,000 per person per day.
The foregoing costs, expenses and charges will be paid by the Company
to VBW&C promptly upon receipt by the Company of an invoice(s) from
VBW&C setting forth in reasonable detail the items requiring
reimbursement or payment.
<PAGE> 5
PNV.Net, Inc.
May 12, 1999
Page 5
3. OFFERING TO PROSPECTIVE INVESTORS; COMPLIANCE WITH SECURITIES LAWS.
The Company reserves the right to reject an investment from any prospective
investor. The Company will provide VBW&C with a list of the name and state of
residence of each person to whom an offer to participate in the Offering is to
be made by or on behalf of the Company, other than by VBW&C, prior to the making
of any such offer. Each of the Company and VBW&C agrees to conduct the Offering
in a manner intended to qualify for the exemption from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) of the Securities Act and Rule 506
of Regulation D promulgated thereunder. Each of the Company and VBW&C agrees to
limit offers to sell, and solicitations of offers to buy, securities of the
Company in connection with the Offering to persons reasonably believed by it to
be "accredited investors" within the meaning of Rule 501(a) of the Securities
Act. Each of the Company and VBW&C agrees to conduct the Offering in a manner
intended to comply with the registration or qualification requirements, or
available exemptions therefrom, under applicable state "blue sky" laws and
applicable securities laws of other jurisdictions. The Company will not, for a
period of six months following the closing date of the Offering, offer for sale
or sell any securities unless, in the opinion of the Company's legal counsel,
concurred with by VBW&C or its counsel, such offering will not cause the
issuance of securities pursuant to the Offering to be subject to the
registration or qualification requirements of applicable federal securities
laws, state "blue sky" laws or the securities laws of any other jurisdiction (by
integration with any other offering of securities or otherwise). Other than as
previously disclosed to VBW&C in writing, the Company has not engaged in any
offer or sale of securities during the six months prior to the date of this
engagement letter.
4. DUE DILIGENCE.
The Company shall cooperate with VBW&C in connection with, and shall make
available to VBW&C such documents and other information as VBW&C shall
reasonably request to satisfy, its due diligence requirements.
5. CLOSING DOCUMENTS.
The Company will, at each closing of the Offering, furnish VBW&C with the same
favorable opinion of its counsel as is furnished to the investors participating
in such closing, together with a letter from such counsel that its opinion to
investors may be relied upon by VBW&C as if addressed to VBW&C. In addition, at
each closing the Company will provide VBW&C with the same certificates of the
officers of the Company as are furnished to the investors and such other
certification and documents as VBW&C or its counsel may reasonably request, in
form and substance satisfactory to VBW&C and its counsel.
6. INFORMATION PROVIDED TO VBW&C.
The Company will cooperate with and make available to VBW&C all information that
VBW&C reasonably requests in connection with the Offering, Combination
Transaction and VBW&C's engagement hereunder, including without limitation
information concerning the Company's business, assets, operations, financial
condition and plans. It is understood and agreed that in performing its services
hereunder, VBW&C will rely upon the accuracy and completeness of, and shall have
no duty to investigate or verify, public reports of the Company and information
provided to VBW&C, whether in written, oral or other form, by or on behalf of
the Company.
7. TERMINATION.
VBW&C's engagement hereunder shall continue from the date hereof until
terminated by either party, with or without cause, by written notice to the
other party of such termination. The termination of such engagement shall not
result in any liability or obligation of either party to the other. In addition,
in connection with any other private financing that is not the subject of a
separate engagement letter with VBW&C and which is engaged in
<PAGE> 6
PNV.Net, Inc.
May 12, 1999
Page 6
by the Company at any time within eighteen (18) months following the completion
of a private placement and termination of VBW&C's engagement hereunder or
within 3 months following a termination where a private placement had not been
completed, VBW&C will receive a Fee determined in accordance with Section
2.A.ii with respect to securities purchased by investors who invested in a
private placement completed during the term of VBW&C's engagement or with whom
VBW&C had contact during the term of VBW&C's engagement hereunder.
8. INDEMNIFICATION.
VBW&C and the Company hereby agree to the terms set forth in EXHIBIT A hereto,
which is expressly made a part of this engagement letter.
9. MISCELLANEOUS.
A. Notices. All notices or communications hereunder will be in writing
and mailed or delivered as follows:
If to VBW&C: Volpe Brown Whelan & Company, LLC
One Maritime Plaza, 11th Floor
San Francisco, CA 94111
Attn: Kenneth B. Sawyer
If to the Company: PNV.Net, Inc.
11711 NW 39th Street
Coral Springs, FL 33065
Attn: Robert P. May
B. SURVIVAL. Notwithstanding anything herein to the contrary, the
representations, warranties and covenants set forth herein will
remain in full force and effect regardless of any investigation made
by or on behalf of VBW&C, any investor or any other entity or
persons and will survive delivery of any payment for the Stock; and
the compensation, reimbursement, indemnification, contribution and
confidentiality provisions hereof shall survive any expiration or
termination of VBW&C's engagement hereunder.
C. GOVERNING LAW. This engagement letter, including the exhibits
hereto, shall be governed by and construed in accordance with the
internal laws of the State of Delaware applied to contracts made and
to be performed in California between California residents, without
regard to any conflict of laws provisions.
D. CAPTIONS. The captions in this engagement letter are used for
convenience only, and shall not be considered in interpreting this
engagement letter.
E. COUNTERPARTS. This engagement letter may be executed in
counterparts, all of which together shall constitute a binding
agreement between VBW&C and the Company.
F. DATE OF ENGAGEMENT LETTER. All references herein to the date of this
engagement letter shall be deemed to mean the date on which this
letter is executed by the Company as set forth below.
G. ENTIRE AGREEMENT. This engagement letter, together with the exhibits
hereto, contains the entire agreement between the Company and VBW&C
concerning the subject matter hereof and supersedes any prior
understanding or agreement between them with respect thereto. Any
<PAGE> 7
PNV.Net, Inc.
May 12, 1999
Page 7
waiver of any right or obligation hereunder must be in writing
signed by the party against whom enforcement is sought.
Please confirm your agreement to the foregoing by signing and
returning to us the enclosed duplicate copy of this letter.
Sincerely,
VOLPE BROWN WHELAN & COMPANY, LLC
By: /s/ (ILLEGIBLE)
-----------------------
Date: 5/19/99
-----------------------
ACCEPTED AND AGREED:
PNV.Net, Inc.
By: /s/ R. May
--------------------------
Title: CEO
--------------------------
Date: 5/29/99
--------------------------
<PAGE> 8
PNV.Net, Inc.
May 12, 1999
Page 8
EXHIBIT A
This Exhibit A is entered into pursuant to, and is made a part of, the
attached engagement letter between VBW&C and the Company. Capitalized terms used
and not defined in this Exhibit A shall have the meanings assigned to them in
the engagement letter.
The Company agrees to indemnify and hold harmless VBW&C, its
affiliates, and each of their respective partners, directors, officers, agents,
consultants, employees, advisors, representatives and controlling persons (each
an "Indemnified Person") from and against any claims, losses, damages, expenses
or liabilities (collectively, "Losses"), including without limitation legal fees
(subject to the limitations set forth below), incurred in connection with
investigating, preparing, defending, paying, settling or compromising any
action, claim or proceeding (whether or not in connection with any pending or
threatened litigation in which any Indemnified Person is a named party) to which
any Indemnified Person may become subject and which is related to or arises out
of the engagement letter or the transactions contemplated thereby. The Company
will not, however, be responsible to an Indemnified Person with respect to any
Losses to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such Losses resulted primarily from actions
taken or omitted to be taken by such Indemnified Person due to the Indemnified
Person's gross negligence or bad faith.
The Company will reimburse each Indemnified Person for Losses as such
Losses are incurred or paid, notwithstanding the absence of judicial
determination as to the proprietary or enforceability of the Company's
obligation to reimburse such Indemnified Person for such Losses and the
possibility that such payments might later be held by a court of competent
jurisdiction to have been improper. To the extent that any such interim
reimbursement is so held to have been improper, the Indemnified Person shall
promptly return it to the Company, together with interest, compounded annually,
equal to the prime rate announced from time to time by Bank of America, San
Francisco, California.
If the indemnification provided for herein should be, for any reason
whatsoever, unenforceable, unavailable or otherwise insufficient to hold each
Indemnified Person harmless, the Company shall pay to or on behalf of each
Indemnified Person contributions for Losses so that the Indemnified Person
ultimately bears only a portion of such Losses as is appropriate (i) to reflect
the relative benefits received by such Indemnified Person on the one hand and
the Company on the other hand in connection with the engagement letter and the
transactions contemplated thereby or (ii) if the allocation on the basis set
forth in clause (i) above is not permitted by applicable law, to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Indemnified Person and the Company as well as any other relevant
equitable considerations; provided, however, that in no event shall the
aggregate contribution of all Indemnified Persons to all Losses exceed the
amount of the fees actually received by VBW&C pursuant to the engagement letter.
The respective relative benefits received by all Indemnified Persons and the
Company shall be deemed to be in the same proportion as the aggregate fee paid
to VBW&C pursuant to the engagement letter bears to the total consideration paid
or contemplated to be paid or received by the Company or its stockholders, as
the case may be, in connection with the Combination Transaction or any similar
transaction referred to in the engagement letter, whether or not such
transaction is consummated. The relative fault of each Indemnified Person and
the Company shall be determined by reference to, among other things, whether the
actions or omissions to act were by such Indemnified Person or the Company, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action or omission to act. Notwithstanding the
foregoing, no Indemnified Person shall have any obligation to investigate or
verify the information provided to VBW&C in connection with the provision of its
financial advisory services under the engagement letter, and the Company shall
be solely liable for any Losses related to or arising out of the use of such
information that is inaccurate for any reason in connection with the services
provided under the engagement letter.
<PAGE> 9
PNV.Net, Inc.
May 12, 1999
Page 9
The Company also agrees that no Indemnified Person shall have any
liability to the Company or its affiliates, directors, officers, employees,
agents, consultants, advisors, representatives, control persons or stockholders,
directly or indirectly, related to or arising out of the engagement letter or
the transactions contemplated thereby, except Losses incurred by the Company to
the extent a court of competent jurisdiction shall have determined by a final
judgment that such losses resulted primarily from actions taken or omitted to be
taken by such Indemnified Person due to such Indemnified Person's gross
negligence or bad faith. In no event, regardless of the legal theory advanced,
shall any Indemnified Person be liable for any consequential, indirect,
incidental or special damages of any nature.
In case any proceeding shall be instituted involving any Indemnified
Person, such Indemnified Person shall promptly notify the Company in writing.
The failure of an Indemnified Person to provide such prompt notice shall not
reduce such Indemnified Person's right to indemnification or contribution
hereunder to the extent that such failure does not materially prejudice the
ability to defend such proceeding. Upon the request of VBW&C, the Company shall
retain counsel reasonably satisfactory to VBW&C to represent the Indemnified
Parties and any others the Company may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person, except to the extent that (i) the Company and
Indemnified Person shall have mutually agreed to the retention of such counsel
at the Company's expense or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Company or any others the
Company may designate and one or more Indemnified Persons, and representation of
the Indemnified Persons and such other parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. In
any case in which one or more Indemnified Parties are entitled to separate
counsel due to such actual or potential differing interests, the Company shall
not be liable for the expenses of more than one separate counsel, and such
counsel shall be designated in writing by VBW&C. The Company shall not be liable
for any settlement of any proceeding effected without its written consent, which
consent will not be unreasonably withheld. The Company shall not, without the
prior written consent of the Indemnified Person, effect any settlement of, or
consent to the entry of any judgment in connection with, any pending or
threatened proceeding in respect of which such Indemnified Person is or could
have been a party and indemnity or contribution could have been sought hereunder
by such Indemnified Person, unless such settlement or judgment includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of the proceeding.
The obligations of the Company referred to above shall be in addition
to any rights that any Indemnified Person may otherwise have and shall inure to
the benefit of and be binding upon any successors, assigns, heirs and personal
representatives of any Indemnified Person or the Company.
VOLPE BROWN WHELAN & COMPANY, LLC
By: /s/ (ILLEGIBLE)
-------------------------
Date: 5/19/99
-----------------------
AGREED AND ACCEPTED:
PNV.Net, Inc.
By: /s/ R. May
----------------------
Title: CEO
----------------------
Date: 5/29/99
----------------------
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made and entered into effective the
24th day of May, 1999, by and between Park `N View, Inc., a Delaware corporation
(the "Company") and Steven Yevoli (the "Executive").
WHEREAS, the Company is engaged in the business of developing and
providing telecommunications, data transmission, internet, cable television and
other services to truckstops, truckdrivers and truck fleet owners; and
WHEREAS, Employee desires to work for the Company under the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Executive and the Company agree as follows:
1. Term of Agreement. The term of this Agreement shall commence as of
the date and year first above written (the "Effective Date") and shall remain in
effect for the duration of the Executive's employment with the Company
(hereinafter "Term of Agreement"). The Executive's employment with the Company
and the Term of Agreement shall continue until terminated with or without cause
by either party immediately upon giving the other party written notice thereof,
or upon verbal notice confirmed thereafter in writing. Nothing herein shall be
understood as modifying or otherwise altering the Executive's at-will
relationship or in any other way creating a contract of employment with the
Executive for any stated term.
2. Position and Responsibilities. The Executive shall be employed as
Vice President, New Media and E-Business of the Company. While so employed, the
Executive agrees to devote his full working time and attention to carrying out
his duties and responsibilities under this Agreement and shall use his best
efforts, skills and abilities to further the interests of the Company. While
employed by the Company, the Executive may not work for any other entity, in any
capacity, without the prior express written consent of the Company. The
Executive agrees to comply with all policies, standards and regulations of the
Company now existing or hereafter promulgated.
3. Location. The Executive acknowledges that he will work primarily out
of New York and will manage the Company's New York presence with respect to New
Media and E-Business. The Executive further acknowledges that the Company may,
in its discretion, change the location at which the Executive is required to
perform his duties under this Agreement and may require the Executive to change
his residence to live in a location other than his current home in New York. In
the event the Company does require the Executive to change his residence during
the Term of Agreement, the Company shall reimburse the Executive for reasonable
moving expenses.
<PAGE> 2
4. Compensation and Related Matters.
(a) Salary. During the Term of Agreement, the Company shall
pay to the Executive a salary at a rate of One Hundred Thirty-Five Thousand
Dollars ($135,000.00) per annum in equal installments on the fifteenth and last
day of each month in arrears, which salary may be increased in the sole
discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee") from time to time based on periodic performance
reviews (the "Base Salary").
(b) Bonus. For each fiscal year during the Term of Agreement,
the Executive shall be eligible for an incentive bonus for such fiscal year (a
"Bonus") upon satisfaction (as determined by the Compensation Committee in its
discretion) of goals and objectives specified by the Chief Executive Officer of
the Company. The Executive's Bonus shall be targeted at forty-five percent (45%)
of Executive then-current Base Salary but may be increased or decreased by the
Compensation Committee based upon Executive's achievements. For the period
beginning on the Effective Date and ending June 30, 1999, the Executive shall be
eligible for such Bonus as may be recommended by the Compensation Committee and
approved by the Board of Directors of the Company (the "Board").
(c) Stock Options. The Company shall grant a nonqualified
stock option to the Executive substantially in the form of the nonqualified
stock option award agreement attached hereto as Exhibit A, which generally
provides that the Company shall grant Executive nonqualified stock options for
80,000 shares of common stock at an exercise price of Five Dollars ($5) per
share. The options will vest subject to Executive's continued employment with
the Company, the terms of the Company's equity compensation plan and the award
agreement evidencing the options at the following schedule: 16,000 shares will
vest on the Effective Date; an additional 16,000 share will vest on the first
anniversary of the Effective Date; an additional 16,000 shares will vest on the
second anniversary of the Effective Date, an additional 16,000 shares will vest
on the third anniversary of the Effective Date; and the last 16,000 shares will
vest on the fourth anniversary of the Effective Date.
(d) Performance-Based Stock Options. The Company shall grant a
nonqualified stock option to the Executive substantially in the form of the
nonqualified stock option award agreement attached hereto as Exhibit B, which
generally provides that the Company shall grant Executive nonqualified stock
options for 25,000 shares of common stock at an exercise price of Five Dollars
($5) per share. The options will vest, subject to Executive's continued
employment with the Company, the terms of the Company's equity compensation plan
and the award agreement evidencing the options at the following schedule: (i)
12,5000 shares will vest upon meeting certain performance achievements and
milestones established by the Chief Executive Officer for the fiscal year ended
June 30, 2000; and (ii) 12,5000 shares will vest upon meeting certain
performance achievements and milestones established by the Chief Executive
Officer for the fiscal year ended June 30, 2001.
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(e) Travel Expenses. The parties acknowledge that the
Executive may continue to maintain his home in New York for some time after the
Executive commences performance under this Agreement. The Company shall
reimburse the Executive for air travel and related expenses by Executive between
the Company's offices in Coral Springs, Florida and the Executive's residence
and/or office in New York.
(f) Business Expenses. During the Term of Agreement, the
Company shall reimburse the Executive for all reasonable business expenses
incurred by the Executive in performing services hereunder, including travel
expenses while away from home on business, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by the Company.
(g) Vacation. In addition to all paid Company holidays, the
Executive shall be entitled to up to twenty (20) business days paid vacation in
each full calendar year and accrued in accordance with Company policy. Any
vacation days accrued, but not used, in any calendar year shall be forfeited
without payment therefor. The Executive shall be entitled to a pro rata portion
of his vacation entitlement for the calendar year 1999.
(h) Other Benefits. The Executive shall be eligible to
participate in the Company's retirement and welfare benefit plans under the
terms and conditions established by the applicable plan documents.
5. Termination.
(a) The Company shall have the right to terminate the
Executive's employment at any time for any reason. If the Company terminates the
employment of the Executive, the Term of Agreement shall terminate immediately
thereafter and the Company shall pay the Executive the portion of his Base
Salary in effect at the time of termination as he may be entitled to receive for
services rendered prior to the date of such termination and for any accrued but
unused vacation. The Executive shall not be entitled to any Bonus, pro rata or
otherwise, upon termination of his employment and the Term of Agreement.
(b) The Executive shall have the right to voluntarily
terminate his employment at any time for any reason. If Executive terminates his
employment, the Term of Agreement shall terminate immediately thereafter and the
Company shall pay the Executive the portion of his Base Salary in effect at the
time of termination as he may be entitled to receive for services rendered prior
to the date of such termination and for any accrued but unused vacation. The
Executive shall not be entitled to any Bonus, pro rata or otherwise, upon
termination of employment and the Term of Agreement.
6. Representations.
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<PAGE> 4
(a) The Executive warrants and represents that the Executive's
performance of all of the terms of this Agreement and as an employee does not
and will not breach any agreement to keep in confidence proprietary information
acquired by the Executive in confidence or in trust prior to the Executive's
employment by the Company. The Executive represents that the Executive has not
entered into, and agrees not to enter into, any agreement either oral or written
in conflict herewith.
(b) The Executive warrants and represents that the Executive
has not brought and will not bring with the Executive to the Company, or use in
the performance of the Executive's responsibilities for the Company, any
materials or documents of a former employer which are not generally available to
the public, unless the Executive has obtained written authorization from the
former employer or other owner for their possession and use and provided the
Company with a copy of such authorization.
(c) The Executive understands that during the Executive's
employment for the Company the Executive is not to breach any obligation of
confidentiality that the Executive has to a former employer or any other person
or entity.
7. Other Agreements. This Agreement supersedes all prior agreements and
understandings, oral or written, between the Company and the Executive with
respect to the subject matter hereof. Notwithstanding the foregoing, Executive
will adhere to and honor all obligations to the Company as described in the
Confidentiality and Assignment of Inventions Agreement attached hereto as
Exhibit C and executed simultaneously herewith.
8. Amendment. No change, modification, termination or attempted waiver
of any of the provisions of this Agreement shall be binding upon any party
hereto unless reduced to writing and signed by the party against whom
enforcement is sought.
9. Assignment. The Company shall have the right to assign this contract
to a successor or surviving entity, and all covenants and agreements hereunder
shall inure to the benefit of and be enforceable by or against its successors
and assigns. The Executive's obligations under this Agreement shall not be
transferable by assignment or otherwise by the Executive and any attempt to do
any of the foregoing shall be null and void.
10. Counterparts. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and all of
which, together, shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without reference to its
conflict of law provisions.
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12. Venue. Any litigation under this Agreement may be brought by the
Company in the State of Florida, notwithstanding that the Executive is not at
that time a resident of the State of Florida and cannot be served process within
that state. The Executive hereby irrevocably consents to the jurisdiction of the
courts of Florida (whether federal or state courts) over his or her person.
13. Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their heirs,
assigns and successors in interest.
14. Withholding of Taxes. The Company may withhold from any payments
made under this Agreement all federal, state, city, or other taxes as shall be
required pursuant to any law, regulation or ruling.
15. Headings. The headings contained in this Agreement are for
reference purposes only and shall not be deemed interpretation of this
Agreement.
16. Representation. The Executive represents and warrants that the
performance of the Executive's duties under this Agreement, and the execution of
this Agreement by him, will not violate any agreement between the Executive and
any other person, firm, partnership, Company or any other organization. The
Executive represents and warrants that he has consulted with and received advice
from his own counsel in electing to enter into this Agreement.
17. Notices. Any notice given to either party hereto shall be in
writing and shall be deemed to have been given when delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested, duly
and properly addressed to the party concerned at the address indicated below or
to such changed address as party may subsequently give notice of:
If to the Company:
11711 NW 39th Street
Coral Springs, Florida 33065
If to the Executive:
57 Fox Hollow Road
Woodbury, NY 11797
to Executive's last known address as shown on the Company's
records.
18. Survival. The Executive and the Company agree that the provisions
of Sections 6-18 herein shall survive the termination of this Agreement and the
termination of the Executive's employment hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE EXECUTIVE:
/s/ Steven Yevoli (Seal)
------------------------------
Steven Yevoli
THE COMPANY:
PARK `N VIEW, INC.
By:/s/ Steve Conkling
---------------------------------
Steve Conkling, President
6
<PAGE> 1
EXHIBIT 10.43
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
UNDER THE PARK 'N VIEW, INC.
STOCK OPTION PLAN
THIS AWARD AGREEMENT is made and entered into this 24th day of May,
1999, by and between Park 'N View, Inc., a Delaware corporation (the "Company"),
and Steven Yevoli (the "Eligible Participant").
WHEREAS, the Eligible Participant is a valuable and trusted employee to
the Company; and
WHEREAS, the Board considers it desirable and in the best interests of
the Company that the Eligible Participant be given an opportunity to acquire a
proprietary interest in the Company as an incentive to advance the interests of
the Company; and
WHEREAS, on May 13, 1999 (the "Option Grant Date") the Board granted
the Eligible Participant, effective upon commencement of employment, a
nonqualified stock option to purchase shares of the common stock of the Company
(the "Stock"), in accordance with the Park 'N View, Inc. Stock Option Plan
adopted by the Company on August 26, 1996 and approved by the shareholders of
the Company (the "Plan") (capitalized terms used herein which are not otherwise
defined herein shall have the meanings ascribed to them under the Plan).
WHEREAS, this Award Agreement memorializes the grant of such
nonqualified stock option to the Eligible Participant.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, it is agreed by and between the parties as follows:
1. Grant of Nonqualified Stock Option. The Company granted to the
Eligible Participant a nonqualified stock option (the "Option") to purchase
25,000 shares of Stock (the "Shares") at the purchase price of $5.00 per share
in the manner and subject to the terms and conditions hereinafter provided.
2. Time of Exercise of Option; Vesting. Subject to the termination
provisions set forth in Section 5 below, to the extent the Option has vested as
provided below, it may be exercised, in whole or in part, at any time and from
time to time but not later than May 12, 2009 (the "Exercise Period"). Any
unvested portion of the Option may not be exercised. Provided that the Option
shall vest with respect to an increment as specified only if Eligible
Participant is employed with the Company on the specified date for such
increment, the Option shall vest as follows:
<PAGE> 2
(a) One-half (1/2) of the Shares shall vest and be exercisable
upon determination by the Chief Executive Officer, in his sole discretion, that
the Eligible Participant has or will meet the goals established by the Chief
Executive Officer for the fiscal year ended June 30, 2000; and
(b) One-half (1/2) of the Shares shall vest and be exercisable
upon determination by the Chief Executive Officer, in his sole discretion, that
the Eligible Participant has or will meet the goals by the Chief Executive
Officer for the fiscal year ended June 30, 2001.
The schedule set forth above is cumulative, so that Shares as
to which the Option has become vested and exercisable on and after a date
indicated by the schedule may be purchased pursuant to exercise of the Option at
any subsequent date prior to termination of the Option.
Notwithstanding the provisions of Section 2, as of the fifth
anniversary of the Option Grant Date (the "Final Vesting Date"), all of the
Shares shall vest and be exercisable, provided that no Termination of Employment
has occurred with respect to the Eligible Participant prior to the Final Vesting
Date.
Notwithstanding the provisions of Section 2, the Option shall vest and
become exercisable, to the extent not already vested and exercisable, upon a
Change in Control (as defined in Section 6 below). In the event of a Change in
Control, the Company shall send Eligible Participant prior written notice of the
effectiveness of such event and the last day on which Eligible Participant may
exercise the Option. Eligible Participant may, upon compliance with all of the
terms of this Award Agreement and the Plan, purchase any or all of the Shares
with respect to which the Option is vested and exercisable on or prior to the
last day specified in such notice and, to the extent the Option is not
exercised, it shall terminate at 5:00 p.m., eastern standard time, on the last
day specified in such notice.
3. Method of Exercise. The Option shall be exercised by written notice
directed to the Board, a form of which is attached hereto as Exhibit A and
incorporated herein by reference, accompanied by a check in payment of the price
specified in Section 1 above for the number of Shares specified, unless the
Board shall authorize an alternative form of payment. For the purposes of this
Section 3, payment also may be made by delivery of shares of Common Stock held
by the Eligible Participant having an aggregate Fair Market Value (as defined
below) equal to the amount of cash that would otherwise be required to pay the
full option price, or by authorizing a third party to sell a portion of the
shares acquired upon exercise of the Option and remit to the Company a
sufficient portion of the sales proceeds to pay the full option price. Payment
also may be made by combining the above methods. To the extent that shares are
used in making a full or partial payment of the option price, each such share
will be valued at the Fair Market Value thereof as of the date of exercise. Any
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<PAGE> 3
overpayment will be promptly refunded, and any underpayment will be deemed an
exercise of such lesser whole number of shares as the amount paid is sufficient
to purchase.
As soon as practicable following receipt of such notice from the
Eligible Participant, the Board shall notify the Eligible Participant of any
payment or other allocation required under Section 4 below. Upon receipt of
notice from the Board that the Eligible Participant has paid the price specified
in Section 1 above and paid or made any allocation required under Section 4
below, the Company shall make immediate delivery of such Shares; provided,
however, that if any law or regulation requires the Company to take any action
with respect to the Shares specified in such notice before the issuance thereof,
then the date of delivery of such Shares shall be extended for the period
necessary to take such action.
The term "Fair Market Value" on any date will mean the last sale price
on such date of the shares of the Common Stock or, in case no such sale takes
place on such day, the average of the closing bid and asked prices of the shares
of the Common Stock, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the shares of the Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which
shares of the Common Stock are listed or admitted to trading or, if shares of
the Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted sale price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the NASDAQ Stock Market or such other system then in use, or, if on
any such date shares of the Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares of the Common Stock
selected by the Board. If shares of the Common Stock are not publicly held or so
listed or publicly traded, the "Fair Market Value" shall be an amount determined
in good faith by the Board as the fair market value of a share of Common Stock
which amount may be different from the fair market value of shares of Common
Stock used for purposes of stock option grants.
4. Payment to Satisfy Withholding Obligations. Notwithstanding any
other provision of this Award Agreement, any rights of the Eligible Participant
to exercise the Option shall be conditioned upon the Eligible Participant
forwarding to the Company, in addition to the price per share specified in
Section 1 above, cash payment of an amount equal to the amount the Company is
required by law or regulation of any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with such
exercise of the Option, if any, as determined by the Board in its discretion.
The amount of such payment shall be communicated to the Eligible Participant by
the Board as soon as practicable following the Board's receipt of the notice
specified in Section 3. In lieu of payment specified in this Section 4, the
Board may in its discretion agree with the Eligible
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Participant to another means of satisfying the Company's withholding obligation
in connection with the exercise of the Option.
5. Termination of Option. Except as otherwise stated herein, the Option
shall terminate and cease to be exercisable upon the first to occur of the
following:
(a) the date all Shares available for purchase under this
Award Agreement have been so purchased;
(b) upon the expiration of three (3) years following the
Eligible Participant's Termination of Employment for any reason including by
reason of death or Disability; or
(c) at 5:00 p.m., eastern standard time, on the last date
specified in the notice described in Section 2 above in the event of a Change in
Control; or
(d) upon the expiration of the Exercise Period set forth in
Section 2 above.
6. Change in Control. For purposes of this Agreement, the term "Change
in Control" shall be deemed to have occurred if:
(a) Tender Offer or Acquisition. Any "person" as defined in
section 3(a)(9) of the Securities Exchange Act of 1934 (the "Act"), including a
"group" (as that term is used in sections 13(d)(3) and 14(d)(2) of the Act), but
excluding the Company and any employee benefit plan sponsored or maintained by
the Company, including any trustee of such plan acting as trustee, who:
(i) makes a tender or exchange offer for any shares
of the Company's stock pursuant to which at least fifty percent (50%) of the
Company's stock is purchased; or
(ii) together with its "affiliates" and "associates"
(as those terms are defined in Rule 12b-2 under
the Act) becomes the "beneficial owner" (within the meaning of Rule 13d-3 under
the Act) of at least fifty percent (50%) of the Company's stock; or
(b) Merger or Consolidation. The happening of any one (1) of
the following events: (i) the dissolution or liquidation of the Company; (ii) a
reorganization, merger or consolidation involving the Company, unless (A) the
transaction involves only the Company and one or more of the Company's parent
corporation and wholly-owned (excluding interests held by employees, officers
and directors) subsidiaries; or (B) the shareholders who had the power to elect
a majority of the board of directors of the Company immediately prior to the
transaction have the power to elect a majority of the board of directors of the
surviving entity immediately following the transaction; (iii) the sale of all or
substantially all of the assets of the Company to another company, person or
business entity;
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<PAGE> 5
or (iv) an acquisition of Company stock, unless the shareholders who had the
power to elect a majority of the board of directors of the Company immediately
prior to the acquisition have the power to elect a majority of the board of
directors of the Company immediately following the transaction.
7. Rights Prior to Exercise of Option. The Eligible Participant shall
have no rights as a stockholder with respect to the Shares except to the extent
he has exercised the Option, paid the price specified in Section 1 and received
delivery of such Shares as herein provided.
8. Non-Transferable. During the Eligible Participant's lifetime, this
Option shall be exercisable only by him and neither it nor any right thereunder
shall be transferable except by will or laws of descent and distribution (and
shall be exercisable by such transferee only as provided in Sections 2 and 5
above), or be subject to attachment, execution or other similar process. In the
event of any attempt by the Eligible Participant to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right hereunder, except as
provided for herein, or in the event of the levy of any attachment, execution or
similar process upon the rights or interest hereby conferred, the Board may
terminate the Option by notice to the Eligible Participant, and the Option shall
thereupon become null and void.
9. Covenants and Representations of Eligible Participant. The Eligible
Participant represents, warrants, covenants and agrees with the Company as
follows:
(a) The Option is being received for the Eligible
Participant's own account, and not for the account of any other person, with the
intent of holding the Option and the Shares issuable pursuant thereto for
investment and not with the intent of participating, directly or indirectly, in
a distribution or resale of the Shares or any portion thereof.
(b) The Eligible Participant is not acquiring the Option or
any Shares based upon any representation, oral or written, by any person with
respect to the future value of, or income from, the Shares, but rather upon
independent examination and judgment as to the prospects of the Company.
(c) The Eligible Participant has had the opportunity to ask
questions of and receive answers from the Company and its executive officers and
to obtain all information necessary for the Eligible Participant to make an
informed decision with respect to the investment in the Company represented by
the Option and any Shares issued upon its exercise.
(d) The Eligible Participant is able to bear the economic risk
of any investment in the Shares, including the risk of a complete loss of the
investment, and the Eligible Participant acknowledges that he or she must
continue to bear the economic risk of any investment in Shares received upon
exercise of the Option for an indefinite period.
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(e) The Eligible Participant understands and agrees that the
Shares subject to the Option may be issued and sold to the Eligible Participant
without registration under any state or federal laws relating to the
registration of securities, and the Shares will be issued and sold in reliance
upon exemptions from registration under appropriate state and federal laws based
in part upon the representations of the Eligible Participant made herein.
(f) Shares issued to the Eligible Participant upon exercise of
the Option will not be offered for sale, sold or transferred by the Eligible
Participant other than pursuant to: (1) an effective registration under
applicable state securities laws or in a transaction which is otherwise in
compliance with those laws; (2) an effective registration under the Securities
Act of 1933 or in a transaction otherwise in compliance with such Act; and (3)
evidence satisfactory to the Company of compliance with all applicable state and
federal securities laws. The Company shall be entitled to rely upon an opinion
of counsel satisfactory to it with respect to compliance with the foregoing
laws.
(g) A legend in substantially the following form, indicating
that the Shares issued pursuant to the Option have not been registered under any
federal or state securities laws, may be placed on the certificate or
certificates delivered to the Eligible Participant, and any transfer agent of
the Company may be instructed to require compliance with all legends on such
certificates:
The securities represented hereby have not been registered under the
Securities Act of 1933, or the securities laws of any state. The
securities represented hereby may no be resold unless registered under
the Securities Act of 1933 and any applicable state securities laws
unless an exemption from registration exists.
In addition, the shares of Stock issued to the Eligible Participant
will be subject to the terms of that certain Securityholders' Agreements dated
November 2, 1995 and November 13, 1996 and the certificate or certificates
delivered to the Eligible Participant shall include a legend in substantially
the following form:
The shares represented by this certificate are subject to certain
Securityholders' Agreements dated as of November 2, 1995 and November
13, 1996 by and between Park 'N View, Inc., a Delaware corporation, and
its shareholders restricting the free transferability of said shares.
Copies of such Securityholders' Agreements are on file in the office of
the Secretary of the Company.
(h) The Eligible Participant has not relied upon the Board,
the Company, or an employee or agent of the Company with respect to any tax
consequences related to the grant or exercise of this Option, or the disposition
of Shares purchased pursuant to exercise of
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the Option. The Eligible Participant acknowledges that, as a result of the grant
and/or exercise of the Option, the Eligible Participant may incur a substantial
tax liability. The Eligible Participant assumes full responsibility for all such
consequences and the filing of all tax returns and elections the Eligible
Participant may be required to or find desirable to file in connection
therewith. In the event any valuation of the Option or Shares purchased pursuant
to its exercise must be made under federal or state tax laws and such valuation
affects any return or election of the Company, the Eligible Participant agrees
that the Company may determine such value and that the Eligible Participant will
observe any determination so made by the Company in all returns and elections
filed by the Eligible Participant.
(i) The agreements, representations, warranties and covenants
made by the Eligible Participant herein with respect to the Option shall also
extend to and apply to all of the Shares issued to the Eligible Participant from
time to time pursuant to exercise of the Option. Acceptance by the Eligible
Participant of any certificate representing Shares shall constitute a
confirmation by the Eligible Participant that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at such time.
10. Sale or Other Disposition by Majority Interest. The Eligible
Participant hereby irrevocably appoints the Company and its President, or either
of them, as the Eligible Participant's agents and attorneys-in-fact, with full
power of substitution for and in the Eligible Participant's name, to sell,
exchange, transfer or otherwise dispose of all or a portion of the Shares and to
do any and all things and to execute any and all documents and instruments
(including, without limitation, any stock transfer powers) in connection
therewith, such powers of attorney not to become operable until such time as the
holder or holders of a majority of the issued and outstanding shares of Stock
sell, exchange, transfer or otherwise dispose of, or contract to sell, exchange,
transfer or otherwise dispose of, all or a majority of the issued and
outstanding shares of Stock. Any sale, exchange, transfer or other disposition
of all or a portion of Shares pursuant to the foregoing powers of attorney shall
be made upon substantially the same terms and conditions (including sale price
per share) applicable to a sale, exchange, transfer or other disposition of
shares of Stock owned by the holder or holders of a majority of the issued and
outstanding shares of Stock. For purposes of determining the sale price per
share of the Shares under this Section 9, there shall be excluded the
consideration (if any) paid or payable to the holder or holders of a majority of
the issued and outstanding shares of Stock in connection with any employment,
consulting, noncompetition or similar agreements which such holder or holders
may enter into in connection with or subsequent to such sale, transfer, exchange
or other disposition. The foregoing power of attorney shall not impose or be
deemed to impose any fiduciary duty or any other duty (except as set forth in
this Section 9) or obligation on either the Company or its President, shall be
irrevocable and coupled with an interest and shall not terminate by operation of
law, whether by the death, bankruptcy or adjudication of incompetency or
insanity of the Eligible Participant or the occurrence of any other event.
7
<PAGE> 8
11. Binding Effect. This Award Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
12. Gender and Number. All terms used in this Award Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
13. Terms and Conditions of Plan. The terms and conditions included in
the Plan are incorporated by reference herein, and to the extent that any
conflict may exist between any term or provision of this Award Agreement and any
term or provision of the Plan as in effect from time to time, such term or
provision of the Plan shall control.
14. Entire Agreement. This Award Agreement (including the Plan which is
incorporated herein by reference) sets forth, as of the date hereof, all of the
promises, agreements, conditions, understandings, warranties and representations
between the parties hereto with respect to the Option and the Shares, and as of
the date hereof, there are no promises, agreements, conditions, understandings,
warranties or representations, oral or written, express or implied, between them
with respect to the Option or the Shares other than as set forth therein or
herein. This Award Agreement supersedes and replaces any and all prior
agreements between the parties hereto with respect to the Option or the Shares.
Except as set forth in the Plan, this Award Agreement is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the Option and the Shares.
15. Invalid or Unenforceable Provision. The invalidity or
unenforceability of any particular provision of this Award Agreement shall not
affect the other provisions hereof, and this Award Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
16. Governing Law. This Award Agreement shall be construed and enforced
in accordance with the laws of Delaware, without reference to its conflicts of
laws rules or the principles of the choice of law.
17. Miscellaneous.
(a) Neither the granting of this Option, the exercise thereof
nor any other provision of this Award Agreement shall be construed as conferring
upon the Eligible Participant any right to be employed or continue to be
employed by the Company or any of its subsidiaries or to otherwise continue in
the service of such corporations, or as interfering with or restricting in any
way the right of such corporations to terminate their relationship with the
Eligible Participant at any time.
8
<PAGE> 9
(b) The Company, the Board and any employees or agents thereof
are relieved from any liability for the non-issuance or non-transfer, or any
delay in the issuance or transfer, of any of the Shares which results from the
inability of the Company to obtain, or in any delay in obtaining, from each
regulatory body having jurisdiction all requisite authority to issue or transfer
the Stock of the Company in satisfaction of this Option if counsel for the
Company deems such authorization necessary for the lawful issuance or transfer
of any such Shares.
(c) No Stock acquired by exercise of this Option shall be sold
or otherwise disposed of in violation of any federal or state securities law or
regulation. Stock certificates evidencing the shares issuable upon exercise of
this Option may contain a legend regarding resale limitations, including the
requirement that the Eligible Participant deliver an opinion of counsel to the
Company.
(d) This Option shall be exercised in accordance with the
terms of the Plan and such administrative regulations as the Board may from time
to time adopt. All acts, determinations and decisions of the Board with respect
to the interpretation, construction and application of the Plan and/or this
Award Agreement shall be conclusive and binding upon the Eligible Participant
and all other persons.
(e) The Board shall be entitled to amend this Award Agreement
at any time provided that the Award Agreement, as amended, is consistent with
the provisions of the Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Award
Agreement to be executed as of the day and year first above written.
PARK 'N VIEW, INC.
By: /s/ Steve Conkling
--------------------------------
Steve Conkling, President
ELIGIBLE PARTICIPANT
/s/ Steven Yevoli
------------------------------------
Steven Yevoli
9
<PAGE> 10
EXHIBIT A
Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Attention: Board of Directors
Re: Exercise of Nonqualified Stock Option
Dear Board Members:
Pursuant to the terms and conditions of the Nonqualified Stock Option
Award Agreement dated as of _________________, 19__ (the "Award Agreement")
between _____________________________ and Park 'N View, Inc. (the "Company"), I
hereby agree to purchase _______ shares of the Stock of the Company and tender
payment in full for such shares in accordance with the terms of the Award
Agreement. I hereby consent to being a party to the Securityholders' Agreements
as is required by the Award Agreement.
I hereby reaffirm that the representations and warranties made in the
Award Agreement are true and correct on the date hereof as if made on the date
hereof.
Very truly yours,
----------------------------------
Print Name:
-----------------------
Date:
----------------------
<PAGE> 1
EXHIBIT 10.44
- --------------------------------------------------------------------------------
AGREEMENT OF LEASE
between
ELEVEN PENN PLAZA LLC
Landlord
and
PNV. NET, INC.
Tenant
Portion of the 20th Floor
Eleven Penn Plaza
New York, New York
PROSKAUER ROSE LLP
1585 Broadway
New York, New York 10036-8299
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS................................................................................ 1
ARTICLE 1
DEMISE, PREMISES, TERM, RENT...................................................... 8
ARTICLE 2
USE AND OCCUPANCY ................................................................ 9
ARTICLE 3
ALTERATIONS.......................................................................10
ARTICLE 4
REPAIRS-FLOOR LOAD................................................................13
ARTICLE 5
WINDOW CLEANING...................................................................14
ARTICLE 6
REQUIREMENTS OF LAW................................................................14
ARTICLE 7
SUBORDINATION .....................................................................16
ARTICLE 8
RULES AND REGULATIONS ............................................................19
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT.................................19
ARTICLE 10
DESTRUCTION-FIRE OR OTHER CAUSE...................................................21
ARTICLE 11
EMINENT DOMAIN ...................................................................25
ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC..............................................26
ARTICLE 13
ELECTRICITY.......................................................................39
ARTICLE 14
ACCESS TO PREMISES................................................................43
ARTICLE 15
CERTIFICATE OF OCCUPANCY..........................................................45
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 16
DEFAULT..........................................................................45
ARTICLE 17
REMEDIES AND DAMAGES ............................................................48
ARTICLE 18
LANDLORD FEES AND EXPENSES.......................................................51
ARTICLE 19
NO REPRESENTATIONS BY LANDLORD...................................................51
ARTICLE 20
END OF TERM......................................................................52
ARTICLE 21
QUIET ENJOYMENT..................................................................53
ARTICLE 22
FAILURE TO GIVE POSSESSION.......................................................53
ARTICLE 23
NO WAIVER........................................................................54
ARTICLE 24
WAIVER OF TRIAL BY JURY..........................................................54
ARTICLE 25
INABILITY TO PERFORM.............................................................55
ARTICLE 26
BILLS AND NOTICES................................................................55
ARTICLE 27
ESCALATION ......................................................................56
ARTICLE 28
SERVICES.........................................................................63
ARTICLE 29
PARTNERSHIP TENANT...............................................................66
ARTICLE 30
VAULT SPACE......................................................................67
ARTICLE 31
SECURITY.........................................................................67
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 32
CAPTIONS........................................................................68
ARTICLE 33
PARTIES BOUND...................................................................69
ARTICLE 34
BROKER..........................................................................69
ARTICLE 35
INDEMNITY.......................................................................69
ARTICLE 36
ADJACENT EXCAVATION-SHORING.....................................................70
ARTICLE 37
MISCELLANEOUS...................................................................71
ARTICLE 38
RENT CONTROL ...................................................................73
</TABLE>
Schedule A - Rules and Regulations
Schedule B - Cleaning Specifications
EXHIBIT "A" - Floor Plan
EXHIBIT "B" - Landlord's Work
<PAGE> 5
AGREEMENT OF LEASE, made as of the 26th day of July, 1999, between
Landlord and Tenant.
WITNESSETH:
The parties hereto, for themselves, their legal representatives,
successors and assigns, hereby covenant as follows.
DEFINITIONS
"Affiliate" shall mean a Person which shall (1) Control, (2) be under
the Control of, or (3) be under common Control with the Person in question.
"Alteration Fee" shall have the meaning set forth in Section 3.2
hereof.
"Alterations" shall mean alterations, installations, improvements,
additions or other physical changes (other than decorations) in or about the
Premises.
"Applicable Rate" shall mean the lesser of (x) two (2) percentage
points above the then current Base Rate, and (y) the maximum rate permitted by
applicable law.
"Assessed Valuation" shall have the meaning set forth in Section 27.1
hereof.
"Assignment Proceeds" shall have the meaning set forth in Section 12.8
hereof.
"Assignment Statement" shall have the meaning set forth in Section 12.8
hereof.
"Assignment Termination" shall have the meaning set forth in Section
12.8 hereof.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., or any
statute of similar nature and purpose.
"Base Electric Rate" shall mean the Electric Rate as of the date
hereof.
"Base Electricity Inclusion Factor" shall have the meaning set forth in
Section 13.2 hereof.
"Base Operating Expenses" shall have the meaning set forth in Section
27.1 hereof.
"Base Operating Year" shall have the meaning set forth in Section 27.1
hereof.
<PAGE> 6
"Base Rate" shall mean the rate of interest publicly announced from
time to time by The Chase Manhattan Bank, N.A., or its successor, as its "prime
lending rate" (or such other term as may be used by The Chase Manhattan Bank,
N.A., from time to time, for the rate presently referred to as its "prime
lending rate"), which rate was 7.75% on June 18, 1999.
"Base Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Broker" shall have the meaning set forth in Article 34 hereof.
"Building" shall mean all the buildings, equipment and other
improvements and appurtenances of every kind and description now located or
hereafter erected, constructed or placed upon the land and any and all
alterations, and replacements thereof, additions thereto and substitutions
therefor, known by the address of Eleven Penn Plaza, New York, New York.
"Building Systems," shall mean the mechanical, gas, electrical,
sanitary, heating, air conditioning, ventilating, elevator, plumbing,
life-safety and other service systems of the Building.
"Business Days" shall mean all days, excluding Saturdays, Sundays and
all days observed by either the State of New York or the Federal Government and
by the labor unions servicing the Building as legal holidays.
"Commencement Date" shall mean the date on which Landlord's Work shall
be Substantially Completed; provided, however, if Landlord shall be delayed in
Substantially Completing Landlord's Work by reason of a delay due to the act or
omission of Tenant, Tenant's agents, employees, invitees, licensees or
contractors, the Commencement Date shall mean the date on which Landlord's Work
would have been Substantially Completed but for such delay.
"Control" or "control" shall mean direct or indirect ownership of more
than fifty percent (50%) of the outstanding voting stock of a corporation or
other majority equity and control interest if not a corporation and the
possession, directly or indirectly, of power to direct or cause the direction of
the management and policy of such corporation or other entity, whether through
the ownership of voting securities, by statute or according to the provisions of
a contract.
"Current Year" shall have the meaning set forth in Section 27.4 hereof.
"Deficiency" shall have the meaning set forth in Section 17.2 hereof.
"Electric Rate" shall have the meaning set forth in Section 13.2
hereof.
"Electricity Additional Rent" shall have the meaning set forth in
Section 13.3 hereof.
"Electricity Inclusion Factor" shall have the meaning set forth in
Section 13.2 hereof.
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<PAGE> 7
"Electricity Statement" shall have the meaning set forth in Section
13.2 hereof.
"Escalation Rent" shall mean, individually or collectively, the Tax
Payment and the Operating Payment.
"Event of Default" shall have the meaning set forth in Section 16.1
hereof.
"Expiration Date" shall mean the Fixed Expiration Date or such earlier
date on which the Term shall sooner end pursuant to any of the terms,
conditions or covenants of this Lease or pursuant to law.
"1st Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Fixed Expiration Date" shall have the meaning set forth in Section 1.1
hereof.
"Fixed Rent" shall have the meaning set forth in Section 1.1 hereof.
"Full Value" shall have the meaning set forth in Section 13.2 hereof.
"Governmental Authority (Authorities)" shall mean the United States of
America, the State of New York, the City of New York, any political subdivision
thereof and any agency, department, commission, board, bureau or instrumentality
of any of the foregoing, or any quasi-governmental authority, now existing or
hereafter created, having jurisdiction over the Real Property or any portion
thereof.
"HVAC" shall mean heat, ventilation and air conditioning.
"HVAC Systems" shall mean the Building Systems providing HVAC.
"Indemnitees" shall mean Landlord, the members and partners comprising
Landlord and its and their members, partners, shareholders, officers, directors,
employees, agents and contractors, Lessors and Mortgagees.
"Initial Alterations" shall mean the Alterations to be made by Tenant
to initially prepare the Premises for Tenant's occupancy.
"Landlord", on the date as of which this Lease is made, shall mean
Eleven Penn Plaza LLC, a New York limited liability company, having an office
c/o MRC Management LLC, 330 Madison Avenue, New York, New York 10017, but
thereafter, "Landlord" shall mean only the fee owner of the Real Property or if
there shall exist a Superior Lease, the tenant thereunder.
"Landlord's Engineer" shall have the meaning set forth in Section 13.2
hereof.
3
<PAGE> 8
"Landlord's Work" shall have the meaning set forth in Section 19.1
hereof.
"Lessor(s)" shall mean a lessor under a Superior Lease.
"Letter of Credit" shall have the meaning set forth in Article 31
hereof.
"Long Lead Work" shall mean any item which is not a stock item and must
be specially manufactured, fabricated or installed or is of such an unusual,
delicate or fragile nature that there is a substantial risk that
(i) there will be a delay in its manufacture, fabrication,
delivery or installation, or
(ii) after delivery, such item will need to be reshipped or
redelivered or repaired
so that in Landlord's reasonable judgment the item in question cannot be
completed when the standard items are completed even though the item of Long
Lead Work in question is (1) ordered together with the other items required and
(2) installed or performed (after the manufacture or fabrication thereof) in the
order and sequence that such Long Lead Work and other items are normally
installed or performed in accordance with good construction practice. In
addition, "Long Lead Work" shall include any standard item which in accordance
with good construction practice should be completed after the completion of any
item of work in the nature of the items described in the immediately preceding
sentence.
"Mortgage(s)" shall mean any trust indenture or mortgage which may now
or hereafter affect the Real Property, the Building or any Superior Lease and
the leasehold interest created thereby, and all renewals, extensions,
supplements, amendments, modifications, consolidations and replacements thereof
or thereto, substitutions therefor, and advances made thereunder.
"Mortgagee(s)" shall mean any trustee, mortgagee or holder of a
Mortgage.
"Operating Expenses" shall have the meaning set forth in Section 27.1
hereof.
"Operating Payment" shall have the meaning set forth in Section 27.4
hereof.
"Operating Statement" shall have the meaning set forth in Section 27.1
hereof.
"Operating Year" shall have the meaning set forth in Section 27.1
hereof.
"Operation of the Property" shall mean the maintenance, repair and
management of the Real Property and the curbs, sidewalks and areas adjacent
thereto.
"Overtime Periods" shall have the meaning set forth in Section 28.3
hereof.
4
<PAGE> 9
"Parties" shall have the meaning set forth in Section 37.2 hereof.
"Partner" or "partner" shall mean any partner of Tenant, any employee
of a professional corporation which is a partner comprising Tenant, and any
shareholder of Tenant if Tenant shall become a professional corporation.
"Partnership Tenant" shall have the meaning set forth in Article 29
hereof.
"Persons(s) or person(s)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"Premises" shall mean, subject to the provisions of Section 14.4
hereof, the portion of the twentieth (20th) floor of the Building as set forth
on the floor plan attached hereto and made a part hereof as Exhibit "A".
"Real Property" shall mean the Building, together with the plot of land
upon which it stands.
"Recapture Space" shall have the meaning set forth in Section 12.6
hereof.
"Recapture Sublease" shall have the meaning set forth in Section 12.6
hereof.
"Related Entity" shall have the meaning set forth in Section 12.4
hereof.
"Rent Commencement Date" shall mean the date which is three (3) months
after the Commencement Date.
"Rental" shall mean and be deemed to include Fixed Rent, Escalation
Rent, all additional rent and any other sums payable by Tenant hereunder.
"Requirements" shall mean all present and future laws, rules, orders,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, of all Governmental Authorities now existing
or hereafter created, and of any and all of their departments and bureaus, and
of any applicable fire rating bureau, or other body exercising similar
functions, affecting the Real Property or any portion thereof, or any street,
avenue or sidewalk comprising a part of or in front thereof or any vault in or
under the same, or requiring removal of any encroachment, or affecting the
maintenance, use or occupation of the Real Property or any portion thereof.
"Rules and Regulations" shall mean the rules and regulations annexed
hereto and made a part hereof as Schedule A and such other and further rules and
regulations as Landlord or Landlord's agents may from time to time adopt on not
less than ten (10) days prior notice to Tenant, subject to Tenant's right to
dispute the reasonableness thereof as provided in Article 8 hereof.
5
<PAGE> 10
"Space Factor" shall mean Five Thousand Four Hundred Ten (5,410) as the
same may be increased or decreased pursuant to the terms hereof.
"Specialty Alterations" shall mean Alterations consisting of kitchens,
executive bathrooms, raised computer floors, computer installations, vaults,
libraries, internal staircases, dumbwaiters, pneumatic tubes, vertical and
horizontal transportation systems, and other Alterations of a similar character.
"Sublease Expenses" shall have the meaning set forth in Section 12.7
hereof.
"Sublease Profit" shall have the meaning set forth in Section 12.7
hereof.
"Sublease Rent" shall have the meaning set forth in Section 12.7
hereof.
"Substantial Completion" or "Substantially Completed" or words of
similar import shall mean that Landlord's Work has been substantially completed,
it being agreed that Landlord's Work shall be deemed substantially complete
notwithstanding the fact that (a) minor or insubstantial details of construction
or demolition and/or mechanical adjustment and/or decorative items remain to be
performed, and (b) any Long Lead Work remains to be performed.
"Superior Lease(s)" shall mean all ground or underlying leases of the
Real Property or the Building and all renewals, extensions, supplements,
amendments and modifications thereof.
"Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Tax Payment" shall have the meaning set forth in Section 27.2 hereof.
"Tax Statement shall have the meaning set forth in Section 27.1 hereof.
"Tax Year" shall have the meaning set forth in Section 27.1 hereof.
"Tenant", on the date as of which this Lease is made, shall mean
PNV.net, Inc., a Delaware corporation, having an office at Eleven Penn Plaza,
New York, New York, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the originally
named tenant and any assignee of this Lease shall not be released from
liability hereunder in the event of any assignment of this Lease.
"Tenant Statement" shall have the meaning set forth in Section 12.6
hereof.
"Tenant's Engineer" shall have the meaning set forth in Section 13.3
hereof.
"Tenant's Property" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings, decorations
and other items of personal property.
6
<PAGE> 11
"Tenant's Share" shall mean Fifty-Five ten thousandths percent
(0.0055%) as the same may be increased or decreased pursuant to the terms
hereof.
"Tentative Monthly Escalation Charge" shall have the meaning set forth
in Section 27.4 hereof.
"Term" shall mean a term which shall commence on the Commencement Date
and shall expire on the Expiration Date.
"Termination Date" shall have the meaning set forth in Section 12.6
hereof.
"Third Engineer" shall have the meaning set forth in Section 13.3
hereof.
"Unavoidable Delays" shall have the meaning set forth in Article 25
hereof.
7
<PAGE> 12
ARTICLE 1
DEMISE, PREMISES, TERM, RENT
Section 1.1. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord the Premises for the Term to commence on the Commencement Date and
to end on the date (the "Fixed Expiration Date") which is the last day of the
month in which the day immediately preceding the fifth (5th) anniversary of the
Rent Commencement Date shall occur, at an annual rent (the "Fixed Rent") of:
(i) Two Hundred Thousand One Hundred Seventy Dollars
($200,170) per annum for the period (the "1st Rental Period") commencing on the
Rent Commencement Date and ending on the day immediately preceding the two (2)
year, six (6) month anniversary of the Rent Commencement Date, or if the Rent
Commencement Date shall occur other than on the first day of the month, ending
on the last day of the month in which the two (2) year, six (6) month
anniversary of the Rent Commencement Date shall occur ($16,680.83 per month),
and
(ii) Two Hundred Sixteen Thousand Four Hundred
Dollars ($216,400) per annum for the period commencing on the day next
succeeding the end of the 1st Rental Period and ending on the Fixed Expiration
Date ($18,033.33 per month),
(which Fixed Rent amounts include the Electricity Inclusion Factor) which Tenant
agrees to pay in lawful money of the United States which shall be legal tender
in payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance, on the first (1st) day of each calendar
month during the Term commencing on the Rent Commencement Date, at the office of
Landlord or such other place as Landlord may designate, without any set-off,
offset, abatement or deduction whatsoever, except that Tenant shall pay the
first full monthly installment on the execution hereof. At the request of
Landlord, Fixed Rent shall be payable when due by wire transfer of funds to an
account designated from time to time by Landlord.
Section 1.2. If the Rent Commencement Date shall occur on a date other
than the first (1st) day of any calendar month, then, on the Rent Commencement
Date, Tenant shall pay to Landlord an amount equal to Five Hundred Fifty-Six and
03/100 Dollars ($556.03), multiplied by the number of calendar days in the
period from the Rent Commencement Date to the last day of the month in which the
Rent Commencement Date shall occur, both dates inclusive.
Section 1.3. Tenant shall pay to Landlord, as additional rent, on
account of electricity consumed at the Premises, an amount equal to One Thousand
Three Hundred Fifty-two and 50/100 Dollars ($1,352.50) per month during the
period commencing on the Commencement Date and ending on the day immediately
preceding the Rent Commencement Date.
Section 1.4. Promptly after Landlord shall Substantially Complete
Landlord's Work, Landlord and Tenant shall enter into an agreement in form and
substance reasonably satisfactory to both parties, confirming the Commencement
Date and Fixed Expiration Date; provided,
8
<PAGE> 13
however, that failure to execute and deliver such agreement shall not affect the
validity of the Commencement Date, the Rent Commencement Date and the Fixed
Expiration Date.
ARTICLE 2
USE AND OCCUPANCY
Section 2.1. Tenant shall use and occupy the Premises as general and
executive offices, uses incidental thereto and for no other purpose.
Section 2.2. (A) Tenant shall not use the Premises or any part
thereof, or permit the Premises or any part thereof to be used, (1) for the
business of photographic, multilith or multigraph reproductions or offset
printing, except in connection with, either directly or indirectly, Tenant's
own business and/or activities, (2) for a banking, trust company, depository,
guarantee or safe deposit business, (3) as a savings bank, a savings and loan
association, or as a loan company, (4) for the sale of travelers checks, money
orders, drafts, foreign exchange or letters of credit or for the receipt of
money for transmission, (5) as a stockbroker's or dealer's office or for the
underwriting or sale of securities, (6) by the United States government, the
City or State of New York, any foreign government, the United Nations or any
agency or department of any of the foregoing or any other Person having
sovereign or diplomatic immunity, (7) as a restaurant or bar or for the sale
of confectionery, soda or other beverages, sandwiches, ice cream or baked goods
or for the preparation, dispensing or consumption of food or beverages in any
manner whatsoever, except for consumption by Tenant's officers, employees and
business guests, (8) as an employment agency, executive search firm or similar
enterprise, labor union, school, or vocational training center (except for the
training of employees of Tenant intended to be employed at the Premises), or
(9) as a barber shop or beauty salon.
(B) In connection with, and incidental to, Tenant's use of
the Premises for general and executive offices as provided in this Article 2,
Tenant, at its sole cost and expense and upon compliance with all applicable
Requirements, may install a "dwyer" or similar unit in the Premises for the
purpose of warming food for the officers, employees and business guests of
Tenant (but not for use as a public restaurant), provided that Tenant shall
obtain all permits required by any Governmental Authorities for the operation
thereof and such installation shall comply with the provisions of this Lease,
including, without limitation, Article 3 hereof. Tenant may also install, at its
sole cost and expense and subject to and in compliance with the provisions of
Articles 3 and 4 hereof, vending machines for the exclusive use of the officers,
employees and business guests of Tenant, each of which vending machines (if it
dispenses any beverages or other liquids or refrigerates) shall have a
waterproof pan located thereunder, connected to a drain.
9
<PAGE> 14
ARTICLE 3
ALTERATIONS
Section 3.1. (A) Tenant shall not make any Alterations without
Landlord's prior consent. Landlord shall not unreasonably withhold or delay its
consent to any proposed nonstructural Alterations, provided that such
Alterations (i) are not visible from the outside of the Building, (ii) do not
affect any part of the Building other than the Premises or require any
alterations, installations, improvements, additions or other physical changes to
be performed in or made to any portion of the Building or the Real Property
other than the Premises, (iii) do not affect any service required to be
furnished by Landlord to Tenant or to any other tenant or occupant of the
Building, (iv) do not affect the proper functioning of any Building System, (v)
do not reduce the value or utility of the Building, and (vi) do not affect the
certificate of occupancy for the Building or the Premises. Landlord shall not be
deemed to be unreasonable with respect to withholding its consent to any
proposed nonstructural Alteration which meets the criteria set forth in this
Section 3.1 (A) if the Lessor or Mortgagee, as the case may be, shall withhold
its consent.
(B) (1) Prior to making any Alterations (other than
Alterations performed by Landlord on behalf of Tenant for which Landlord is
responsible for preparing plans and specifications and for obtaining permits and
approvals), including, without limitation, the Initial Alterations, Tenant shall
(i) submit to Landlord detailed plans and specifications (including layout,
architectural, mechanical and structural drawings) for each proposed Alteration
and shall not commence any such Alteration without first obtaining Landlord's
approval of such plans and specifications, which, in the case of nonstructural
Alterations which meet the criteria set forth in Section 3.1 (A) above, shall
not be unreasonably withheld or delayed, (ii) at Tenant's expense, obtain all
permits, approvals and certificates required by any Governmental Authorities, it
being agreed that all filings with Governmental Authorities to obtain such
permits, approvals and certificates shall be made, at Tenant's expense, by a
Person designated by Landlord, and (iii) furnish to Landlord duplicate original
policies or certificates thereof of worker's compensation (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors in
connection with such Alteration) and comprehensive public liability (including
property damage coverage) insurance in such form, with such companies, for such
periods and in such amounts as Landlord may reasonably approve, naming Landlord
and its agents, any Lessor and any Mortgagee, as additional insureds. Upon
completion of such Alteration, Tenant, at Tenant's expense, shall obtain
certificates of final approval of such Alteration required by any Governmental
Authority and shall furnish Landlord with copies thereof, together with the
"as-built" plans and specifications for such Alterations, it being agreed that
all filings with Governmental Authorities to obtain such permits, approvals and
certificates shall be made, at Tenant's expense, by a Person designated by
Landlord. All Alterations shall be made and performed substantially in
accordance with the plans and specifications therefor as approved by Landlord,
all Requirements, the Rules and Regulations, and all rules and regulations
relating to Alterations promulgated by Landlord in its reasonable judgment. All
materials and equipment to be incorporated in the Premises as a result of any
Alterations or a part thereof shall be first quality and no such materials or
equipment (other than Tenant's Property) shall be subject to any lien,
encumbrance, chattel mortgage or title retention or security agreement. In
addition, no
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Alteration shall be undertaken prior to Tenant's delivering to Landlord either
(i) a performance bond and labor and materials payment bond (issued by a surety
company and in form reasonably satisfactory to Landlord), each in an amount
equal to one hundred twenty percent (120%) of the cost of such Alteration (as
reasonably estimated by Landlord's architect, engineer, or contractor), or (ii)
such other security as shall be reasonably satisfactory to Landlord or required
by any Mortgagee or Lessor. If, as a result of any Alterations performed by
Tenant, including, without limitation, the Initial Alterations, any alterations,
installations, improvements, additions or other physical changes are required to
be performed or made to any portion of the Building or the Real Property other
than the Premises in order to comply with any Requirement(s), which alterations,
installations, improvements, additions or other physical changes would not
otherwise have had to be performed or made pursuant to applicable Requirement(s)
at such time, Landlord, at Tenant's sole cost and expense, may perform or make
such alterations, installations, improvements, additions or other physical
changes and take such actions as Landlord shall deem reasonably necessary and
Tenant, within five (5) days after demand therefor by Landlord, shall provide
Landlord with such security as Landlord shall reasonably require, in an amount
equal to one hundred twenty percent (120%) of the cost of such alterations,
installations, improvements, additions or other physical changes, as reasonably
estimated by Landlord's architect, engineer or contractor. All Alteration(s)
shall be performed only under the supervision of an independent licensed
architect approved by Landlord, which approval shall not be unreasonably
withheld.
(2) Landlord reserves the right to disapprove any plans
and specifications in part, to reserve approval of items shown thereon pending
its review and approval of other plans and specifications, and to condition its
approval upon Tenant making revisions to the plans and specifications or
supplying additional information. Any review or approval by Landlord of any
plans and/or specifications or any preparation or design of any plans by
Landlord's architect or engineer (or any architect or engineer designated by
Landlord) with respect to any Alteration is solely for Landlord's benefit, and
without any representation or warranty whatsoever to Tenant or any other Person
with respect to the compliance thereof with any Requirements, the adequacy,
correctness or efficiency thereof or otherwise.
(C) Tenant shall be permitted to perform Alterations during
the hours of 8:00 A.M. to 6:00 P.M. on Business Days, provided that such work
shall not interfere with or interrupt the operation and maintenance of the
Building or unreasonably interfere with or interrupt the use and occupancy of
the Building by other tenants in the Building. Otherwise, Alterations shall be
performed at such times and in such manner as Landlord may from time to time
reasonably designate. All Tenant's Property installed by Tenant and all
Alterations in and to the Premises which may be made by Tenant at its own cost
and expense prior to and during the Term, shall remain the property of Tenant.
Upon the Expiration Date, Tenant shall remove Tenant's Property from the
Premises and, at Tenant's option, Tenant also may remove, at Tenant's cost and
expense, all Alterations made by Tenant to the Premises, provided, however,
in any case, that Tenant shall repair and restore in a good and workerlike
manner to good condition any damage to the Premises or the Building caused by
such removal. Notwithstanding the foregoing, however, Landlord, upon notice
given at least thirty (30) days prior to the Fixed Expiration Date or upon
such shorter notice as is reasonable under the circumstances upon the earlier
expiration of the
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Term, may require Tenant to remove any Alterations, and to repair and restore in
a good and workerlike manner to good condition any damage to the Premises or the
Building caused by such removal.
(D) (1) All Alterations shall be performed, at Tenant's sole
cost and expense, by Landlord's contractor(s) or by contractors, subcontractors
or mechanics approved by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant. If Tenant engages any
contractor set forth on the list, Tenant shall not be required to obtain
Landlord's consent for such contractor unless, prior to the earlier of (a)
entering into a contract with such contractor, and (b) the commencement of work
by such contractor, Landlord shall notify Tenant that such contractor has been
removed from the list.
(2) Notwithstanding the foregoing, with respect to any
Alteration affecting any Building System, (i) Tenant shall select a contractor
from a list of approved contractors furnished by Landlord to Tenant (containing
at least three (3) contractors) and (ii) the Alteration shall, at Tenant's cost
and expense, be designed by Landlord's engineer for the relevant Building
System.
(E) Any mechanic's lien filed against the Premises or the Real
Property for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant shall be discharged by Tenant within thirty (30) days
after Tenant shall have received notice thereof (or such shorter period if
required by the terms of any Superior Lease or Mortgage), at Tenant's expense,
by payment or filing the bond required by law. Tenant shall not, at any time
prior to or during the Term, directly or indirectly employ, or permit the
employment of, any contractor, mechanic or laborer in the Premises, whether in
connection with any Alteration or otherwise, if such employment would interfere
or cause any conflict with other contractors, mechanics or laborers engaged in
the construction, maintenance or operation of the Building by Landlord, Tenant
or others, or of any adjacent property owned by Landlord. In the event of any
such interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Building immediately.
Section 3.2. Tenant shall pay to Landlord or to Landlord's agent, as
additional rent, all out-of pocket costs and expenses incurred by Landlord or
Landlord's agent in connection with any Alterations, including, without
limitation, the initial Alterations (the "Alteration Fee"). The Alteration Fee
shall be paid by Tenant within ten (10) Business Days after demand therefor.
Tenant also shall pay any fee charged by any Lessor or Mortgagee in reviewing
the plans and specifications for such Alterations or inspecting the progress of
completion of the same.
Section 3.3. Upon the request of Tenant, Landlord, at Tenant's cost
and expense, shall join in any applications for any permits, approvals or
certificates required to be obtained by Tenant in connection with any permitted
Alteration (provided that the provisions of the applicable Requirement shall
require that Landlord join in such application) and shall otherwise cooperate
with Tenant in connection therewith, provided that Landlord shall not be
obligated to
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incur any cost or expense, including, without limitation, attorneys' fees and
disbursements, or suffer any liability in connection therewith.
ARTICLE 4
REPAIRS-FLOOR LOAD
Section 4.1. Landlord shall operate, maintain and make all necessary
repairs (both structural and nonstructural) to the part of Building Systems
which provide service to the Premises (but not to the distribution portions of
such Building Systems located within the Premises) and the public portions of
the Building, both exterior and interior, in conformance with standards
applicable to non-institutional first class office buildings in Manhattan.
Tenant, at Tenant's sole cost and expense, shall take good care of the Premises
and the fixtures, equipment and appurtenances therein and the distribution
systems and shall make all nonstructural repairs thereto as and when needed to
preserve them in good working order and condition, except for reasonable wear
and tear, obsolescence and damage for which Tenant is not responsible pursuant
to the provisions of Article 10 hereof. Notwithstanding the foregoing, all
damage or injury to the Premises or to any other part of the Building and
Building Systems, or to its fixtures, equipment and appurtenances, whether
requiring structural of nonstructural repairs, caused by or resulting from
carelessness, omission, neglect or improper conduct of, or Alterations made by,
Tenant, Tenant's agents, employees, invitees or licensees, shall be repaired at
Tenant's sole cost and expense, by Tenant to the reasonable satisfaction of
Landlord (if the required repair are nonstructural in nature and do not affect
any Building System), or by Landlord (if the required repairs are structural in
nature or affect any Building System). All of the aforesaid repairs shall be of
first quality and of a class consistent with non-institutional first class
office building work or construction and shall be made in accordance with the
provisions of Article 3 hereof. If Tenant fails after ten (10) days' notice (or
such shorter period as Landlord may be permitted pursuant to any Superior Lease
or Mortgage or such shorter period as may be required due to an emergency) to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by Landlord at the expense of Tenant, and the expenses thereof
incurred by Landlord, with interest thereon at the Applicable Rate, shall be
forthwith paid to Landlord as additional rent after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in the Building or in any Building System, located in, servicing or
passing through the Premises.
Section 4.2. Tenant shall not place a load upon any floor of the
Premises exceeding one hundred twenty (120) pounds per square foot "live load".
Tenant shall not move any safe, heavy machinery, heavy equipment, business
machines (other than standard office machines), freight, bulky matter or
fixtures into or out of the Building without Landlord's prior consent, which
consent shall not be unreasonably withheld, and shall make payment to Landlord
of Landlord's costs in connection therewith. If such safe, machinery, equipment,
freight, bulky matter or fixtures requires special handling, Tenant shall employ
only persons holding a Master Rigger's license to do said work. All work in
connection therewith shall comply with all Requirements and the Rules and
Regulations, and shall be done during such hours as Landlord may reasonably
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designate. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient in Landlord's
reasonable judgment to absorb and prevent vibration, noise and annoyance. Except
as expressly provided in this Lease, there shall be no allowance to Tenant for a
diminution of rental value and no liability on the part of Landlord by reason of
inconvenience, annoyance or injury to business arising from Landlord, Tenant or
others making, or failing to make, any repairs, alterations, additions or
improvements in or to any portion of the Building or the Premises, or in or to
fixtures, appurtenances or equipment thereof.
Section 4.3. Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy of the Premises in making any
repairs, alterations, additions or improvements; provided, however, that
Landlord shall have no obligation to employ contractors of labor at so-called
overtime or other premium pay rates or to incur any other overtime costs or
expenses whatsoever, except that Landlord, at its expense but subject to
recoupment pursuant to Article 27 hereof, shall employ contractors or labor at
so-called overtime or other premium pay rates if necessary to make any repair
required to be made by it hereunder to remedy any condition that either (i)
results in a denial of access to the Premises, (ii) threatens the health or
safety of any occupant of the Premises, or (iii) except in the case of a fire or
other casualty, materially interferes with Tenant's ability to conduct its
business in the Premises. In all other cases, at Tenant's request, Landlord
shall employ contractors or labor at so-called overtime or other premium pay
rates and incur any other overtime costs or expenses in making any repairs,
alterations, additions or improvements, and Tenant shall pay to Landlord, as
additional rent, within ten (10) Business Days after demand, an amount equal to
the difference between the overtime or other premium pay rates and the regular
pay rates for such labor and any other overtime costs or expenses so incurred.
ARTICLE 5
WINDOW CLEANING
Tenant shall not clean, nor require, permit, suffer or allow any
window in the Premises to be cleaned from the outside in violation of Section
202 of the Labor Law, or any other Requirement, or of the rules of the Board of
Standards and Appeals, or of any other board or body having or asserting
jurisdiction.
ARTICLE 6
REQUIREMENTS OF LAW
Section 6.1. Tenant, at its sole cost and expense, shall comply with
all Requirements applicable to the Premises including, without limitation, those
applicable to the making of any Alterations therein or the result of the making
thereof and those applicable by reason of the nature or type of business
operated by Tenant in the Premises. Tenant shall not do or permit to be done any
act or thing upon the Premises which will invalidate or be in conflict with a
standard
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"all-risk" insurance policy; and shall not do, or permit anything to be done
in or upon the Premises, or bring or keep anything therein, except as now or
hereafter permitted by the New York City Fire Department, New York Board of Fire
Underwriters, the Insurance Services Office or other authority having
jurisdiction and then only in such quantity and manner of storage as not to
increase the rate for fire insurance applicable to the Building, or use the
Premises in a manner (as opposed to mere use as general "offices") which shall
increase the rate of fire insurance on the Building or on property located
therein, over that in similar type buildings or in effect on the Commencement
Date. If by reason of Tenant's failure to comply with the provisions of this
Article, the fire insurance rate shall be higher than it otherwise would be,
then Tenant shall desist from doing or permitting to be done any such act or
thing and shall reimburse Landlord, as additional rent hereunder, for that part
of all fire insurance premiums thereafter paid by Landlord which shall have been
charged because of such failure by Tenant, and shall make such reimbursement
upon demand by Landlord. In any action or proceeding wherein Landlord and Tenant
are parties, a schedule or "make up" of rates for the Building or the Premises
issued by the Insurance Services Office, or other body fixing such fire
insurance rates, shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to the
Building,
Section 6.2. Tenant, at its sole cost and expense and after notice to
Landlord, may contest by appropriate proceedings prosecuted diligently and in
good faith, the legality or applicability of any Requirement affecting the
Premises, provided that (a) Landlord (or any Indemnitee) shall not be subject to
imprisonment or to prosecution for a crime, nor shall the Real Property or any
part thereof be subject to being condemned or vacated, nor shall the certificate
of occupancy for the Premises or the Building be suspended or threatened to be
suspended by reason of non-compliance or by reason of such contest; (b) before
the commencement of such contest, if Landlord or any Indemnitee may be subject
to any civil fines or penalties or other criminal penalties or if Landlord may
be liable to any independent third party as a result of such noncompliance,
Tenant shall furnish to Landlord either (i) a bond of a surety company
satisfactory to Landlord, in form and substance reasonably satisfactory to
Landlord, and in an amount equal to one hundred twenty percent (120%) of the
sum of (A) the cost of such compliance, (B) the criminal or civil penalties or
fines that may accrue by reason of such non-compliance (as reasonably estimated
by Landlord), and (C) the amount of such liability to independent third parties
(as reasonably estimated by Landlord), and shall indemnify Landlord (and any
Indemnitee) against the cost of such compliance and liability resulting from
or incurred in connection with such contest or non-compliance (except that
Tenant shall not be required to furnish such bond to Landlord if it has
otherwise furnished any similar bond required by law to the appropriate
Governmental Authority and has named Landlord as a beneficiary thereunder) or
(ii) other security reasonably satisfactory in all respects to Landlord;
(c) such non-compliance or contest shall not constitute or result in a
violation (either with the giving of notice or the passage of time or both) of
the terms of any Mortgage or Superior Lease, or if such Superior Lease or
Mortgage shall condition such non-compliance or contest upon the taking of
action or furnishing of security by Landlord, such action shall be taken or
such security shall be furnished at the expense of Tenant; and (d) Tenant shall
keep Landlord regularly advised as to the status of such proceedings. Without
limiting the applicability of the foregoing, Landlord (or any Indemnitee)
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shall be deemed subject to prosecution for a crime if Landlord (or any
Indemnitee), a Lessor, a Mortgagee or any of their officers, directors,
partners, shareholders, agents or employees is charged with a crime of any kind
whatsoever, unless such charges are withdrawn ten (10) days before Landlord (or
any Indemnitee), such Lessor or such Mortgagee or such officer, director,
partner, shareholder, agent or employee, as the case may be, is required to
plead or answer thereto.
ARTICLE 7
SUBORDINATION
Section 7.1. This Lease shall be subject and subordinate to each and
every Superior Lease and to each and every Mortgage. This clause shall be
self-operative and no further instrument of subordination shall be required
from Tenant to make the interest of any Lessor or Mortgagee superior to the
interest of Tenant hereunder; however, Tenant shall execute and deliver promptly
any instrument, in recordable form, that Landlord, any Mortgagee or Lessor may
request to evidence and confirm such subordination. If the date of expiration of
any Superior Lease shall be the same day as the Expiration Date, the Term shall
end and expire twelve (12) hours prior to the expiration of the Superior Lease.
Tenant shall not do anything that would constitute a default under any Superior
Lease or Mortgage, or omit to do anything that Tenant is obligated to do under
the terms of this Lease so as to cause Landlord to be in default thereunder. If,
in connection with the financing of the Real Property, the Building or the
interest of the lessee under any Superior Lease, or if in connection with the
entering into of a Superior Lease, any lending institution or Lessor shall
request reasonable modifications of this Lease that do not increase Tenant's
monetary obligations under this Lease, or materially adversely affect or
diminish the rights, or materially increase the other obligations of Tenant
under this Lease, Tenant shall make such modifications.
Section 7.2. If at any time prior to the expiration of the Term, any
Superior Lease shall terminate or be terminated for any reason or any Mortgagee
comes into possession of the Real Property or the Building or the estate created
by any Superior Lease by receiver or otherwise, Tenant agrees, at the election
and upon demand of any owner of the Real Property or the Building, or of the
Lessor, or of any Mortgagee in possession of the Real Property or the Building,
to attorn, from time to time, to any such owner, Lessor or Mortgagee or any
person acquiring the interest of Landlord as a result of any such termination,
or as a result of a foreclosure of the Mortgage or the granting of a deed in
lieu of foreclosure, upon the then executory terms and conditions of this Lease,
subject to the provisions of Section 7.1 hereof and this Section 7.2. for the
remainder of the Term, provided that such owner, Lessor or Mortgagee, or
receiver caused to be appointed by any of the foregoing, as the case may be,
shall then be entitled to possession of the Premises and provided further that
such owner, Lessor or Mortgagee, as the case may be, or anyone claiming by,
through or under such owner, Lessor or Mortgagee, as the case may be, including
a purchaser at a foreclosure sale, shall not be:
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(1) liable for any act or omission of any prior
landlord (including, without limitation, the then defaulting landlord), or
(2) subject to any defense or offsets which Tenant may
have against any prior landlord (including, without limitation, the then
defaulting landlord), or
(3) bound by any payment of Rental which Tenant may
have made to any prior landlord (including, without limitation, the then
defaulting landlord) more than thirty (30) days in advance of the date upon
which such payment was due, or
(4) bound by any obligation to make any payment to or
on behalf of
(5) bound by any obligation to perform any work or to
make improvements to the Premises, except for (i) repairs and maintenance
pursuant to the provisions of Article 4, the need for which repairs and
maintenance first arises after the date upon which such owner, Lessor, or
Mortgagee shall be entitled to possession of the Premises, (ii) repairs to the
Premises or any part thereof as a result of damage by fire or other casualty
pursuant to Article 10 hereof, but only to the extent that such repairs can be
reasonably made from the net proceeds of any insurance actually made available
to such owner, Lessor or Mortgagee, and (iii) repairs to the Premises as a
result of a partial condemnation pursuant to Article 11 hereof, but only to the
extent that such repairs can be reasonably made from the net proceeds of any
award made available to such owner, Lessor or Mortgagee, or
(6) bound by any amendment or modification of this
Lease made without its consent, or
(7) bound to return Tenant's security deposit, if any,
until such deposit has come into its actual possession and Tenant would be
entitled to such security deposit pursuant to the terms of this Lease.
The provisions of this Section 7.2 shall ensure to the benefit of any such
owner, Lessor or Mortgagee, shall apply notwithstanding that, as a matter of
law, this Lease may terminate upon the termination of any Superior Lease, shall
be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Tenant, however, upon demand of any
such owner, Lessor or Mortgagee, shall execute, at Tenant's expense, from time
to time, instruments, in recordable form, in confirmation of the foregoing
provisions of this Section 7.2, satisfactory to any such owner, Lessor or
Mortgagee, acknowledging such attornment and setting forth the terms and
conditions of its tenancy. Nothing contained in this Section 7.2 shall be
construed to impair any right otherwise exercisable by any such owner, Lessor or
Mortgagee. Notwithstanding the provisions of this Section 7.2, this Lease shall
not terminate by reason of the termination of any Superior Lease without the
prior written consent of the Mortgagee of the Mortgage which is a first mortgage
on Landlord's interest in the Real Property or the leasehold estate created by
such Superior Lease.
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Section 7.3. From time to time, within ten (10) days next following
request by Landlord, any Mortgagee or any Lessor, Tenant shall deliver to
Landlord, such Mortgagee or such Lessor a written statement executed by Tenant,
in form satisfactory to Landlord, such Mortgagee or such Lessor, (1) stating
that this Lease is then in full force and effect and has not been modified (or
if modified, setting forth all modifications), (2) setting forth the date to
which the Fixed Rent, Escalation Rent and other items of Rental have been paid,
(3) stating whether or not, to the best knowledge of Tenant, Landlord is in
default under this Lease, and, if Landlord is in default, setting forth the
specific nature of all such defaults, and (4) as to any other matters reasonably
requested by Landlord, such Mortgagee or such Lessor. Tenant acknowledges that
any statement delivered pursuant to this Section 7.3 may be relied upon by any
purchaser or owner of the Real Property or the Building, or Landlord's interest
in the Real Property or the Building or any Superior Lease, or by any Mortgagee,
or by an assignee of any Mortgagee, or by any Lessor.
Section 7.4. From time to time, within ten (10) days next following
request by Tenant but not more frequently than twice in any twelve (12) month
period, Landlord shall deliver to Tenant a written statement executed by
Landlord (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Fixed Rent, Escalation Rent and any other
items of Rental have been paid, (iii) stating whether or not, to the best
knowledge of Landlord (but without having made any investigation), Tenant is in
default under this Lease, and, if Tenant is in default, setting forth the
specific nature of all such defaults, and (iv) as to any other matters
reasonably requested by Tenant and related to this Lease.
Section 7.5. As long as any Superior Lease or Mortgage shall exist,
Tenant shall not seek to terminate this Lease by reason of any act or omission
of Landlord until Tenant shall have given written notice of such act or omission
to all Lessors and Mortgagees at such addresses as shall have been furnished to
Tenant by such Lessors and Mortgagees and, if any such Lessor or Mortgagee, as
the case may be, shall have notified Tenant within ten (10) Business Days
following receipt of such notice of its intention to remedy such act or
omission, until a reasonable period of time shall have elapsed following the
giving of such notice, during which period such Lessors and Mortgagees shall
have the right, but not the obligation, to remedy such act or omission.
Section 7.6. Tenant hereby irrevocably waives any and all right(s) it
may have in connection with any zoning lot merger or transfer of development
rights with respect to the Real Property including, without limitation, any
rights it may have to be a party to, to contest, or to execute, any Declaration
of Restrictions (as such term is used in Section 12-10 of the Zoning Resolution
of The City of New York effective December 15, 1961, as amended) with respect to
the Real Property, which would cause the Premises to be merged with or unmerged
from any other zoning lot pursuant to such Zoning Resolution or to any document
of a similar nature and purpose, and Tenant agrees that this Lease shall be
subject and subordinate to any Declaration of Restrictions or any other document
of similar nature and purpose now or hereafter affecting the Real Property. In
confirmation of such subordination and waiver, Tenant shall execute and deliver
promptly any certificate or instrument that Landlord reasonably may request.
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ARTICLE 8
RULES AND REGULATIONS
Tenant and Tenant's contractors, employees, agents, visitors,
invitees and licensees shall comply with the Rules and Regulations. Tenant
shall have the right to dispute the reasonableness of any additional Rule or
Regulation hereafter adopted by Landlord. If Tenant disputes the reasonableness
of any additional Rule or Regulation hereafter adopted by Landlord, the dispute
shall be determined by arbitration in the City of New York in accordance with
the rules and regulations then obtaining of the American Arbitration
Association or its successor. Any such determination shall be final and
conclusive upon the parties hereto. The right to dispute the reasonableness of
any additional Rule or Regulation upon Tenant's part shall be deemed waived
unless the same shall be asserted by service of a notice upon Landlord within
thirty (30) days after receipt by Tenant of notice of the adoption of any such
additional Rule or Regulation. Nothing in this Lease contained shall be
construed to impose upon Landlord any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease against
any other tenant, and Landlord shall not be liable to Tenant for violation of
the same by any other tenant, its employees, agents, visitors or licensees.
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
Section 9.1. (A) Any Building employee to whom any property shall be
entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's
agent with respect to such property and neither Landlord nor its agents shall
be liable for any damage to property of Tenant or of others entrusted to
employees of the Building, nor for the loss of or damage to any property of
Tenant by theft or otherwise. Neither Landlord nor its agents shall be liable
for any injury (or death) to persons or damage to property, or interruption of
Tenant's business, resulting from fire or other casualty; nor shall Landlord or
its agents be liable for any such injury (or death) to persons or damage caused
by other tenants or persons in the Building or caused by construction of any
private, public or quasi-public work; nor shall Landlord be liable for any
injury (or death) to persons or damage to property or improvements, or
interruption of Tenant's business, resulting from any latent defect in the
Premises or in the Building (provided that the foregoing shall not relieve
Landlord from its obligations, if any, to repair such latent defect pursuant to
the provisions of Article 4 hereof.
(B) If at any time any windows of the Premises are temporarily
closed, darkened or bricked-up due to any Requirement or by reason of repairs,
maintenance, alterations, or improvements to the Building, or any of such
windows are permanently closed, darkened or bricked-up due to any Requirement,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor, nor abatement or
diminution of Fixed Rent or any other item of Rental, nor shall the same
release Tenant from its obligations hereunder, nor constitute an actual or
constructive eviction, in whole or in part, by
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reason of inconvenience or annoyance to Tenant, or injury to or interruption of
Tenant's business, or otherwise, nor impose any liability upon Landlord or its
agents. If at any time the windows of the Premises are temporarily closed,
darkened or bricked-up, as aforesaid, then, unless Tenant is required pursuant
to the Lease to perform the repairs, maintenance, alterations, or improvements,
or to comply with the Requirements, which resulted in such windows being
closed, darkened or bricked-up, Landlord shall perform such repairs,
maintenance, alterations or improvements and comply with the applicable
Requirements with reasonable diligence and otherwise take such action as may be
reasonably necessary to minimize the period during which such windows are
temporarily closed, darkened, or bricked-up.
(C) Tenant shall immediately notify Landlord of any fire
or accident in the Premises.
Section 9.2. Tenant shall obtain and keep in full force and effect (i)
an "all risk" insurance policy for Tenant's Specialty Alterations and Tenant's
Property at the Premises in an amount equal to one hundred percent (100%) of
the replacement value thereof, and (ii) a policy of commercial general
liability and property damage insurance on an occurrence basis, with a broad
form contractual liability endorsement. Such policies shall provide that Tenant
is named as the insured. Landlord, Landlord's managing agent, Landlord's agents
and any Lessors and any Mortgagees (whose names shall have been furnished to
Tenant) shall be added as additional insureds, as their respective interests may
appear, with respect to the insurance required to be carried pursuant to
clauses (i) and (ii) above. Such policy with respect to clause (ii) above shall
include a provision under which the insurer agrees to indemnify, defend and
hold Landlord, Landlord's managing agent, Landlord's agents and such Lessors
and Mortgagees harmless from and against, subject to the limits of liability
set forth in this Section 9.2, all cost, expense and liability arising out of,
or based upon, any and all claims, accidents, injuries and damages mentioned in
Article 35. In addition, the policy required to be carried pursuant to clause
(ii) above shall contain a provision that (a) no act or omission of Tenant
shall affect or limit the obligation of the insurer to pay the amount of any
loss sustained and (b) the policy shall be non-cancellable with respect to
Landlord, Landlord's managing agent, Landlord's agents and such Lessors and
Mortgagees (whose names and addresses shall have been furnished to Tenant)
unless thirty (30) days' prior written notice shall have been given to Landlord
by certified mail, return receipt requested, which notice shall contain the
policy number and the names of the insured and additional insureds. In
addition, upon receipt by Tenant of any notice of cancellation or any other
notice from the insurance carrier which may adversely affect the coverage of
the insureds under such policy of insurance, Tenant shall immediately deliver
to Landlord and any other additional insured hereunder a copy of such notice.
The minimum amounts of liability under the policy of insurance required to be
carried pursuant to clause (ii) above shall be a combined single limit with
respect to each occurrence in an amount of $5,000,000 for injury (or death) to
persons and damage to property, which amount shall be increased from time to
time to that amount of insurance which in Landlord's reasonable judgment is
then being customarily required by prudent landlords of non-institutional first
class buildings in New York City. All insurance required to be carried by
Tenant pursuant to the terms of this Lease shall be effected under valid and
enforceable policies issued by reputable and independent insurers permitted to
do business in the
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State of New York, and rated in Best's Insurance Guide, or any successor thereto
(or if there be none, an organization having a national reputation) as having a
general policyholder rating of "A" and a financial rating of at least "XIII".
Section 9.3. On or prior to the Commencement Date, Tenant shall
deliver to Landlord appropriate certificates of insurance, including evidence
of waivers of subrogation required pursuant to Section 10.5 hereof, required to
be carried by Tenant pursuant to this Article 9. Evidence of each renewal or
replacement of a policy shall be delivered by Tenant to Landlord at least
twenty (20) days prior to the expiration of such policy.
Section 9.4. Tenant acknowledges that Landlord shall not carry
insurance on, and shall not be responsible for damage to, Tenant's Property or
Specialty Alterations, and that Landlord shall not carry insurance against, or
be responsible for any loss suffered by Tenant due to, interruption of Tenant's
business.
Section 9.5. If notwithstanding the recovery of insurance proceeds by
Tenant for loss, damage or destruction of its property (or rental value or
business interruptions) Landlord is liable to Tenant with respect thereto or is
obligated under this Lease to make replacement, repair or restoration, then, at
Landlord's option, either (i) the amount of the net proceeds of Tenant's
insurance against such loss, damage or destruction shall be offset against
Landlord's liability to Tenant therefor, or (ii) shall be made available to
Landlord to pay for replacement repair or restoration.
ARTICLE 10
DESTRUCTION-FIRE OR OTHER CAUSE
Section 10.1. (A) If the Premises (including Alterations other than
Specialty Alterations) shall be damaged by fire or other casualty, and if
Tenant shall give prompt notice thereof to Landlord, the damage, with such
modifications as shall be required in order to comply with Requirements shall
be diligently repaired by and at the expense of Landlord to substantially the
condition prior to the damage, and until such repairs which are required to be
performed by Landlord (excluding Long Lead Work) shall be substantially
completed (of which substantial completion Landlord shall promptly notify
Tenant) the Fixed Rent, Escalation Rent and Space Factor shall be reduced in
the proportion which the area of the part of the Premises which is not usable
by Tenant, as determined by Landlord in its reasonable discretion, bears to the
total area of the Premises immediately prior to such casualty. Upon the
substantial completion of such repairs (excluding Long Lead Work), Landlord
shall diligently prosecute to completion any items of Long Lead Work remaining
to be completed. Landlord shall have no obligation to repair any damage to, or
to replace, any Specialty Alterations or Tenant's Property, which Tenant shall
complete promptly after substantial completion of Landlord's repair obligations
under this Article 10. In addition, Landlord shall not be obligated to repair
any damage to, or to replace, any Alterations installed by Tenant unless Tenant
shall have notified Landlord of the completion of such Alterations and the cost
thereof, and shall have maintained adequate records with respect to
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such Alterations. Tenant shall make all necessary repairs to the Specialty
Alterations and same shall be completed promptly after substantial completion
of Landlord's repair obligations under this Article 10. Landlord shall use its
reasonable efforts to minimize interference with Tenant's use and occupancy in
making any repairs pursuant to this Section. Anything contained herein to the
contrary notwithstanding, if the Premises including any Alterations) are
damaged by fire or other casualty at any time prior to the completion of the
Initial Alterations, Landlord's obligation to repair the Premises (and any
Alterations) shall be limited to repair of the part of the Building Systems
serving the Premises on the Commencement Date, but not the distribution
portions of such Building Systems located within the Premises, the floor and
ceiling slabs of the Premises and the exterior walls of the Premises, all to
substantially the same condition which existed on the Commencement Date, with
such modifications as shall be required in order to comply with Requirements.
(B) Prior to the substantial completion of Landlord's
repair obligations set forth in Section 10.1 (A) hereof, Landlord shall
provide Tenant and Tenant's contractor, subcontractors and materialmen access
to the Premises to perform Specialty Alterations (or Alterations, if Landlord
is not obligated to repair the same pursuant to the provisions hereof), on the
following terms and conditions (but not to occupy the same for the conduct of
business):
(1) Tenant shall not commence work in any
portion of the Premises until the date specified in a notice from Landlord to
Tenant stating that the repairs required to be made by Landlord have been or
will be completed to the extent reasonably necessary, in Landlord's discretion,
to permit the commencement of the Specialty Alterations (or Alterations, if
Landlord is not obligated to repair same pursuant to the provisions hereof)
then prudent to be performed in accordance with good construction practice in
the portion of the Premises in question without interference with, and
consistent with the performance of, the repairs remaining to be performed.
(2) Such access by Tenant shall be deemed to be
subject to all of the applicable provisions of this Lease, including, without
limitation, Tenant's obligation to pay to Landlord an amount equal to the
Electricity Inclusion Factor, or, if applicable, the Electricity Additional
Rent except that there shall be no obligation on the part of Tenant solely
because of such access to pay any Fixed Rent or Escalation Rent with respect to
the affected portion of the Premises for any period prior to substantial
completion of the repairs.
(3) It is expressly understood that if Landlord
shall be delayed from substantially completing the repairs due to any acts of
Tenant, its agents, servants, employees or contractors, including, without
limitation, by reason of the performance of any Specialty Alteration (or
Alteration, if Landlord is not obligated to repair same pursuant to the
provisions hereof), by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any
of Tenant's obligations described or referred to in this Lease, or if such
repairs are not completed because under good construction scheduling practice
such repairs should be performed after completion of any Specialty Alteration
(or Alteration, if Landlord is not obligated to repair the same pursuant to the
provisions hereof), then
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such repairs shall be deemed substantially complete on the date when the
repairs would have been substantially complete but for such delay and the
expiration of the abatement of the Tenant's obligations hereunder shall not be
postponed by reason of such delay. Any additional costs to Landlord to complete
any repairs occasioned by such delay shall be paid by Tenant to Landlord within
ten (10) days after demand, as additional rent.
Section 10.2. Anything contained in Section 10.1 hereof to the
contrary notwithstanding, if the Building shall be so damaged by fire or other
casualty that, in Landlord's opinion, substantial alteration, demolition, or
reconstruction of the Building shall be required (whether or not the Premises
shall have been damaged or rendered untenantable), then Landlord, at Landlord's
option, may, not later than ninety (90) days following the damage, give Tenant
a notice in writing terminating this Lease, provided that if the Premises are
not substantially damaged or rendered substantially untenantable, Landlord may
not terminate this Lease unless it shall elect to terminate leases (including
this Lease), affecting at least fifty percent (50%) of the rentable area of the
Building (excluding any rentable area occupied by Landlord or its Affiliates).
If Landlord elects to terminate this Lease, the Term shall expire upon a date
set by Landlord, but not sooner than the tenth (10th) day after such notice
is given, and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof. Upon the
termination of this Lease under the conditions provided for in this Section
10.2, the Fixed Rent and Escalation Rent shall be apportioned and any prepaid
portion of Fixed Rent and Escalation Rent for any period after such date shall
be refunded by Landlord to Tenant.
Section 10.3. (A) Within forty-five (45) days after notice to Landlord
of any damage described in Section 10.1 hereof, Landlord shall deliver to Tenant
a statement prepared by a reputable contractor setting forth such contractor's
estimate as to the time required to repair such damage, exclusive of time
required to repair any Specialty Alterations (which are Tenant's obligation to
repair) or to perform Long Lead Work. If the estimated time period exceeds
twelve (12) months from the date of such statement, Tenant may elect to
terminate this Lease by notice to Landlord not later than thirty (30) days
following receipt of such statement. If Tenant makes such election, the Term
shall expire upon the thirtieth (30th) day after notice of such election is
given by Tenant, and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof. If Tenant shall
not have elected to terminate this Lease pursuant to this Article 10 (or is not
entitled to terminate this Lease pursuant to this Article 10), the damages shall
be diligently repaired by and at the expense of Landlord as set forth in Section
10.1 hereof.
(B) Notwithstanding the foregoing, if the Premises shall
be substantially damaged during the last year of the Term, Landlord may elect
by notice, given within thirty (30) days after the occurrence of such damage,
to terminate this Lease and if Landlord makes such election, the Term shall
expire upon the thirtieth (30th) day after notice of such election is given by
Landlord and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof.
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(C) Except as expressly set forth in this Section 10.3,
Tenant shall have no other options to cancel this Lease under this Article 10.
Section 10.4. This Article 10 constitutes an express agreement
governing any case of damage or destruction of the Premises or the Building by
fire or other casualty, and Section 227 of the Real Property Law of the State
of New York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
Section 10.5. The parties hereto shall procure an appropriate clause
in, or endorsement on, any fire or extended coverage insurance covering the
Premises, the Building and personal property, fixtures and equipment located
thereon or therein, pursuant to which the insurance companies waive subrogation
or consent to a waiver of right of recovery and having obtained such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, will not make any claim against or seek to recover from the other for
any loss or damage to its property or the property of others resulting from
fire or other hazards covered by such fire and extended coverage insurance,
provided, however, that the release, discharge, exoneration and covenant not to
sue herein contained shall be limited by and be coextensive with the terms and
provisions of the waiver of subrogation clause or endorsements or clauses or
endorsements consenting to a waiver of right of recovery. If the payment of an
additional premium is required for the inclusion of such waiver of subrogation
provision, each party shall advise the other of the amount of any such
additional premiums and the other party at its own election may, but shall not
be obligated to, pay the same. If such other party shall not elect to pay such
additional premium, the first party shall not be required to obtain such waiver
of subrogation provision. If either party shall be unable to obtain the
inclusion of such clause even with the payment of an additional premium, then
such party shall attempt to name the other party as an additional insured (but
not a loss payee) under the policy. If the payment of an additional premium is
required for naming the other party as an additional insured (but not a loss
payee), each party shall advise the other of the amount of any such additional
premium and the other party at its own election may, but shall not be obligated
to, pay the same. If such other party shall not elect to pay such additional
premium or if it shall not be possible to have the other party named as an
additional insured (but not loss payee), even with the payment of an
additional premium, then (in either event) such party shall so notify the
first party and the first party shall not have the obligation to name the other
party as an additional insured. Tenant acknowledges that Landlord shall not
carry insurance on and shall not be responsible for damage to, Tenant's
Property or Specialty Alterations or any other Alteration prior to the
completion of the Initial Alterations, and that Landlord shall not carry
insurance against, or be responsible for any loss suffered by Tenant due to,
interruption of Tenant's business.
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ARTICLE 11
EMINENT DOMAIN
Section 11.1. if the whole of the Real Property, the Building or the
Premises shall be LEASE AND THE TERM acquired or condemned for any public or
quasi-public use or purpose, this shall end as of the date of the vesting of
title with the same effect as if said date were the Expiration Date. If only a
part of the Real Property and not the entire Premises shall be so acquired or
condemned then, (1) except as hereinafter provided in this Section 11.1, this
Lease and the Term shall continue in force and effect, but, if a part of the
Premises is included in the part of the Real Property so acquired or condemned,
from and after the date of the vesting of title, the Fixed Rent and the Space
Factor shall be reduced in the proportion which the area of the part of the
Premises so acquired or condemned bears to the total area of the Premises
immediately prior to such acquisition or condemnation and Tenant's Share shall
be redetermined based upon the proportion in which the ratio between the
rentable area of the Premises remaining after such acquisition or condemnation
bears to the rentable area of the Building remaining after such acquisition or
condemnation; (2) whether or not the Premises shall be affected thereby,
Landlord, at Landlord's option, may give to Tenant, within sixty (60) days next
following the date upon which Landlord shall have received notice of vesting of
title, a thirty (30) days' notice of termination of this Lease if Landlord
shall elect to terminate leases (including this Lease), affecting at least
fifty percent (50%) of the rentable area of the Building (excluding any
rentable area leased by Landlord or its Affiliates); and (3) if the part of the
Real Property so acquired or condemned shall contain more than fifteen percent
(15%) of the total area of the Premises immediately prior to such acquisition
or condemnation, or if, by reason of such acquisition or condemnation, Tenant
no longer has reasonable means of access to the Premises, Tenant, at Tenant's
option, may give to Landlord, within sixty (60) days next following the date
upon which Tenant shall have received notice of vesting of title, a thirty (30)
days' notice of termination of this Lease. If any such thirty (30) days'
notice of termination is given by Landlord or Tenant, this Lease and the Term
shall come to an end and expire upon the expiration of said thirty (30) days
with the same effect as if the date of expiration of said thirty (30) days were
the Expiration Date. If a part of the Premises shall be so acquired or condemned
and this Lease and the Term shall not be terminated pursuant to the foregoing
provisions of this Section 11.1, Landlord, at Landlord's expense, shall restore
that part of the Premises not so acquired or condemned to a self-contained
rental unit inclusive of Tenant's Alterations (other than Specialty
Alterations), except that if such acquisition or condemnation occurs prior to
completion of the Initial Alterations, Landlord shall only be required to
restore that part of the Premises not so acquired or condemned to a
self-contained rental unit exclusive of Tenant's Alterations. Upon the
termination of this Lease and the Term pursuant to the provisions of this
Section 11.1, the Fixed Rent and Escalation Rent shall be apportioned and any
prepaid portion of Fixed Rent and Escalation Rent for any period after such
date shall be refunded by Landlord to Tenant.
Section 11.2. In the event of any such acquisition or condemnation of
all or any part of the Real Property, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall have no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term and Tenant hereby expressly assigns to Landlord
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all of its right in and to any such award. Nothing contained in this Section
11.2 shall be deemed to prevent Tenant from making a separate claim in any
condemnation proceedings for the then value of any Tenant's Property included
in such taking, and for any moving expenses.
Section 11.3. If the whole or any part of the Premises shall be
acquired or condemned temporarily during the Term for any public or
quasi-public use or purpose, Tenant shall give prompt notice thereof to
Landlord and the Term shall not be reduced or affected in any way and Tenant
shall continue to pay in full all items of Rental payable by Tenant hereunder
without reduction or abatement, and Tenant shall be entitled to receive for
itself any award or payments for such use, provided, however, that:
(i) if the acquisition or condemnation is for a
period not extending beyond the Term and if such award or
payment is made less frequently than in monthly installments,
the same shall be paid to and held by Landlord as a fund
which Landlord shall apply from time to time to the Rental
payable by Tenant hereunder, except that, if by reason of
such acquisition or condemnation changes or alterations are
required to be made to the Premises which would necessitate
an expenditure to restore the Premises, then a portion of
such award or payment considered by Landlord as appropriate
to cover the expenses of the restoration shall be retained by
Landlord, without application as aforesaid, and applied
toward the restoration of the Premises as provided in Section
11.1 hereof; or
(ii) if the acquisition or condemnation is for a
period extending beyond the Term, such award or payment shall
be apportioned between Landlord and Tenant as of the
Expiration Date; Tenant's share thereof, if paid less
frequently than in monthly installments, shall be paid to
Landlord and applied in accordance with the provisions of
clause (i) above, provided, however, that the amount of any
award or payment allowed or retained for restoration of the
Premises shall remain the property of Landlord if this Lease
shall expire prior to the restoration of the Premises.
ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
Section 12.10 (A) Except as expressly permitted herein, Tenant,
without the prior consent of Landlord in each instance, shall not (a) assign
its rights or delegate its duties under this Lease (whether by operation of
law, transfers of interests in Tenant or otherwise), mortgage or encumber its
interest in this Lease, in whole or in part, (b) sublet, or permit the
subletting of, the Premises or any part thereof, or (c) permit the Premises or
any part thereof to be occupied or used for desk space, mailing privileges or
otherwise, by any Person other than Tenant.
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(B) If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or
of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other consideration constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and shall be promptly paid to or turned over to
Landlord.
Section 12.2. (A) If Tenant's interest in this Lease is assigned in
violation of the provisions of this Article 12, such assignment shall be void
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of
Rental from the assignee as a fee for its use and occupancy, and shall apply
the net amount collected to the Fixed Rent and other items of Rental reserved
in this Lease. If the Premises or any part thereof are sublet to, or occupied
by, or used by, any Person other than Tenant, whether or not in violation of
this Article 12, Landlord, after default by Tenant under this Lease, including,
without limitation, a subletting or occupancy in violation of this Article 12,
may collect any item of Rental or other sums paid by the subtenant, user or
occupant as a fee for its use and occupancy, and shall apply the net amount
collected to the Fixed Rent and other items of Rental reserved in this Lease.
No such assignment, subletting, occupancy or use, whether with or without
Landlord's prior consent, nor any such collection or application of Rental or
fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as tenant hereunder. The consent by
Landlord to any assignment, subletting, occupancy or use shall not relieve
Tenant from its obligation to obtain the express prior consent of Landlord to
any further assignment, subletting, occupancy or use.
(B) Tenant shall reimburse Landlord on demand for any
out-of-pocket costs that may be incurred by Landlord in connection with any
proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Premises or any part thereof, including, without limitation,
any reasonable processing fee, reasonable attorneys' fees and disbursements and
the reasonable costs of making investigations as to the acceptability of the
proposed subtenant or the proposed assignee.
(C) Neither any assignment of Tenant's interest in this
Lease nor any subletting, occupancy or use of the Premises or any part thereof
by any Person other than Tenant, nor any collection of Rental by Landlord from
any Person other than Tenant as provided in this Section 12.2, nor any
application of any such Rental as provided in this Section 12.2 shall, in any
circumstances, relieve Tenant of its obligations under this Lease on Tenant's
part to be observed and performed.
(D) Any Person to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee
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shall execute and deliver to Landlord upon demand an instrument confirming such
assumption. No assignment of this Lease shall relieve Tenant of its obligations
hereunder and, subsequent to any assignment, Tenant's liability hereunder shall
continue notwithstanding any subsequent modification or amendment hereof or the
release of any subsequent tenant hereunder from any liability, to all of which
Tenant hereby consents in advance.
Section 12.3. (A) If Tenant assumes this Lease and proposes to assign
the same pursuant to the provisions of the Bankruptcy Code to any Person who
shall have made a bona fide offer to accept an assignment of this Lease on
terms acceptable to Tenant, then notice of such proposed assignment shall be
given to Landlord by Tenant no later than twenty (20) days after receipt by
Tenant, but in any event no later than ten (10) days prior to the date that
Tenant shall make application to a court of competent jurisdiction for
authority and approval to enter into such assignment and assumption. Such
notice shall set forth (a) the name and address of such Person, (b) all of the
terms and conditions of such offer, and (c) adequate assurance of future
performance by such Person under the Lease as set forth in Paragraph (B) below,
including, without limitation, the assurance referred to in Section 365(b)(3)
of the Bankruptcy Code. Landlord shall have the prior right and option, to be
exercised by notice to Tenant given at any time prior to the effective date of
such proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such Person, less any brokerage commissions which would otherwise
be payable by Tenant out of the consideration to be paid by such Person in
connection with the assignment of this Lease.
(B) The term "adequate assurance of future performance"
as used in this Lease shall mean that any proposed assignee shall, among other
things, (a) deposit with Landlord on the assumption of this Lease the sum of
the then Fixed Rent as security for the faithful performance and observance by
such assignee of the terms and obligations of this Lease, which sum shall be
held by Landlord in accordance with the provisions of Article 31 hereof, (b)
furnish Landlord with financial statements of such assignee for the prior three
(3) fiscal years, as finally determined after an audit and certified as correct
by a certified public accountant, which financial statements shall show a net
worth of at least six (6) times the then Fixed Rent for each of such three (3)
years, (c) grant to Landlord a security interest in such property of the
proposed assignee as Landlord shall deem necessary to secure such assignee's
future performance under this Lease, and (d) provide such other information or
take such action as Landlord, in its reasonable judgment shall determine is
necessary to provide adequate assurance of the performance by such assignee of
its obligations under the Lease.
Section 12.4. (A) As long as PNV.net, Inc. is Tenant, Tenant shall
have the privilege, subject to the terms and conditions hereinafter set forth,
without the consent of Landlord but subject to Tenant's satisfaction of
conditions set forth in clauses (1), (4) and (5) of Section 12.8(A) hereof, and
without Landlord having the right granted in Section 12.8(B) hereof to
recapture, to assign its interest in this Lease (i) to any corporation which
is a successor to Tenant either by merger or consolidation, (ii) to a purchaser
of all or substantially all of Tenant's assets (provided such purchaser shall
have also assumed substantially all of Tenant's liabilities) or (iii)
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to a Person which shall (1) Control, (2) be under the Control of, or (3) be
under common Control with Tenant (any such Person referred to in this clause
(iii) being a "Related Entity"). As long as PNV.net, Inc. is Tenant, Tenant
also shall have the privilege, subject to the terms and conditions hereinafter
set forth, without the consent of Landlord but subject to Tenant's satisfaction
of conditions set forth in clauses (3), (6) through (8) and (10) of Section
12.6(A) and without Landlord having the right granted in Section 12.6(B)
hereof to recapture, to sublease all or any portion of the Premises to a
Related Entity. Any assignment or subletting described above may only be made
upon the condition that (a) any such assignee or subtenant shall continue to
use the Premises for the conduct of the same business as Tenant was conducting
prior to such assignment or sublease, (b) the principal purpose of such
assignment or sublease is not the acquisition of Tenant's interest in this
Lease or to circumvent the provisions of Section 12.1 of this Article (except
if such assignment or sublease is made to a Related Entity and is made for a
valid intracorporate business purpose and is not made to circumvent the
provisions of Section 12.1 of this Article), and (c) in the case of an
assignment, any such assignee shall have a net worth and annual income and cash
flow, determined in accordance with generally accepted accounting principles,
consistently applied, after giving effect to such assignment equal to the
greater of Tenant's net worth and annual income and cash flow, as so
determined, on (i) the date immediately preceding the date of such assignment,
and (ii) the Commencement Date. Tenant shall, within ten (10) Business Days
after execution thereof, deliver to Landlord either (x) a duplicate original
instrument of assignment in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant, together with an instrument in form and
substance reasonably satisfactory to Landlord, duly executed by the assignee,
in which such assignee shall assume observance and performance of, and agree to
be personally bound by, all of the terms, covenants and conditions of this
Lease on Tenant's part to be observed and performed, or (y) a duplicate
original sublease in form and substance reasonably satisfactory to Landlord,
duly executed by Tenant and the subtenant.
(B) If Tenant is a partnership, the admission of new
Partners, the withdrawal, retirement, death, incompetency or bankruptcy of any
Partner, or the reallocation of partnership interests among the Partners shall
not constitute an assignment of this Lease, provided the principal purpose of
any of the foregoing is not to circumvent the restrictions on assignment set
forth in the provisions of this Article 12. The reorganization of Tenant from a
professional corporation into a partnership or the reorganization of a Tenant
from a partnership into a professional corporation, shall not constitute an
assignment of this Lease, provided that immediately following such
reorganization the Partners of Tenant shall be the same as the shareholders of
Tenant existing immediately prior to such reorganization, or the shareholders
of Tenant shall be the same as the Partners of Tenant existing immediately
prior to such reorganization, as the case may be. If Tenant shall become a
professional corporation, each individual shareholder in Tenant and each
employee of a professional corporation which is a shareholder in Tenant shall
have the same personal liability as such individual or employee would have
under this Lease if Tenant were a partnership and such individual or employee
were a Partner in Tenant. If any individual Partner in Tenant is or becomes an
employee of a professional corporation, such individual shall have the same
personal liability under this Lease
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as such individual would have if he and not the professional corporation were a
Partner of Tenant.
(C) Except as set forth above, either a transfer
(including the issuance of treasury stock or the creation and issuance of new
stock or a new class of stock) of a controlling interest in the shares of
Tenant or of any entity which holds an interest in Tenant through one or more
intermediaries (if Tenant or such entity is a corporation or trust) or a
transfer of a majority of the total interest in Tenant or of any entity which
holds an interest in Tenant through one or more intermediaries (if Tenant or
such entity is a partnership or other entity) at any one time or over a period
of time through a series of transfers, shall be deemed an assignment of this
Lease and shall be subject to all of the provisions of this Article 12,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of shares of Tenant or of any entity which
holds an interest in Tenant through one or more intermediaries (if Tenant or
such entity is a corporation or trust) for purposes of this Section 12.4 shall
not include the sale of shares by persons other than those deemed "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended, which
sale is effected through the "over-the-counter market" or through any
recognized stock exchange.
Section 12.5. If, at any time after the originally named Tenant herein
may have assigned Tenant's interest in this Lease, this Lease shall be
disaffirmed or rejected in any proceeding of the types described in paragraph
(E) of Section 16.1 hereof, or in any similar proceeding, or in the event of
termination of this Lease by reason of any such proceeding or by reason of
lapse of time following notice of termination given pursuant to said Article 16
based upon any of the Events of Default set forth in such paragraph, any prior
Tenant, including, without limitation, the originally named Tenant, upon
request of Landlord given within thirty (30) days next following any such
disaffirmance, rejection or termination (and actual notice thereof to Landlord
in the event of a disaffirmance or rejection or in the event of termination
other than by act of Landlord), shall (1) pay to Landlord all Fixed Rent,
Escalation Rent and other items of Rental due and owing by the assignee to
Landlord under this Lease to and including the date of such disaffirmance,
rejection or termination, and (2) as "tenant", enter into a new lease with
Landlord of the Premises for a term commencing on the effective date of such
disaffirmance, rejection or termination and ending on the Expiration Date,
unless sooner terminated as in such lease provided, at the same Fixed Rent and
upon the then executory terms, covenants and conditions as are contained in
this Lease, except that (a) Tenant's rights under the new lease shall be
subject to the possessory rights of the assignee under this Lease and the
possessory rights of any person claiming through or under such assignee or by
virtue of any statute or of any order of any court, (b) such new lease shall
require all defaults existing under this Lease to be cured by Tenant with due
diligence, and (c) such new lease shall require Tenant to pay all Escalation
Rent reserved in this Lease which, had this Lease not been so disaffirmed,
rejected or terminated, would have accrued under the provisions of Article 27
hereof after the date of such disaffirmance, rejection or termination with
respect to any period prior thereto. If any such prior Tenant shall default in
its obligation to enter into said new lease for a period of ten (10) days next
following Landlord's request therefor, then, in addition to all other rights
and remedies by reason of such default, either at law or in equity, Landlord
shall have the same rights and remedies against such Tenant as if such Tenant
had
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entered into such new lease and such new lease had thereafter been terminated
as of the commencement date thereof by reason of such Tenant's default
thereunder.
Section 12.6. (A) Notwithstanding the provisions of Section 12.1
hereof, if Landlord shall not exercise its rights pursuant to paragraph (B) of
this Section 12.6, Landlord shall not unreasonably withhold its consent to any
subletting of the Premises, provided that:
(1) the Premises shall not, without Landlord's prior
consent, have been listed or otherwise publicly advertised for subletting at a
rental rate less than the prevailing rental rate set by Landlord for comparable
space in the Building or if there is no comparable space, the prevailing rental
rate reasonably determined by Landlord;
(2) Intentionally Omitted Prior to Execution;
(3) no Event of Default shall have occurred and be
continuing;
(4) upon the date Tenant delivers the Tenant Statement to
Landlord and upon the date immediately preceding the commencement date of any
sublease approved by Landlord, the proposed subtenant shall have a financial
standing (taking into consideration the obligations of the proposed subtenant
under the sublease) satisfactory to Landlord, be of a character, be engaged in
a business, and propose to use the Premises in a manner in keeping with the
standards in such respects of the other tenancies in the Building;
(5) the proposed subtenant (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed subtenant) shall not be a tenant or subtenant of any space in the
Building, nor shall the proposed subtenant (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed subtenant) be a Person with whom Landlord is negotiating or discussing
to lease space in the Building; if Tenant shall propose to sublease space and
is about to commence negotiations with a tenant, subtenant or prospective
subtenant, Tenant shall advise Landlord of the identity of such prospective
subtenant and Landlord shall promptly advise Tenant if the execution of a
sublease with such tenant, subtenant or prospective subtenant would violate the
provisions of this clause (5);
(6) the character of the business to be conducted or the
proposed use of the Premises by the proposed subtenant shall not (a) be likely
to increase Landlord's operating expenses beyond that which would be incurred
for use by Tenant or for use in accordance with the standards of use of other
tenancies in the Building; (b) increase the burden on existing cleaning
services or elevators over the burden prior to such proposed subletting; (c)
violate any provision or restrictions herein relating to the use or occupancy
of the Premises; (d) require any alterations, installations, improvements,
additions or other physical changes to be performed in or made to any portion
of the Building or the Real Property other than the Premises; or (e) violate
any provision or restrictions in any other lease for space in the Building or
in any Superior Lease or Mortgage; if Landlord shall have consented to a
sublease and, as a result of the use and
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occupancy of the subleased portion of the Premises by the subtenant, operating
expenses are increased, then Tenant shall pay to Landlord, within ten (10) days
after demand, as additional rent, all resulting increases in operating
expenses;
(7) the subletting shall be expressly subject to all of
the terms, covenants, conditions and obligations on Tenant's part to be
observed and performed under this Lease and the further condition and
restriction that the sublease shall not be modified without the prior written
consent of Landlord, which consent shall not be unreasonably withheld, or
assigned (by operation of law or otherwise; for purposes of this clause (7),
the transfer of a majority of the issued and outstanding capital stock of any
corporate subtenant or the transfer of a majority of the total interest in a
subtenant (if a partnership or other entity), however accomplished, whether in
a single transaction or in a series of related or unrelated transactions, shall
be deemed an assignment of the sublease, except that the transfer of the
outstanding capital stock of a corporate subtenant shall be deemed not to
include the sale of such stock by persons other than those deemed "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended, which
sale is effected through the "over-the-counter market" or through any
recognized stock exchange) encumbered or otherwise transferred or the subleased
premises further sublet by the subtenant in whole or in part, or any part
thereof suffered or permitted by the subtenant to be used or occupied by
others, without the prior written consent of Landlord in each instance;
(8) the subletting shall end no later than one (1) day
before the Expiration Date and shall not be for a term of less than one (1)
year unless it commences less than one (1) year before the Expiration Date;
(9) no subletting shall be for less than Two Thousand
Seven Hundred Five (2,705) contiguous rentable square feet and at no time shall
there be more than two (2) occupants, including Tenant, in the Premises; and
(10) such sublease shall expressly provide that in the
event of termination, re-entry or dispossess of Tenant by Landlord under this
Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant, at
Landlord's option, shall attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not be:
(i) liable for any act or omission of Tenant
under such, sublease, or
(ii) subject to any defense or offsets which
such subtenant may have against Tenant or,
(iii) bound by any previous payment which such
subtenant may have made to Tenant more than thirty (30) days in advance of the
date upon which such payment was due, unless previously approved by Landlord,
or
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(iv) bound by any obligation to make any payment
to or on behalf of such subtenant, or
(v) bound by any obligation to perform any work
or to make improvements to the Premises, or portion thereof demised by such
sublease, or
(vi) bound by any amendment or modification of
such sublease made without its consent, or
(vii) bound to return such subtenant's security
deposit, if any, until such deposit has come into its actual possession and
such subtenant would be entitled to such security deposit pursuant to the terms
of such sublease.
If Tenant proposes to sublet a portion of the Premises then, unless the context
otherwise requires, references in this Section 12.6 to the Premises shall be
deemed to refer to the portion of the Premises proposed to be sublet by Tenant.
(B) At least fifteen (15) Business Days prior to any
proposed subletting of the Premises, Tenant shall submit a statement to
Landlord (a "Tenant Statement") containing the following information: (a)
the name and address of the proposed subtenant, (b) the terms and conditions of
the proposed subletting, including, without limitation, the rent payable and
the value (including cost, overhead and supervision) of any improvements
(including any demolition to be performed) to the Premises for occupancy by
such subtenant, (c) the nature and character of the business of the proposed
subtenant, (d) a description of the portion of the Premises to be sublet, and
(e) any other information that Landlord may reasonably request, together with a
statement specifically directing Landlord's attention to the provisions of this
Section 12.6(B) requiring Landlord to respond to Tenant's request within
fifteen (15) Business Days after Landlord's receipt of the Tenant Statement.
Landlord shall have the right, exercisable by notice to Tenant within fifteen
(15) Business Days after Landlord's receipt of the Tenant Statement, at
Landlord's sole option, either (i) if the proposed subletting is for all or
substantially all of the Premises for all or substantially all of the remaining
Term of this Lease, to terminate this Lease on a date specified in Landlord's
notice to Tenant (the "Termination Date"), which date shall not be earlier than
one (1) day before the effective date of the proposed subletting, nor later
than sixty-one (61) days after said effective date, or (ii) to sublet (in its
own name or that of its designee) such portion of the Premises ("Recapture
Space") from Tenant on the terms and conditions set forth in the Tenant
Statement, subject to the further provisions of paragraph (C) of this Section
12.6. If Landlord shall fail to notify Tenant within said fifteen (15) Business
Day period of Landlord's intention to exercise its rights pursuant to this
Section 12.6(B) or of Landlord's consent to or disapproval of the proposed
subletting pursuant to the Tenant Statement as contemplated by Section 12.6(A)
hereof, or if Landlord shall have consented to such subletting as provided in
Section 12.6(A) hereof, Tenant shall have the right to sublease that portion of
the Premises to such proposed subtenant on the same terms and conditions set
forth in the Tenant Statement, subject to the terms and conditions of this
Lease, including, without limitation, paragraph (A) of this Section 12.6. If
Tenant shall not enter into such sublease within ninety (90)
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days after the delivery of the Tenant Statement to Landlord, then the
provisions of Section 12.1 hereof and this Section 12.6 shall again be
applicable to any other proposed subletting. If Tenant shall enter into such
sublease within ninety (90) days as aforesaid, Tenant shall deliver a true,
complete and fully executed counterpart of such sublease to Landlord within
five (5) days after execution thereof.
(C) If Landlord exercises its option to terminate this
Lease as aforesaid, Tenant shall vacate and surrender the Premises on or before
the Termination Date in accordance with Article 20 hereof and the Term shall
end on the Termination Date as if it were the Expiration Date. If Landlord
exercises its option to sublet the Recapture Space, such sublease to Landlord
or its designee as subtenant (each, a "Recapture Sublease") shall:
(1) be at a rental equal to the lesser of (x)
the Rent Per Square Foot multiplied by the number of rentable square feet of
the Recapture Space and (y) the sublease rent set forth in the Tenant Statement
and otherwise be upon the same terms and conditions as those contained in this
Lease (as modified by the Tenant Statement), except such as are irrelevant or
inapplicable and except as otherwise expressly set forth to the contrary in
this paragraph (C);
(2) give the subtenant the unqualified and
unrestricted right, without Tenant's permission, to assign such sublease and to
further sublet the Recapture Space or any part thereof and to make any and all
changes, alterations, and improvements in the Recapture Space;
(3) provide in substance that any such changes,
alterations, and improvements made in the Recapture Space may be removed, in
whole or in part, prior to or upon the expiration or other termination of the
Recapture Sublease provided that any material damage and injury caused thereby
shall be repaired;
(4) provide that (i) the parties to such
Sublease expressly negate any intention that any estate created under such
Sublease be merged with any other estate held by either of said parties, (ii)
prior to the commencement of the term of the Recapture Sublease, Tenant, at its
sole cost and expense (unless the Tenant Statement provides otherwise), shall
make such alterations as may be required or reasonably deemed necessary by the
subtenant to physically separate the Recapture Space, if such Space constitutes
a portion of the Premises, from the balance of the Premises and to provide
appropriate means of ingress to and egress thereto and to the public portions
of the balance of the floor such as toilets, janitor's closets, telephone and
electrical closets, fire stairs, elevator lobbies, etc., and (iii) at the
expiration of the term of such Sublease, Tenant shall accept the Recapture
Space in its then existing condition, broom clean;
(5) provide that the subtenant or occupant may
use and occupy the Recapture Space for any lawful purpose (without regard to
any limitation set forth in the Tenant Statement); and
(6) not require the subtenant thereunder to post
a security deposit.
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(D) Performance by Landlord, or its designee, under a
Recapture Sublease shall be deemed performance by Tenant of any similar
obligation under this Lease and Tenant shall not be liable for any default
under this Lease or deemed to be in default hereunder if such default is
occasioned by or arises from any act or omission of the subtenant under the
Recapture Sublease or is occasioned by or arises from any act or omission of
any occupant under the Recapture Sublease.
(E) If Landlord is unable to give Tenant possession of
the Recapture Space at the expiration of the term of the Recapture Sublease by
reason of the holding over or retention of possession of any tenant or other
occupant, then (w) Landlord shall continue to pay all charges previously
payable, and comply with all other obligations, under the Recapture Sublease
until the date upon which Landlord shall give Tenant possession of the
Recapture Space free of occupancies, (x) neither the Expiration Date nor the
validity of this Lease shall be affected, (y) Tenant waives any rights under
Section 223-a of the Real Property Law of New York, or any successor statute of
similar import, to rescind this Lease and further waives the right to recover
any damages from Landlord which may result from the failure of Landlord to
deliver possession of the Recapture Space at the end of the term of the
Recapture Sublease, and (z) Landlord, at Landlord's expense, shall use its
reasonable efforts to deliver possession of the Recapture Space to Tenant and
in connection therewith, if necessary, shall institute and diligently and in
good faith prosecute holdover and any other appropriate proceedings against the
occupant of such Space; if Landlord fails to prosecute such proceedings in such
manner and such failure continues after reasonable notice thereof by Tenant,
Tenant may prosecute such proceedings in Landlord's name and at Landlord's
expense.
(F) The failure by Landlord to exercise its option under
Section 12.6(B) with respect to any subletting shall not be deemed a waiver of
such option with respect to any extension of such subletting or any subsequent
subletting of the Premises affected thereby.
Section 12.7. (A) In connection with any subletting of the Premises,
Tenant shall pay to Landlord an amount equal to seventy percent (70%) of any
Sublease Profit derived therefrom. Anything contained herein to the contrary
notwithstanding Tenant shall not be entitled to any proceeds derived from or
relating to (directly or indirectly) any subletting of the Recapture Space by
Landlord or its designee to a subtenant. All sums payable hereunder by Tenant
shall be calculated on an annualized basis, but shall be paid to Landlord, as
additional rent, within ten (10) days after receipt thereof by Tenant.
(B) For purposes of this Lease:
(1) "Rent Per Square Foot" shall mean the sum of
the then Fixed Rent, Escalation Rent, and, if applicable, Electricity
Additional Rent, divided by the Space Factor.
(2) "Sublease Profit" shall mean the product of
(x) the Sublease Rent Per Square Foot, less the Rent Per Square Foot, and (y)
the number Of rentable square feet constituting the portion of the Premises
sublet by Tenant.
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(3) "Sublease Rent" shall mean any rent or other
consideration paid to Tenant directly or indirectly by any subtenant or any
other amount received by Tenant from or in connection with any subletting
(including, but not limited to, sums paid for the sale or rental, or
consideration received on account of any contribution, of Tenant's Property or
sums paid in connection with the supply of electricity or HVAC) less the
Sublease Expenses.
(4) "Sublease Expenses" shall mean: (i) in the
event of a sale of Tenants Property, the then unamortized or undepreciated cost
thereof determined on the basis of Tenant's federal income tax returns, (ii)
the reasonable out-of-pocket costs and expenses of Tenant in making such
sublease, such as broker's fees, attorneys' fees, and advertising fees paid to
unrelated third parties, (iii) any sums paid to Landlord pursuant to Section
12.2(B) hereof, (iv) the cost of improvements or alterations made by Tenant
expressly and solely for the purpose of preparing that portion of the Premises
for such subtenancy if not used by Tenant subsequent to the expiration of the
term of the sublease, and (v) the unamortized or undepreciated cost of any
Tenant's Property leased to and used by such subtenant. In determining Sublease
Rent, the costs set forth in clauses (ii), (iii) and (iv) shall be amortized on
a straight-line basis over the term of such sublease and the costs set forth
in clause (v) shall be amortized on a straight line basis over the greater of
the longest useful life of such improvements, alterations or Property (as
permitted pursuant to the Internal Revenue Code of 1986, as amended) and the
term of such sublease.
(5) "Sublease Rent Per Square Foot" shall mean
the Sublease Rent divided by the rentable square feet of the space damaged
under the sublease in question.
(6) Sublease Profit shall be recalculated from
time to time to reflect any corrections in the prior calculation thereof due to
(i) subsequent payments received or made by Tenant, (ii) the final adjustment of
payments to be made by or to Tenant, and (iii) mistake. Promptly after receipt
or final adjustment of any such payments or discovery of any such mistake,
Tenant shall submit to Landlord a recalculation of the Sublease Profit, and an
adjustment shall be made between Landlord and Tenant, on account of prior
payments made or credits received pursuant to this Section 12.7. In addition,
if Sublease Expenses utilized for the purpose of calculating Sublease Profit
included an amount attributable to the cost of the improvements made by Tenant
expressly and solely for the purpose of preparing the Premises or a portion
thereof for the occupancy of the subtenant and subsequent to the expiration of
the sublease such improvements and/or alterations were not demolished and/or
removed, Sublease Profits shall be recalculated as if the cost of such
improvements and/or alterations were not incurred by Tenant and Tenant promptly
shall pay to Landlord seventy percent adjustment (70%) of the additional amount
of such Sublease Profit resulting from such recalculation.
Section 12.8. (A) Notwithstanding the provisions of Section 12.1
hereof, if Landlord shall not exercise its rights pursuant to paragraph (B)(2)
of this Section 12.8, Landlord shall not unreasonably withhold its consent to
an assignment of this Lease in its entirety provided that:
(1) no Event of Default shall have occurred and
be continuing;
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(2) upon the date Tenant delivers the Assignment
Statement to Landlord and upon the date immediately preceding the date of any
assignment approved by Landlord, the proposed assignee shall have a financial
standing (taking into consideration the obligations of the proposed assignee
under this Lease) satisfactory to Landlord, be of a character, be engaged in a
business, and propose to use the Premises in a manner in keeping with the
standards in such respects of the other tenancies in the Building;
(3) the proposed assignee (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed assignee) shall not be a person or entity with whom Landlord is
negotiating to lease space in the Building at the time of receipt of an
Assignment Statement;
(4) the character of the business to be conducted or the
proposed use of the Premises by the proposed assignee shall not (a) be likely
to increase Landlord's operating expenses beyond that which would be incurred
for use by Tenant or for use in accordance with the standards of use of other
tenancies in the Building; (b) increase the burden on existing cleaning
services or elevators over the burden prior to such proposed assignment; (e)
violate any provision or restrictions herein relating to the use or occupancy
of the Premises; (d) require any alterations, installations, improvements,
additions or other physical changes to be performed in or made to any portion
of the Building or the Real Property other than the Premises; or (e) violate
any provision or restrictions in any other lease for space in the Building or
in any Superior Lease or Mortgage; if Landlord shall have consented to an
assignment and, as a result of the use and occupancy of the Premises by
Tenant/assignee, operating expenses are increased, then Tenant shall pay to
Landlord, within ten (10) days after demand, as additional tent, all
resulting increases in operating expenses; and
(5) the assignee shall agree to assume all of the
obligations of Tenant under this Lease from and after the date of the
assignment.
(B) (1) At least fifteen (15) Business Days prior to any
proposed assignment, Tenant shall submit a statement to Landlord (the
"Assignment Statement") containing the following information: (i) the name and
address of the proposed assignee, (ii) the essential terms and conditions of
the proposed assignment, including, without limitation, the consideration
payable for such assignment and the value (including cost, overhead and
supervision) of any improvements (including any demolition to be performed) to
the Premises proposed to be made by Tenant to prepare the Premises for
occupancy by such assignee, (iii) the nature and character of the business of
the proposed assignee, and (iv) any other information that Landlord may
reasonably request, together with a statement specifically directing Landlord's
attention to the provisions of this Section 12.8(B) requiring Landlord to
respond to Tenant's request within fifteen (15) Business Days after Landlord's
receipt of the Assignment Statement. The Assignment Statement shall be executed
by Tenant and the proposed assignee and shall indicate both parties' intent
(but not necessarily binding obligation) to enter into an assignment agreement
conforming to the terms and conditions of the Assignment Statement and on such
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other terms and conditions to which the parties may agree which are not
inconsistent with the essential terms set forth in the Assignment Statement.
(2) Landlord shall have the right, exercisable
by written notice given to Landlord within fifteen (15) Business Days after
Landlord's receipt of the Assignment Statement, to terminate this Lease (an
"Assignment Termination"), in which event the Term shall expire on a date set
by Landlord that is not sooner than ninety (90) days after the date of
Landlord's notice, and Tenant shall vacate the Premises and surrender the same
to Landlord on such date set by Landlord in accordance with the provisions of
Article 20 hereof.
(3) If Landlord shall fail to notify Tenant
within said fifteen (15) Business Day period of Landlord's intention to
exercise its rights pursuant to paragraph (B)(2) of this Section 12.8 or of
Landlord's consent to or disapproval of the proposed assignment pursuant to the
Assignment Statement, or if Landlord shall have consented to such assignment as
provided in Section 12.8(A) hereof, Tenant shall be free to assign the Premises
to such proposed assignee on the same terms and conditions set forth in the
Assignment Statement. If Tenant shall not enter into such assignment within
ninety (90) days after the delivery of the Assignment Statement to Landlord,
then the provisions of this Section 12.8 shall again be applicable in their
entirety to any proposed assignment.
(4) If Tenant shall propose to assign this Lease
and is about to commence negotiations with a prospective assignee, Tenant shall
advise Landlord of the identity of such prospective assignee and Landlord
shall, within five (5) Business Days, advise Tenant if the execution of an
assignment agreement with such prospective assignee would violate the
provisions of paragraph (A)(3) of this Section 12.8.
(C) If Tenant shall assign this Lease, Tenant shall
deliver to Landlord, within five (5) days after execution thereof, (x) a
duplicate original instrument of assignment in form and substance reasonably
satisfactory to Landlord, duly executed by Tenant, and (y) an instrument in
form and substance reasonably satisfactory to Landlord, duly executed by the
assignee, in which such assignee shall assume observance and performance of,
and agree to be personally bound by, all of the terms, covenants and conditions
of this Lease on Tenant's part to be observed and performed.
(D) Tenant shall pay to Landlord, upon receipt thereof,
an amount equal to seventy percent (70%) of all Assignment Proceeds. For
purposes of this paragraph (D), "Assignment Proceeds" shall mean all
consideration payable to Tenant, directly or indirectly, by any assignee,
including Landlord pursuant to paragraph (B) of this Section 12.8, or any other
amount received by Tenant from or in connection with any assignment (including,
but not limited to, sums paid for the sale or rental, or consideration received
on account of any contribution, of Tenant's Property) after deducting
therefrom: (i) in the event of a sale (or contribution) of Tenant's Property,
the then unamortized or undepreciated cost thereof determined on the basis of
Tenant's federal income tax returns, (ii) the reasonable out-of-pocket costs
and expenses of Tenant in making such assignment, such as brokers' fees,
attorneys' fees, and advertising fees
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paid to unrelated third parties, (iii) any payments required to be made by
Tenant in connection with the assignment of its interest in this Lease pursuant
to Article 31 of the Tax law of the State of New York or any real property
transfer tax of the United States or the City or State of New York (other than
any income tax), (iv) any sums paid by Tenant to Landlord pursuant to Section
12.2(B) hereof, (v) the cost of improvements or alterations made by Tenant
expressly and solely for the purpose of preparing the Premises for such
assignment, as determined by Tenant's federal income tax returns, (vi) the
unamortized or undepreciated cost of any Tenant's Property leased to and used
by such assignee, and (vii) the then unamortized or undepreciated cost of the
Alterations determined on the basis of Tenant's federal income tax returns. If
the consideration paid to Tenant for any assignment shall be paid in
installments, then the expenses specified in this paragraph (D) shall be
amortized over the period during which such installments shall be payable.
Section 12.9. Notwithstanding any other provision of this Lease,
neither Tenant nor any direct or indirect assignee or subtenant of Tenant may
enter into any lease, sublease, license, concession or other agreement for use,
occupancy or utilization of space in the Premises which provides for a rental
or other payment for such use, occupancy or utilization based in whole or in
part on the net income or profits derived by any person from the property
leased, occupied or utilized, or which would require the payment of any
consideration which would not fall within the definition of "rents from real
property", as that term is defined in Section 856(d) of the Internal Revenue
Code of 1986, as amended.
ARTICLE 13
ELECTRICITY
Section l3.1. Tenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Building. The
risers serving the Premises shall be capable of supplying five and six-tenths
(5.6) watts of electricity per usable square foot of the Premises (exclusive of
base Building HVAC). Tenant shall not use any electrical equipment which, in
Landlord's reasonable judgment, would exceed the capacity of existing feeders
to the Building or the risers or wiring installations therein or which will
overload such installations or interfere with the electrical service to other
tenants of the Building. In the event that, in Landlord's sole judgment,
Tenant's electrical requirements necessitate installation of an additional
riser, risers or other proper and necessary equipment, Landlord shall so notify
Tenant of same. Within five (5) Business Days after receipt of such notice,
Tenant shall either cease such use of such additional electricity or shall
request that additional electrical capacity (specifying the amount requested)
be made available to Tenant. Landlord, in Landlord's sole judgment shall
determine whether to make available such additional electrical capacity to
Tenant and the amount of such additional electrical capacity to be made
available. If Landlord shall agree to make available additional electrical
capacity and the same necessitates installation of an additional riser, risers
or other proper and necessary equipment, including, without limitation, any
switchgear, the same shall be installed by Landlord. Any such installation
shall be made at Tenant's sole cost and expense, and
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shall be chargeable and collectible as additional rent and paid within ten (10)
days after the rendition of a bill to Tenant therefor. Landlord shall not be
liable in any way to Tenant for any failure or defect in the supply or
character of electric service furnished to the Premises by reason of any
requirement, act or omission of the utility serving the Building or for any
other reason not attributable to the gross negligence of Landlord, whether
electricity is provided by public or private utility or by any electricity
generation system owned and operated by Landlord.
Section 13.2. (A) Unless Landlord elects to supply electricity to the
Premises pursuant to Section 13.3 or Landlord elects to have Tenant obtain
electricity from the public utility furnishing electricity to the Building
pursuant to the provisions of Section 13.4 hereof, Landlord shall furnish
electric current to the Premises for the use of Tenant for the operation of the
lighting fixtures and the electrical receptacles for ordinary office equipment
in the Premises on a "rent inclusion" basis, that is, there shall be no separate
charge to Tenant for such electric current by way of measuring such electricity
service on any meter. The Fixed Rent set forth in this Lease includes an annual
charge for electricity service of Sixteen Thousand Two Hundred Thirty Dollars
($16,230) (the "Base Electricity Inclusion Factor"; such amount as it may be
increased pursuant to the provisions of this Lease, being referred to as the
"Electricity Inclusion Factor"). The parties agree that although the charge for
furnishing electrical energy is included in the Fixed Rent on a so-called "rent
inclusion" basis, the value to Tenant of such service may not be fully reflected
in the Fixed Rent. Accordingly, Tenant agrees that Landlord, at Landlord's
option, may cause a reputable and independent electrical engineer or electrical
consulting firm, selected by Landlord (such engineer or consulting firm being
hereinafter referred to as "Landlord's Engineer"), to make a determination,
following the commencement of Tenant's normal business activities in the
Premises, of the Full Value of such service to Tenant. As used herein, the "Full
Value" to Tenant of such service shall mean the product obtained by multiplying
the demand and consumption of electric energy at the Premises by the Electric
Rate. Landlord's Engineer" shall certify such determination in writing to
Landlord and Tenant. If the Full Value to Tenant is in excess of the Electricity
Inclusion Factor, the Electricity Inclusion Factor and the Fixed Rent shall be
increased by such excess. However, if it shall be so determined that the Full
Value to Tenant of such service does not exceed the Electricity Inclusion
Factor, there shall nevertheless be no decrease in the Electricity Inclusion
Factor or in the Fixed Rent.
(B) If during the Term the Electric Rate shall increase
over the Base Electric Rate, the Electricity Inclusion Factor (and therefore
the Fixed Rent) shall be proportionately increased.
(C) (i) Landlord, from time to time during the Term,
may cause Landlord's Engineer to survey the demand and consumption of
electrical energy at the Premises. If the then Full Value shall exceed the then
Electricity Inclusion Factor, the Electricity Inclusion Factor (and therefore
the Fixed Rent), shall be proportionately increased, based on the increased
demand and consumption and the then prevailing Electric Rate.
(ii) Landlord shall furnish to Tenant a written
statement (an "Electricity Statement") setting forth Landlord's determination
of any increase which has
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occurred in the Full Value and the Electricity Inclusion Factor (and therefore
the Fixed Rent) pursuant to the provisions of either Sections 13.2(A), (B), or
(C)(i). Any such increase in the Electricity Inclusion Factor and the Fixed
Rent shall be effective as of the date of such increase in the Electric Rate or
the consumption and demand of electric energy by Tenant and shall be
retroactive to such dates if necessary. Any retroactive increase shall be paid
by Tenant within ten (10) days after demand and such amount shall be
collectible by Landlord as Fixed Rent hereunder.
(iii) Each such Electricity Statement given by
Landlord pursuant to Section 13.2(C)(ii) above, shall be conclusive and binding
upon Tenant, unless within sixty (60) days after the receipt of such
Electricity Statement, Tenant shall notify Landlord that it disputes the
correctness of the Electricity Statement. If such dispute is based on Tenant's
demand and consumption of electric current, Tenant shall submit a survey and
determination of such adjustment, made at its sole cost and expense, by a
reputable and independent electrical engineer or electrical consulting firm
("Tenant's Engineer"), within sixty (60) days after receipt of such Electricity
Statement. If Landlord and Tenant are unable to resolve the dispute differences
between them within thirty (30) days after receipt by Landlord of a copy of the
determination of Tenant's Engineer, the dispute shall be decided by a third
reputable and independent electrical engineer or electrical consulting firm
("Third Engineer"). If the parties shall fail to agree upon the designation of
the Third Engineer within forty (40) days after the receipt by Landlord of the
determination of Tenant's Engineer, then either party may apply to the American
Arbitration Association or any successor thereto for the designation of the
Third Engineer. The Third Engineer shall conduct such hearings as he deems
appropriate. The Third Engineer, within thirty (30) days after his designation,
shall select the determination of either Landlord's Engineer or Tenant's
Engineer and such determination shall be conclusive and binding upon the
parties whether or not a judgment shall be entered in any court. The fees of
the Third Engineer and the costs of arbitration shall be paid equally by the
parties, except that each party shall pay its own counsel fees and expenses, if
any, in connection with the arbitration. Pending the resolution of such dispute
by agreement or arbitration as aforesaid, Tenant shall pay the increase in the
Electricity Inclusion Factor in accordance with the Electricity Statement,
without prejudice to Tenant's position, as herein provided. If the dispute
shall be resolved in Tenant's favor, Landlord, at its option, shall either
credit the amount of such overpayment against subsequent monthly installments
of Fixed Rent hereunder or pay to Tenant the amount of such overpayment.
(D) Landlord's failure during the Term to prepare and
deliver any Electricity Statement, or bills, or Landlord's failure to make a
demand, under this Article or any other provisions of this Lease, shall not in
any way be deemed to be a waiver of, or cause Landlord to forfeit or surrender,
its rights to collect any portion of the increase in the Electricity Inclusion
Factor (and therefore the Fixed Rent) which may have become due pursuant to
this Article 13 during the Term. Tenant's liability for the amounts due under
this Article 13 shall survive the expiration or sooner termination of this
Lease and Landlord's obligation, if any, to refund any payments by Tenant in
excess of the amounts required to be paid by Tenant to Landlord pursuant to
this Article 13 shall survive the expiration or sooner termination of this
lease. The preceding sentence shall not, however, be construed as limiting or
restricting, in any manner whatsoever,
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Landlord's right pursuant to this Lease or pursuant to law to offset any such
overpayments by Tenant against any amounts which may be due and payable as
provided in this Lease.
(E) In no event shall any adjustment of the payments made
or to be made hereunder result in a decrease in Fixed Rent or additional rent
payable pursuant to any other provision of this Lease, or in the amount paid
for electricity for the prior year.
(F) The Electricity Inclusion Factor shall be collectible
by Landlord in the same manner as Fixed Rent.
(G) For the purposes of this Section 13.2, Landlord and
Tenant agree that the term "Electric Rate" (including all applicable
surcharges, demand charges, energy charges, fuel adjustment charges, time of
day charges, taxes and other sums payable in respect thereof) shall mean the
greater of:
(i) the service classification pursuant
to which Landlord purchases electricity from the utility company servicing the
Building, and
(ii) the service classification pursuant
to which Tenant would purchase electricity directly from the utility company
servicing the Building.
(H) If Landlord discontinues furnishing electricity to
Tenant pursuant to this Section 13.2, the Fixed Rent shall be decreased by the
Electricity Inclusion Factor effective as of the date Landlord discontinues the
provision of electricity in such manner
Section 13.3. (A) If Landlord shall no longer elect to have
electricity furnished to the Premises pursuant to Section 13.2 hereof then,
unless Landlord elects to have Tenant obtain electricity from the public
utility company furnishing electricity to the Building pursuant to the
provisions of Section 13.4 hereof, electricity shall be furnished by Landlord
to the Premises and Tenant shall pay to Landlord, as additional rent for such
service, during the Term, an amount (the "Electricity Additional Rent") equal
to (i) the amount Landlord actually pays to the utility company to provide
electricity to the Premises, including all applicable surcharges, demand
charges, time-of-day charges, energy charges, fuel adjustment charges, rate
adjustment charges, taxes and other sums payable in respect thereof, based on
Tenant's demand and/or consumption of electricity (and/or any other method of
quantifying Tenant's use of or demand for electricity as set forth in the
utility company's tariff) as registered on a meter or submeter (installed by
Landlord at Tenant's sole cost and expense) for purposes of measuring such
demand consumption and/or other method of quantifying Tenants use of or demand
for electricity (it being agreed that such meter or submeter shall measure
demand and consumption, and off-peak and on-peak use, in either case to the
extent such factors are relevant in making the determination of Landlord's
cost) plus (ii) an amount equal to the out-of-pocket costs and expenses
incurred by Landlord in connection with reading such meters and preparing bills
therefor. Tenant, from time to time, shall have the right to review Landlord's
meter readings, and Landlord's calculation of the Electricity Additional Rent,
at reasonable times and on reasonable prior notice, by giving
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notice thereof to Landlord on or prior to the thirtieth (30th) day after the
date when Landlord gives Tenant a bill or statement for the Electricity
Additional Rent.
(B) Where more than one meter measures the electricity
supplied to Tenant, the electricity rendered through each meter may be computed
and billed separately in accordance with the provisions hereinabove set forth.
Bills for the Electricity Additional Rent shall be rendered to Tenant at such
time as Landlord may elect, and Tenant shall pay the amount shown thereon to
Landlord within ten (10) days after receipt of such bill. Tenant expressly
acknowledges that in connection with the installation of the meters or
submeters, the electricity being supplied to the Premises shall be temporarily
interrupted. Landlord shall use reasonable efforts to minimize interference
with the conduct of Tenant's business in connection with such installation;
provided, however, that Landlord shall have no obligation to employ contractors
or labor at so-called overtime or other premium pay rates or to incur any other
overtime costs or expenses whatsoever.
Section 13.4. If Landlord shall elect to discontinue furnishing
electricity to Tenant this Lease shall continue in full force and effect and
shall be unaffected thereby, except only that from and after the effective date
of such discontinuance, Landlord shall not be obligated to furnish electricity
to Tenant and Tenant shall not be obligated to pay the Electricity Additional
Rent. If Landlord so discontinues furnishing electricity to Tenant, Tenant
shall use diligent efforts to obtain electric energy directly from the public
utility furnishing electric service to the Building. The costs of such service
shall be paid by Tenant directly to such public utility. Such electricity may
be furnished to Tenant by means of the existing electrical facilities serving
the Premises, at no charge, to the extent the same are available, suitable and
safe for such purposes as determined by Landlord. All meters and all additional
panel boards, feeders, risers, wiring and other conductors and equipment which
may be required to obtain electricity shall be installed by Landlord at
Tenant's expense. Provided Tenant shall use and continue to use diligent
efforts to obtain electric energy directly from the public utility, Landlord,
to the extent permitted by applicable Requirements, shall not discontinue
furnishing electricity to the Premises until such installations have been made
and Tenant shall be able to obtain electricity directly from the public
utility.
ARTICLE 14
ACCESS TO PREMISES
Section 14.1. (A) Tenant shall permit Landlord, Landlord's agents,
representatives, contractors and employees and public utilities servicing the
Building to erect, use and maintain, concealed ducts, pipes and conduits in and
through the Premises. Landlord, Landlord's agents, representatives,
contractors, and employees and the agents, representatives, contractors, and
employees of public utilities servicing the Building shall have the right to
enter the Premises at all reasonable times upon reasonable prior notice (except
in the case of an emergency in which event Landlord and Landlord's agents,
representatives, contractors, and employees may enter without prior notice to
Tenant which notice may be oral, to examine the same, to show them to
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prospective purchasers, or prospective or existing Mortgagees or Lessors, and
to make such repairs, alterations, improvements, additions or restorations (i)
as Landlord may deem necessary or desirable to the Premises or to any other
portion of the Building, or (ii) which Landlord may elect to perform following
ten (10) days after notice, except in the case of an emergency (in which event
Landlord and Landlord's agents, representatives, contractors, and employees may
enter without prior notice to Tenant), following Tenant's failure to make
repairs or perform any work which Tenant is obligated to make or perform under
this Lease, or (iii) for the purpose of complying with any Requirements, a
Superior Lease or a Mortgage, and Landlord shall be allowed to take all
material into and upon the Premises that may be required therefor without the
same constituting an eviction or constructive eviction of Tenant in whole or in
part and the Fixed Rent (and any other item of Rental) shall in no wise abate
while said repairs, alterations, improvements, additions or restorations are
being made, by reason of loss or interruption of business of Tenant, or
otherwise.
(B) Any work performed or installations made pursuant to
this Article 14 shall be made with reasonable diligence and otherwise pursuant
to the provisions of Section 4.3 hereof.
(C) Except as hereinafter provided, any pipes, ducts, or
conduits installed in or through the Premises pursuant to this Article 14 shall
be concealed behind, beneath or within partitioning, columns, ceilings or
floors located or to be located in the Premises. Notwithstanding the foregoing,
any such pipes, ducts, or conduits may be furred at points immediately adjacent
to partitioning columns or ceilings located or to be located in the Premises,
provided that the same are completely furred and that the installation of such
pipes, ducts, or conduits, when completed, shall not reduce the usable area of
the Premises beyond a de minimis amount.
Section 14.2. During the eighteen (18) month period prior to the
Expiration Date, Landlord may exhibit the Premises to prospective tenants
thereof.
Section 14.3. If Tenant shall not be present when for any reason entry
into the Premises shall be necessary or permissible, Landlord or Landlord's
agents, representatives, contractors or employees may enter the same without
rendering Landlord or such agents liable therefor if during such entry Landlord
or Landlord's agents shall accord reasonable care under the circumstances to
Tenant's Property, and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever, for the care,
supervision or repair of the Building or any part thereof, other than as herein
provided.
Section 14.4. Landlord also shall have the right at any time, without
the same constituting an actual or constructive eviction and without incurring
any liability to Tenant therefor, to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets, or other public parts of the Building and to change the name, number
or designation by which the Building is commonly known, provided
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any such change does not (a) unreasonably reduce, interfere with or deprive
Tenant of access to the Building or the Premises or (b) reduce the rentable
area (except by a de minimis amount) of the Premises. All parts (except
surfaces facing the interior of the Premises) of all walls, windows and doors
bounding the Premises (including exterior Building walls, exterior core
corridor walls, exterior doors and entrances), all balconies, terraces and
roofs adjacent to the Premises, all space in or adjacent to the Premises used
for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms,
heating, air cooling, plumbing and other mechanical facilities, service closets
and other Building facilities are not part of the Premises, and Landlord shall
have the use thereof, as well as access thereto through the Premises for the
purposes of operation, maintenance, alteration and repair.
ARTICLE 15
CERTIFICATE OF OCCUPANCY
Tenant shall not at any time use or occupy the Premises in violation
of the certificate of occupancy at such time issued for the Premises or for the
Building and in the event that any department of the City or State of New York
shall hereafter contend or declare by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose which is a violation
of such certificate of occupancy, Tenant, upon written notice from Landlord or
any Governmental Authority, shall immediately discontinue such use of the
Premises. On the Commencement Date a temporary or permanent certificate of
occupancy covering the Premises will be in force permitting the Premises to be
used as offices, provided, however, neither such certificate, nor any provision
of this Lease, nor any act or omission of Landlord, shall be deemed to
constitute a representation or warranty that the Premises, or any part thereof,
lawfully may be used or occupied for any particular purpose or in any
particular manner, in contradistinction to mere "office" use.
ARTICLE 16
DEFAULT
Section 16. 1. Each of the following events shall be an "Event of
Default" hereunder:
(A) if Tenant shall default in the payment when due of
any installment of Fixed Rent and such default shall continue for five (5)
Business Days after notice of such default is given to Tenant, or in the
payment when due of any other item of Rental and such default shall continue
for five (5) Business Days after notice of such default is given to Tenant,
except that if Landlord shall have given two (2) such notices in any twelve
(12) month period, Tenant shall not be entitled to any further notice of its
delinquency in the payment of Rental until such time as twelve (12) consecutive
months shall have elapsed without Tenant having defaulted in any such payment;
or
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(B) if Tenant shall default in the observance or
performance of any term, covenant or condition on Tenant's part to be observed
or performed under any other lease with Landlord or Landlord's predecessor in
interest of space in the Building and such default shall continue beyond any
grace period set forth in such other lease for the remedying of such default;
or
(C) if the Premises shall become abandoned; or
(D) if Tenant's interest or any portion thereof in this
Lease shall devolve upon or pass to any person, whether by operation of law or
otherwise, except as expressly permitted under Article 12 hereof; or
(E) (1) if Tenant shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(2) if Tenant shall commence or institute any
case, proceeding or other action (A) seeking relief on its behalf as debtor, or
to adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment
for the benefit of creditors; or
(4) if any case, proceeding or other action
shall be commenced or instituted against Tenant (A) seeking to have an order
for relief entered against it as debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property,
which in either of such cases (i) results in any such entry of an order for
relief, adjudication of bankruptcy or insolvency or such an appointment or the
issuance or entry of any other order having a similar effect or (ii) remains
undismissed for a period of sixty (60) days; or
(5) if any case, proceeding or other action
shall be commenced or instituted against Tenant seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its property which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or
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(6) if Tenant shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clauses (2), (3), (4) or (5) above; or
(7) if a trustee, receiver or other custodian is
appointed for any substantial part of the assets of Tenant which appointment is
not vacated or stayed within seven (7) Business Days; or
(F) if Tenant shall fail more than five (5) times during
any twelve (12) month period to pay any installment of Fixed Rent or any item
of Rental when due after receipt of the notice and expiration of the applicable
grace period pursuant to the provisions of paragraph (A) above, if such notice
and grace period are then required; or
(G) if Tenant shall fail to pay any installments of Fixed
Rent or items of Rental when due as required by this Lease, and Landlord shall
bring more than three (3) summary dispossess proceedings during any twelve (12)
month period; or
(H) if this Lease is assigned (or all or a portion of the
Premises are subleased) to a Related Entity and such Related Entity shall no
longer (i) Control, (ii) be under common Control with, or (iii) be under the
Control of Tenant (or any permitted successor by merger, consolidation or
purchase as provided herein); or
(I) if Landlord shall present the Letter of Credit to the
bank which issued the same in accordance with the provisions of Article 31
hereof, and the bank shall fail to honor the Letter of Credit and pay the
proceeds thereof to Landlord for any reason whatsoever; or
(J) if Tenant shall default in the observance or
performance of any other term, covenant or condition of this Lease on Tenant's
part to be observed or performed and Tenant shall fail to remedy such default
within twenty (20) days after notice by Landlord to Tenant of such default, or
if such default is of such a nature that it cannot with due diligence be
completely remedied within said period of twenty (20) days and Tenant shall not
commence within said period of twenty (20) days, or shall not thereafter
diligently prosecute to completion, all steps necessary to remedy such default.
Section 16.2. (A) If an Event of Default (i) described in Section
16.1 (E) hereof shall occur, or (ii) described in Sections 16.1 (A), (B), (C),
(D), (F), (G), (H), (I) or (J) shall occur and Landlord, at any time
thereafter, at its option gives written notice to Tenant stating that this
Lease and the Term shall expire and terminate on the date Landlord shall give
Tenant such notice, then this Lease and the Term and all rights of Tenant under
this Lease shall expire and terminate as if the date on which the Event of
Default described in clause (i) above occurred or the date of such notice,
pursuant to clause (ii) above, as the case may be, were the Fixed Expiration
Date and Tenant immediately shall quit and surrender the Premises, but Tenant
shall nonetheless be liable for all of its obligations hereunder, as provided
for in Articles 17 and 18 hereof Anything
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contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 16.1 (E) hereof, or by federal or state statute, then, following
the expiration of any such stay, or if the trustee appointed in any such
proceeding, Tenant or Tenant as debtor-in-possession shall fail to assume
Tenant's obligations under this Lease within the period prescribed therefor by
law or within one hundred twenty (120) days after entry of the order for relief
or as may be allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease as provided in Section 12.3(B), Landlord, to the extent permitted by law
or by leave of the court having jurisdiction over such proceeding, shall have
the right, at its election, to terminate this Lease on five (5) days' notice to
Tenant, Tenant as debtor-in-possession or said trustee and upon the expiration
of said five (5) day period this Lease shall cease and expire as aforesaid and
Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit
and surrender the Premises as aforesaid.
(B) If an Event of Default described in Section 16.1
(A) hereof shall occur, or this Lease shall be terminated as provided in
Section 16.2(A) hereof, Landlord, without notice, may reenter and repossess the
Premises using such force for that purpose as may be necessary without being
liable to indictment, prosecution or damages therefor and may dispossess Tenant
by summary proceedings or otherwise.
Section 16.3. If at any time, (i) Tenant shall be comprised of two (2)
or more persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
Lease shall have been assigned, the word "Tenant", as used in Section 16.1
(E), shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 16.1(E) shall be deemed paid
as compensation for the use and occupation of the Premises and the acceptance
of any such compensation by Landlord shall not be deemed an acceptance of
Rental or a waiver on the part of Landlord of any rights under Section 16.2.
ARTICLE 17
REMEDIES AND DAMAGES
Section 17.1. (A) If there shall occur any Event of Default, and this
Lease and the Term shall expire and come to an end as provided in Article 16
hereof:
(1) Tenant shall quit and peacefully surrender
the Premises to Landlord, and Landlord and its agents may immediately, or at
any time after such default or after the date upon which this Lease and the
Term shall expire and come to an end, re-enter the Premises or any part
thereof, without notice, either by summary proceedings, or by any other
applicable action or proceeding, or by force or otherwise (without being
liable to indictment,
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prosecution or damages therefor), and may repossess the Premises and dispossess
Tenant and any other persons from the Premises and remove any and all of their
property and effects from the Premises; and
(2) Landlord, at Landlord's option, may relet
the whole or any portion or portions of the Premises from time to time, either
in the name of Landlord or otherwise, to such tenant or tenants, for such term
or terms ending before, on or after the Expiration Date, at such rental or
rentals and upon such other conditions, which may include concessions and free
rent periods, as Landlord, in its sole discretion, may determine; provided,
however, that Landlord shall have no obligation to relet the Premises or any
part thereof and shall in no event be liable for refusal or failure to relet
the Premises or any part thereof, or, in the event of any such reletting, for
refusal or failure to collect any rent due upon any such reletting, and no such
refusal or failure shall operate to relieve Tenant of any liability under this
Lease or otherwise affect any such liability, and Landlord, at Landlord's
option, may make such repairs, replacements, alterations, additions,
improvements, decorations and other physical changes in and to the Premises as
Landlord, in its sole discretion, considers advisable or necessary in
connection with any such reletting or proposed reletting, without relieving
Tenant of any liability under this Lease or otherwise affecting any such
liability.
(B) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such persons might otherwise have under any present or future
law to redeem the Premises, or to re-enter or repossess the Premises, or to
restore the operation of this Lease, after (a) Tenant shall have been
dispossessed by a judgment or by warrant of any court or judge, or (b) any
re-entry by Landlord, or (c) any expiration or termination of this Lease and
the Term, whether such dispossess, re-entry, expiration or termination shall be
by operation of law or pursuant to the provisions of this Lease. The words
"re-enter," "re-entry" and "re-entered" as used in this Lease shall not be
deemed to be restricted to their technical legal meanings. In the event of a
breach or threatened breach by Tenant, or any persons claiming through or under
Tenant, of any term, covenant or condition of this Lease, Landlord shall have
the right to enjoin such breach and the right to invoke any other remedy
allowed by law or in equity as if re-entry, summary proceedings and other
special remedies were not provided in this Lease for such breach. The right
to invoke the remedies hereinbefore set forth are cumulative and shall not
preclude Landlord from invoking any other remedy allowed at law or in equity.
Section 17.2. (A) If this Lease and the Term shall expire and come to
an end as provided in Article 16 hereof, or by or under any summary proceeding
or any other action or proceeding, or if Landlord shall re-enter the Premises
as provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent,
Escalation Rent and other items of Rental payable under this Lease by Tenant to
Landlord to the date upon which this
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Lease and the Term shall have expired and come to an end or to the date of
re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall
pay to Landlord, as damages, any deficiency (referred to as "Deficiency")
between the Rental for the period which otherwise would have constituted the
unexpired portion of the Term and the net amount, if any, of rents collected
under any reletting effected pursuant to the provisions of clause (2) of
Section 17.1(A) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection
with the termination of this Lease, Landlord's re-entry upon the Premises and
with such reletting, including, but not limited to, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees and disbursements,
alteration costs, contribution to work and other expenses of preparing the
Premises for such reletting); any such Deficiency shall be paid in monthly
installments by Tenant on the days specified in this Lease for payment of
installments of Fixed Rent; Landlord shall be entitled to recover from Tenant
each monthly Deficiency as the same shall arise, and no suit to collect the
amount of the Deficiency for any month shall prejudice Landlord's right to
collect the Deficiency for any subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected
any monthly Deficiency as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further
Deficiency as and for liquidated and agreed final damages, a sum equal to the
amount by which the Rental for the period which otherwise would have
constituted the unexpired portion of the Term (commencing on the date
immediately succeeding the last date with respect to which a Deficiency, if
any, was collected) exceeds the then fair and reasonable rental value of the
Premises for the same period, both discounted to present worth at the Base
Rate; if, before presentation of proof of such liquidated damages to any court,
commission or tribunal, the Premises, or any part thereof, shall have been
relet by Landlord for the period which otherwise would have constituted the
unexpired portion of the Term, or any part thereof, the amount of rent reserved
upon such reletting shall be deemed, prima facie, to be the fair and reasonable
rental value for the part or the whole of the Premises so relet during the term
of the reletting.
(B) If the Premises, or any part thereof, shall be relet
together with other space in the Building, the rents collected or reserved
under any such reletting and the expenses of any such reletting shall be
equitably apportioned for the purposes of this Section 17.2. Tenant shall in
no event be entitled to any rents collected or payable under any reletting,
whether or not such rents shall exceed the Fixed Rent reserved in this Lease.
Solely for the purposes of this Article 17, the term "Escalation Rent" as used
in Section 17.2(A) shall mean the Escalation Rent in effect immediately prior
to the Expiration Date, or the date of re-entry upon the Premises by Landlord,
as the case may be, adjusted to reflect any increase pursuant to the
provisions of Article 27 hereof for the Operating Year immediately preceding
such event. Nothing contained in Article 16 hereof or this Article 17 shall be
deemed to limit or preclude the recovery by Landlord from Tenant of the
maximum amount allowed to be obtained as damages by any statute
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or rule of law, or of any sums or damages to which Landlord may be entitled in
addition to the damages set forth in this Section 17.2.
ARTICLE 18
LANDLORD FEES AND EXPENSES
Section 18.1. If Tenant shall be in default under this Lease or if
Tenant shall do or permit to be done any act or thing upon the Premises which
would cause Landlord to be in default under any Superior Lease or Mortgage,
Landlord may (1) as provided in Section 14.1 hereof, perform the same for the
account of Tenant, or (2) make any expenditure or incur any obligation for the
payment of money, including, without limitation, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or
proceeding, and the cost thereof, with interest thereon at the Applicable Rate,
shall be deemed to be additional rent hereunder and shall be paid by Tenant to
Landlord within ten (10) days of rendition of any bill or statement to Tenant
therefor and if the term of this Lease shall have expired at the time of making
of such expenditures or incurring of such obligations, such sums shall be
recoverable by Landlord as damages.
Section 18.2. If Tenant shall fail to pay any installment of Fixed
Rent, Escalation Rent or any other item of Rental when due, Tenant shall pay to
Landlord, in addition to such installment of Fixed Rent, Escalation Rent or
other item of Rental, as the case may be, as a late charge and as additional
rent, a sum equal to interest at the Applicable Rate on the amount unpaid,
computed from the date such payment was due to and including the date of
payment.
ARTICLE 19
NO REPRESENTATIONS BY LANDLORD
Section 19.1. (A) Landlord and Landlord's agents and representatives
have made no representations or promises with respect to the Building, the Real
Property or the Premises except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth herein. Tenant shall accept possession of the Premises
in the condition which shall exist on the Commencement Date "as is" (subject to
the provisions of Section 4.1 hereof), and Landlord shall have no obligation to
perform any work or make any installations in order to prepare the Premises for
Tenant's occupancy, except for the items set forth on Exhibit "B" attached
hereto and made a part hereof ("Landlord's Work").
(B) If and when Tenant shall take actual possession of
the Premises, it shall be conclusively presumed that the same were in
satisfactory condition (except for "punchlist items") as of the date of such
taking of possession, unless within thirty (30) days after the Commencement
Date, Tenant shall give Landlord notice specifying the respects in which
Landlord's Work was not in satisfactory condition. Landlord shall promptly
complete any "punchlist items" and repair any items which were not in a
satisfactory condition. Landlord shall
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have the right to enter the Premises subsequent to the Commencement Date, to
complete Landlord's Work, to complete any "punchlist items" and any Long Lead
Work, and to repair any items which were not in a satisfactory condition and
the payment of Fixed Rent and Escalation Rent shall not be affected thereby.
Landlord agrees to use reasonable efforts to minimize interference with
Tenant's business at the Premises during the completion of Landlord's Work, the
performance of such "punchlist items" and any Long Lead Work, and the
performance of such repairs of items which were not in satisfactory condition
provided the foregoing shall not increase the cost to Landlord of completing
such Landlord's Work, such "punchlist items", Long Lead Work and making of any
such repairs or cause Landlord to incur additional costs at overtime or premium
rates.
Section 19.2. Landlord has made and makes no representation as to the
date on which it will complete Landlord's Work. No delay in completing
Landlord's Work shall in any way affect the validity of this Lease or the
obligations of Tenant hereunder or give rise to a claim for damages by Tenant
or a claim for rescission of this Lease, nor shall the same be construed in any
wise to extend the Term hereof. Landlord agrees that, subject to Unavoidable
Delay, each item of Landlord's Work shall be prosecuted with due diligence;
provided, however, that nothing contained in this Article 19 shall be deemed to
impose upon Landlord any obligations to employ contractors or labor at
so-called overtime or other premium pay rates or to incur any other overtime
costs or expenses whatsoever. Landlord shall have the right to enter the
Premises subsequent to the Commencement Date to complete Landlord's Work and
the payment of Fixed Rent and Escalation Rent shall not be affected thereby.
ARTICLE 20
END OF TERM
Upon the expiration or other termination of this Lease, Tenant shall
quit and surrender to Landlord the Premises, vacant, broom clean, in good order
and condition, ordinary wear and tear and damage for which Tenant is not
responsible under the terms of this Lease excepted, and otherwise in compliance
with the provisions of Article 3 hereof. If the last day of the Term or any
renewal thereof falls on Saturday or Sunday, this Lease shall expire on the
Business Day immediately preceding. Tenant expressly waives, for itself and for
any person claiming through or under Tenant, any rights which Tenant or any
such person may have under the provisions of Section 2201 of the New York Civil
Practice Law and Rules and of any successor law of like import then in force in
connection with any holdover summary proceedings which Landlord may institute
to enforce the foregoing provisions of this Article 20. Tenant acknowledges
that possession of the Premises must be surrendered to Landlord on the
Expiration Date. Tenant agrees to indemnify and save Landlord harmless from and
against all claims, losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys' fees and disbursements) resulting
from delay by Tenant in so surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay. The
parties recognize and agree that the damage to Landlord resulting from any
failure by Tenant to timely surrender possession of the Premises as aforesaid
will be extremely substantial, will exceed the amount of the monthly
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installments of the Fixed Rent and Rental theretofore payable hereunder, and
will be impossible to accurately measure. Tenant therefore agrees that if
possession of the Premises is not surrendered to Landlord within twenty-four
(24) hours after the Expiration Date, in addition to any other rights or
remedies Landlord may have hereunder or at law, and without in any manner
limiting Landlord's right to demonstrate and collect any damages suffered by
Landlord and arising from Tenant's failure to surrender the Premises as
provided herein, Tenant shall pay to Landlord on account of use and occupancy
of the Premises for each month and for each portion of any month during which
Tenant holds over in the Premises after the Expiration Date, a sum equal to the
greater of (i) one and one half (1 1/2) times the aggregate of that portion of
the Fixed Rent, Escalation Rent and Rental which was payable under this Lease
during the last month of the Term, and (ii) the then fair market rental value
for the Premises. Nothing herein contained shall be deemed to permit Tenant to
retain possession of the Premises after the Expiration Date or to limit in any
manner Landlord's right to regain possession of the Premises through summary
proceedings, or otherwise, and no acceptance by Landlord of payments from
Tenant after the Expiration Date shall be deemed to be other than on account of
the amount to be paid by Tenant in accordance with the provisions of this
Article 20. The provisions of this Article 20 shall survive the Expiration
Date.
ARTICLE 21
QUIET ENJOYMENT
Provided no Event of Default has occurred and is continuing, Tenant
may peaceably and quietly enjoy the Premises subject, nevertheless, to the
terms and conditions of this Lease.
ARTICLE 22
FAILURE TO GIVE POSSESSION
Tenant waives any right to rescind this Lease under Section 223-a of
the New York Real Property Law or any successor statute of similar nature and
purpose then in force and further waives the right to recover any damages which
may result from Landlord's failure for any reason to deliver possession of the
Premises on the date set forth in Section 1. 1 hereof for the commencement of
the Term. The provisions of this Article are intended to constitute an "express
provision to the contrary" within the meaning of Section 223-a of the New York
Real Property Law. No such failure to give possession on the date set forth in
Section 1.1 hereof for the commencement of the Term shall in any wise affect
the validity of this Lease or the obligations of Tenant hereunder or give rise
to any claim for damages by Tenant or claim for rescission of this Lease, nor
shall the same be construed in any wise to extend the Term.
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ARTICLE 23
NO WAIVER
Section 23.1. No act or thing done by Landlord or Landlord's agents
during the Term shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall have
any power to accept the keys of the Premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord or of Landlord's agents
shall not operate as a termination of this Lease or a surrender of the
Premises. In the event Tenant at any time desires to have Landlord sublet the
Premises for Tenant's account, Landlord or Landlord's agents are authorized to
receive said keys for such purpose without releasing Tenant from any of the
obligations under this Lease, and Tenant hereby relieves Landlord of any
liability for loss of or damage to any of Tenant's effects in connection with
such subletting.
Section 23.2. The failure of Landlord to seek redress for violation
of, or to insist upon the strict performance of, any covenant or condition of
this Lease, or any of the Rules and Regulations set forth or hereafter adopted
by Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation of the provisions of this Lease, from having all of the
force and effect of an original violation of the provisions of this Lease. The
receipt by Landlord of Fixed Rent, Escalation Rent or any other item of Rental
with knowledge of the breach of any covenant of this Lease shall not be deemed
a waiver of such breach. The failure of Landlord to enforce any of the Rules
and Regulations set forth, or hereafter adopted, against Tenant or any other
tenant in the Building shall not be deemed a waiver of any such Rules and
Regulations. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly Fixed Rent or
other item of Rental herein stipulated shall be deemed to be other than on
account of the earliest stipulated Fixed Rent or other item of Rental, or as
Landlord may elect to apply same, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Fixed Rent or other
item of Rental 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 Fixed Rent or other item of Rental or to pursue any other
remedy provided in this Lease. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless
such executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
The respective parties hereto shall and they hereby do waive trial by
jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for
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personal injury or property damage) on any matters whatsoever arising out of or
in any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises, or for the enforcement of any remedy
under any statute, emergency or otherwise. If Landlord commences any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding (unless failure to impose
such counterclaim would preclude Tenant from asserting in a separate action the
claim which is the subject of such counterclaim), and will not seek to
consolidate such proceeding with any other action which may have been or will
be brought in any other court by Tenant.
ARTICLE 25
INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay Rental hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease
expressly or impliedly to be performed by Landlord or because Landlord is
unable to make, or is delayed in making any repairs, additions, alterations,
improvements or decorations or is unable to supply or is delayed in supplying
any equipment or fixtures, if Landlord is prevented or delayed from so doing by
reason of strikes or labor troubles or by accident, or by any cause whatsoever
beyond Landlord's control, including, but not limited to, laws, governmental
preemption in connection with a national emergency or by reason of any
Requirements of any Governmental Authority or by reason of failure of the HVAC,
electrical, plumbing, or other Building Systems in the Building (to the extent
such failure is due to causes beyond Landlord's control), or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency ("Unavoidable Delays").
ARTICLE 26
BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease shall be in writing and shall be
deemed sufficiently given or rendered if delivered by hand (against a signed
receipt) or if sent by registered or certified mail (return receipt requested)
addressed
if to Tenant (a) at Tenant's address set forth in this Lease,
Attn.: _________________________________________, if mailed
prior to Tenant's taking possession of the Premises, or (b) at
the Building, Attn.: ______________________________, if
mailed subsequent to Tenant's taking possession of the
Premises, or (c) at any place where Tenant or any agent or
employee of Tenant may be found if mailed
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subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises, in each case with a copy to
Kilpatrick Stockton LLP, 4101 Lake Boone Trail, Suite 400,
Raleigh, North Carolina 27607-6519, Attn.: Charles Patrick
Crosby, Jr., Esq. or
if to Landlord at Landlord's address set forth in this Lease,
Attn.: Mr. Glen J. Weiss, and with copies to (x) Vornado
Realty Trust, Park 80 West, Plaza 11. Saddle Brook, New Jersey
07663, Attn. Mr. Joseph Macnow, (y) Proskauer Rose LLP, 1585
Broadway, New York, New York 10036, Attn.: Lawrence J. Lipson,
Esq., and (z) each Mortgagee and Lessor which shall have
requested same, by notice given in accordance with the
provisions of this Article 26 at the address designated by
such Mortgagee or Lessor, or
to such other address(es) as Landlord, Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to the other
in accordance with the provisions of this Article 26. Any such bill, statement,
consent, notice, demand, request or other communication shall be deemed to have
been rendered or given on the date when it shall have been hand delivered or
three (3) Business Days from when it shall have been mailed as provided in this
Article 26. Anything contained herein to the contrary notwithstanding, any
Operating Statement, Tax Statement or any other bill, statement, consent,
notice, demand, request or other communication from Landlord to Tenant with
respect to any item of Rental (other than any "default notice" if required
hereunder) may be sent to Tenant by regular United States mail.
ARTICLE 27
ESCALATION
Section 27.1. For the purposes of this Article 27, the following terms
shall have the meanings set forth below.
(A) "Assessed Valuation" shall mean the amount for which
the Real Property is assessed pursuant to applicable provisions of the New York
City Charter and of the Administrative Code of the City of New York for the
purpose of calculating all or any portion of the Taxes payable with respect to
the Real Property.
(B) "Base Operating Expenses" shall mean the Operating
Expenses for the Base Operating Year.
(C) "Base Operating Year" shall mean the calendar year
ending December 31, 1999.
(D) "Base Taxes" shall mean the Taxes payable for the
twelve (12) month fiscal period commencing July 1, 1999 and ending June 30,
2000.
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(E) (1) "Operating Expenses" shall mean the
aggregate of those costs and expenses (and taxes, if any, thereon, including
without limitation, sales and value added taxes) paid or incurred by or on
behalf of Landlord (whether directly or through independent contractors) in
respect of the Operation of the Property which, are properly chargeable to the
Operation of the Property together with and including (without limitation) the
costs of gas, oil, steam, water, sewer rental, electricity (for the portions of
the Real Property not leased to and occupied by tenants or available for
occupancy), HVAC and other utilities furnished to the Building and utility
taxes, and the expenses incurred in connection with the Operation of the
Property such as insurance premiums, attorneys' fees and disbursements, auditing
and other professional fees and expenses, and all expenses (including
attorneys' fees and disbursements, experts' and other witnesses' fees) incurred
in contesting the validity or amount of any Taxes or in obtaining a refund of
any Taxes, but specifically excluding:
(i) Taxes,
(ii) franchise or income taxes imposed
upon Landlord,
(iii) debt service on Mortgages,
(iv) leasing commissions,
(v) capital improvements (except as
otherwise provided herein),
(vi) the cost of electrical energy
furnished directly to Tenant and other tenants of the Building,
(vii) the cost of tenant installations
incurred in connection with preparing space for a new tenant,
(viii) salaries of personnel above the
grade of building manager and such building manager's supervisor,
(ix) rent paid under Superior Leases
(other than in the nature of Rent consisting of Taxes or Operating Expenses),
(x) any expense for which Landlord is
otherwise compensated through the proceeds of insurance or is otherwise
compensated by any tenant (including Tenant) of the Building for services in
excess of the services Landlord is obligated to furnish to Tenant hereunder,
(xi) legal fees incurred in connection
with any negotiation of, or disputes arising out of, any space lease in the
Building,
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(xii) depreciation, except as provided
herein, and
(xiii) Landlord's advertising and
promotional costs for the Building,
except, however, that if Landlord is not furnishing any particular work or
service (the cost of which if performed by Landlord would constitute an
Operating Expense) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which reasonably would have been incurred during such period by
Landlord if it had at its own expense furnished such work or services to such
tenant. Any insurance proceeds received with respect to any item previously
included as an Operating Expense shall be deducted from Operating Expenses for
the Operating Year in which such proceeds are received; provided, however, to
the extent any insurance proceeds are received by Landlord in any Operating Year
with respect to any item which was included in Operating Expenses during the
Base Operating Year, the amount of insurance proceeds so received shall be
deducted from Base Operating Expenses and (x) the Base Operating Expenses shall
be retroactively adjusted to reflect such deduction and (y) all retroactive
Operating Payments resulting from such retroactive adjustment shall be due and
payable when billed by Landlord. Until such time as the electricity supplied to
each floor of the Building and the common and public areas of the Building
(including, without limitation, the Building Systems) shall be separately
metered or submetered, Operating Expenses shall include an amount equal to (x)
(i) Landlord's cost per kilowatt hour (utilizing the electrical rates applicable
to the Building including energy charges, demand charges, time-of-day charges,
fuel adjustment charges, rate adjustment charges, sales tax and any other
factors used by the public utility in computing its charges to Landlord) of
furnishing electric current to the entire Building, multiplied by (ii) the
number of kilowatt hours of electric current furnished to the public and common
areas of the Building (including, without limitation, the Building Systems) and
other areas not available for occupancy as determined by a survey prepared by an
independent, reputable electrical engineer selected by Landlord, plus (y) an
amount equal to Landlord's out-of-pocket costs in connection with the same.
(2) In determining the amount of Operating Expenses for
any Operating Year, if less than all of the Building rentable area shall have
been occupied by tenant(s) at any time during any such Operating Year,
Operating Expenses shall be determined for such Operating Year to be an amount
equal to the like expenses which would normally be expected to be incurred had
all such areas been occupied throughout such Operating Year.
(3) (a) If any capital improvement is made during
any Operating Year in compliance with a Requirement, whether or not such
Requirement is valid or mandatory, or in lieu of a repair, then the cost of
such improvement shall be included in Operating Expenses for the Operating Year
in which such improvement was made; provided, however, to the extent the cost
of such improvement is required to be capitalized for federal income tax
purposes, such cost shall be amortized over the useful economic life of such
improvement as reasonably estimated by Landlord, and the annual amortization,
together with interest thereon at the then
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Base Rate, of such improvement shall be deemed an Operating Expense in each of
the Operating Years during which such cost of the improvement is amortized.
(b) If any capital improvement is made during
any Operating Year either for the purpose of saving or reducing Operating
Expenses (as, for example, a labor-saving improvement), then the cost of such
improvement shall be included in Operating Expenses for the Operating Year in
which such improvement was made; provided, however, such cost shall be
amortized over such period of time as Landlord reasonably estimates such
savings or reduction in Operating Expenses will equal the cost of such
improvement and the annual amortization, together with interest thereon at the
then Base Rate, of such improvement shall be deemed an Operating Expense in
each of the Operating Years during which such cost of the improvement is
amortized.
(F) "Operating Statement" shall mean a statement in
reasonable detail setting forth a comparison of the Operating Expenses for an
Operating Year with the Base Operating Expenses and the Escalation Rent for the
preceding Operating Year pursuant to the provisions of this Article 27.
(G) "Operating Year" shall mean the calendar year within
which the Commencement Date occurs and each subsequent calendar year for any
part or all of which Escalation Rent shall be payable pursuant to this Article
27.
(H) "Taxes" shall mean the aggregate amount of real
estate taxes and any general or special assessments (exclusive of penalties and
interest thereon) imposed upon the Real Property (including, without
limitation, (i) assessments made upon or with respect to any "air" and
"development" rights now or hereafter appurtenant to or affecting the Real
Property, (ii) any fee, tax or charge imposed by any Governmental Authority for
any vaults, vault space or other space within or outside the boundaries of the
Real Property, and (iii) any taxes or assessments levied after the date of this
Lease in whole or in part for public benefits to the Real Property or the
Building, including, without limitation, any Business Improvement District
taxes and assessments) without taking into account any discount that Landlord
may receive by virtue of any early payment of Taxes; provided, that if because
of any change in the taxation of real estate, any other tax or assessment,
however denominated (including, without limitation, any franchise, income,
profit, sales, use, occupancy, gross receipts or rental tax) is imposed upon
Landlord or the owner of the Real Property or the Building, or the occupancy,
rents or income therefrom, in substitution for any of the foregoing Taxes, such
other tax or assessment shall be deemed part of Taxes computed as if Landlord's
sole asset were the Real Property. Anything contained herein to the contrary
notwithstanding, Taxes shall not be deemed to include (w) any taxes on
Landlord's income, (x) franchise taxes, (y) estate or inheritance taxes or (z)
any similar taxes imposed on Landlord, unless such taxes are levied, assessed
or imposed in lieu of or as a substitute for the whole or any part of the
taxes, assessments, levies, impositions which now constitute Taxes.
(I) "Tax Statement" shall mean a statement in reasonable
detail setting forth a comparison of the Taxes for a Tax Year with the Base
Taxes.
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(J) "Tax Year" shall mean the period July 1 through June
30 (or such other period as hereinafter may be duly adopted by the Governmental
Authority then imposing taxes as its fiscal year for real estate tax purposes),
any portion of which occurs during the Term.
Section 27.2. (A) If the Taxes payable for any Tax Year (any part or
all of which falls within the Term) shall represent an increase above the Base
Taxes, then Tenant shall pay as additional rent for such Tax Year and
continuing thereafter until a new Tax Statement is rendered to Tenant, Tenant's
Share of such increase (the "Tax Payment") as shown on the Tax Statement with
respect to such Tax Year. Tenant shall be obliged to pay the Tax Payment
regardless of whether Tenant is exempt in whole or part, from the payment of
any Taxes by reason of Tenant's diplomatic status or for any other reason
whatsoever. The Taxes shall be computed initially on the basis of the Assessed
Valuation in effect at the time the Tax Statement is rendered (as the Taxes may
have been settled or finally adjudicated prior to such time) regardless of any
then pending application, proceeding or appeal respecting the reduction of any
such Assessed Valuation, but shall be subject to subsequent adjustment as
provided in Section 27.3 hereof.
(B) At any time during or after the Term, Landlord may
render to Tenant a Tax Statement or Statements showing (i) a comparison of the
Taxes for the Tax Year with the Base Taxes and (ii) the amount of the Tax
Payment resulting from such comparison. On the first day of the month following
the furnishing to Tenant of a Tax Statement, Tenant shall pay to Landlord a sum
equal to 1/12th of the Tax Payment shown thereon to be due for such Tax Year
multiplied by the number of months of the Term then elapsed since the
commencement of such Tax Year. Tenant shall continue to pay to Landlord a sum
equal to one-twelfth (1/12th) of the Tax Payment shown on such Tax Statement on
the first day of each succeeding month until the first day of the month
following the month in which Landlord shall deliver to Tenant a new Tax
Statement. If Landlord furnishes a Tax Statement for a new Tax Year subsequent
to the commencement thereof, promptly after the new Tax Statement is furnished
to Tenant, Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Tax Year was greater or
less than the installments of the Tax Payment for the current tax year in
accordance with the Tax Statement, and (a) if there shall be a deficiency,
Tenant shall pay the amount thereof within ten (10) days after demand therefor,
or (b) if there shall have been an overpayment, Landlord shall credit the
amount thereof against the next monthly installments of the Fixed Rent payable
under this Lease. Tax Payments shall be collectible by Landlord in the same
manner as Fixed Rent. Landlord's failure to render a Tax Statement shall not
prejudice Landlord's right to render a Tax Statement during or with respect to
any subsequent Tax Year, and shall not eliminate or reduce Tenant's obligation
to make Tax Payments for such Tax Year.
Section 27.3. (A) Only Landlord shall be eligible to institute tax
reduction or other proceedings to reduce the Assessed Valuation. In the event
that, after a Tax Statement has been sent to Tenant, an Assessed Valuation which
had been utilized in computing the Taxes for a Tax Year is reduced (as a result
of settlement, final determination of legal proceedings or otherwise), and as a
result thereof a refund of Taxes is actually received by or on behalf of
Landlord, then, promptly after receipt of such refund, Landlord shall send
Tenant a Tax Statement adjusting the Taxes for such Tax Year and setting forth
Tenant's Share of such refund and Tenant shall be
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entitled to receive such Share, at Landlord's option, either by way of a credit
against the Fixed Rent next becoming due after the sending of such Tax
Statement or by a refund to the extent no further Fixed Rent is due; provided,
however, that Tenant's Share of such refund shall be limited to the portion of
the Tax Payment, if any, which Tenant had theretofore paid to Landlord
attributable to increases in Taxes for the Tax Year to which the refund is
applicable on the basis of the Assessed Valuation before it had been reduced.
(B) In the event that, after a Tax Statement has been
sent to Tenant, the Assessed Valuation which had been utilized in computing the
Base Taxes is reduced (as a result of settlement, final determination of legal
proceedings or otherwise) then, and in such event: (i) the Base Taxes shall be
retroactively adjusted to reflect such reduction, and (ii) all retroactive Tax
Payments resulting from such retroactive adjustment shall be due and payable
when billed by Landlord. Landlord promptly shall send to Tenant a statement
setting forth the basis for such retroactive adjustment and Tax Payments.
Section 27.4. (A) If the Operating Expenses for any Operating Year
(any part or all of which falls within the Term) shall be greater than the Base
Operating Expenses, then Tenant shall pay as additional rent for such Operating
Year and continuing thereafter until a new Operating Statement is rendered to
Tenant, Tenant's Share of such increase (the "Operating Payment") as
hereinafter provided. Notwithstanding anything to the contrary contained
herein, Landlord shall not render an Operating Statement to Tenant prior to the
first (lst) anniversary of the Commencement Date.
(B) At any time after the first (1st) anniversary of the
Commencement Date or after the Term, Landlord may render to Tenant an Operating
Statement or Statements showing (i) a comparison of the Operating Expenses for
the Operating Year in question with the Base Operating Expenses, and (ii) the
amount of the Operating Payment resulting from such comparison. Landlord's
failure to render an Operating Statement during or with respect to any
Operating Year in question shall not prejudice Landlord's right to render an
Operating Statement during or with respect to any subsequent Operating Year,
and shall not eliminate or reduce Tenant's obligation to make payments of the
Operating Payment pursuant to this Article 27 for such Operating Year.
(C) On the first day of the month following the
furnishing to Tenant of an Operating Statement, Tenant shall pay to Landlord a
sum equal to 1/12th of the operating Payment shown thereon to be due for the
preceding Operating Year multiplied by the number of months (and any fraction
thereof) of the Term then elapsed since the commencement of such Operating Year
in which such Operating Statement is delivered, less Operating Payments
theretofore made by Tenant for such Operating Year and thereafter, commencing
with the then current monthly installment of Fixed Rent and continuing monthly
thereafter until rendition of the next succeeding Operating Statement, Tenant
shall pay on account of the Operating Payment for such Year an amount equal to
1/12th of the Operating Payment shown thereon to be due for the preceding
Operating Year. Any Operating Payment shall be collectible by Landlord in the
same manner as Fixed Rent.
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(D) (1) As used in this Section 27.4, (i) "Tentative
Monthly Escalation Charge" shall mean a sum equal to 1/12th of the product
of (a) Tenant's Share, and (b) the difference between (x) the Base Operating
Expenses and (y) Landlord's estimate of Operating Expenses for the Current
Year, and (ii) "Current Year" shall mean the Operating Year in which a demand
is made upon Tenant for payment of a Tentative Monthly Escalation Charge.
(2) At any time in any Operating Year,
Landlord, at its option, in lieu of the payments required under Section 27.4(C)
hereof, may demand and collect from Tenant, as additional rent, a sum equal to
the Tentative Monthly Escalation Charge multiplied by the number of months in
said Operating Year preceding the demand and reduced by the sum of all payments
theretofore made under Section 27.4(C) with respect to said Operating Year, and
thereafter, commencing with the month in which the demand is made and
continuing thereafter for each month remaining in said Operating Year, the
monthly installments of Fixed Rent shall be deemed increased by the Tentative
Monthly Escalation Charge. Any amount due to Landlord under this Section
27.4(D) may be included by Landlord in any Operating Statement rendered to
Tenant as provided in Section 27.4(B) hereof.
(E) (1) After the end of the Current Year and at any
time that Landlord renders an Operating Statement or Statements to Tenant as
provided in Section 27.4(B) hereof with respect to the comparison of the
Operating Expenses for said Operating Year or Current Year, with the Base
Operating Expenses, as the case may be, the amounts, if any, collected by
Landlord from Tenant under Section 27.4(C) or (D) on account of the Operating
Payment or the Tentative Monthly Escalation Charge, as the case may be, shall
be adjusted, and, if the amount so collected is less than or exceeds the amount
actually due under said Operating Statement for the Operating Year, a
reconciliation shall be made as follows: Tenant shall be debited with any
Operating Payment shown on such Operating Statement and credited with the
amounts, if any, paid by Tenant on account in accordance with the provisions of
subsection (C) and subsection (D)(2) of this Section 27.4 for the Operating
Year in question. Tenant shall pay any net debit balance to Landlord within
fifteen (15) days next following rendition by Landlord of an invoice for such
net debit balance; any net credit balance shall be applied against the next
accruing monthly installments of Fixed Rent.
(2) If the sum of the Tentative Monthly
Escalation Charges and payments made by Tenant in accordance with subsection
(C) of this Section 27.4 for any Operating Year shall have exceeded the
Operating Payment for such Operating Year by more than ten percent (10%),
interest at the Applicable Rate on the portion of the overpayment that exceeds
the applicable Operating Payment by more than ten percent (10%) determined as
of the respective dates of such payments by Tenant and calculated from such
respective dates to the dates on which such amounts are credited against the
monthly installments of Fixed Rent, shall be so credited. Any amount owing to
Tenant subsequent to the Term shall be paid to Tenant within ten (10) Business
Days after a final determination has been made of the amount due to Tenant,
together with interest at the Applicable Rate in accordance with the foregoing.
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Section 27.5. Any Operating Statement sent to Tenant shall be
conclusively binding upon Tenant unless, within ninety (90) days after such
Statement is sent, Tenant shall send a written notice to Landlord objecting to
such Statement and specifying the respects in which such Statement is disputed.
If such notice is sent, Tenant (together with its independent certified public
accountants, provided they are a nationally recognized firm of at least one
hundred fifty (150) partners or principals who are certified public
accountants) may examine Landlord's books and records relating to the Operation
of the Property to determine the accuracy of the Operating Statement. Tenant
recognizes the confidential nature of such books and records and agrees to
maintain the information obtained from such examination in strict confidence.
If after such examination, Tenant still disputes such Operating Statement,
either party may refer the decision of the issues raised to a reputable
independent firm of certified public accountants, selected by Landlord and
approved by Tenant, which approval shall not be unreasonably withheld or
delayed as long as such firm of certified public accountants is a nationally
recognized firm of at least one hundred fifty (150) partners or principals who
are certified public accountants, and the decision of such accountants shall be
conclusively binding upon the parties. The fees and expenses involved in such
decision shall be borne by the unsuccessful party (and if both parties are
partially successful, such fees and expenses shall be apportioned between
Landlord and Tenant in inverse proportion to the amount by which such decision
is favorable to each party). Notwithstanding the giving of such notice by
Tenant, and pending the resolution of any such dispute, Tenant shall pay to
Landlord when due the amount shown on any such Operating Statement, as provided
in Section 27.4 hereof.
Section 27.6. The expiration or termination of this Lease during any
Operating Year or Tax Year shall not affect the rights or obligations of the
parties hereto respecting any payments of Operating Payments for such Operating
Year and any payments of Tax Payments for such Tax Year, and any Operating
Statement relating to such Operating Payment and any Tax Statement relating to
such Tax Payment, may be sent to Tenant subsequent to, and all such rights and
obligations shall survive, any such expiration or termination. In determining
the amount of the Operating Payment for the Operating Year or the Tax Payment
for the Tax Year in which the Term shall expire, the payment of the Operating
Payment for such Operating Year or the Tax Payment for the Tax Year shall be
prorated based on the number of days of the Term which fall within such
Operating Year or Tax Year, as the case may be. Any payments due under such
Operating Statement or Tax Statement shall be payable within thirty (30) days
after such Statement is sent to Tenant.
ARTICLE 28
SERVICES
Section 28.1. (A) Landlord shall provide passenger elevator service to
the Premises on Business Days from 8:00 A.M. to 6:00 P.M. and on Saturdays from
8:00 A.M. to 1:00 P.M. and have an elevator subject to call at all other times.
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(B) There shall be one (1) freight elevator serving the
Premises and the entire Building on call on a "first come, first served" basis
on Business Days from 8:00 A.M. to 5:00 P.M., and on a reservation, "first
come, first served" basis from 5:00 P.M. to 8:00 A.M. on Business Days and at
any time on days other than Business Days. If Tenant shall use the freight
elevators serving the Premises between 5:00 P.M. and 8:00 A.M. on Business Days
or at any time on any other days, Tenant shall pay Landlord, as additional rent
for such use, the standard rates then fixed by Landlord for the Building, or if
no such rates are then fixed, at reasonable rates.
(C) Landlord shall not be required to furnish any freight
elevator services during the hours from 5:00 P.M. to 8:00 A.M. on Business Days
and at any time on days other than Business Days unless Landlord has received
advance notice from Tenant requesting such services prior to 2:00 P.M. of the
day upon which such service is requested or by 2:00 P.M. of the last preceding
Business Day if such periods are to occur on a day other than a Business Day.
Section 28.2. Landlord, at Landlord's expense (but subject to
recoupment pursuant to Article 27 hereof), shall furnish to the perimeter of
the Premises (for distribution by Tenant within the Premises) through the HVAC
System, when required for the comfortable occupancy of the Premises, HVAC on a
year round basis from 8:00 A.M. to 6:00 P.M. on Business Days and from 8:00
A.M. to 1:00 P.M. on Saturdays. Landlord, throughout the Term, shall have free
access to any and all mechanical installations of Landlord, including, but not
limited to, air-cooling, fan, ventilating and machine rooms and electrical
closets; Tenant shall not construct partitions or other obstructions which may
interfere with Landlord's free access thereto, or interfere with the moving of
Landlord's equipment to and from the enclosures containing said installations.
Neither Tenant, nor its agents, employees or contractors shall at any time
enter the said enclosures or tamper with, adjust or touch or otherwise in any
manner affect said mechanical installations. Tenant shall draw and close the
draperies or blinds for the windows of the Premises whenever the HVAC System is
in operation and the position of the sun so requires and shall at all times
cooperate fully with Landlord and abide by all of the regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the HVAC System.
Section 28.3. The Fixed Rent does not reflect or include any charge to
Tenant for the furnishing of any necessary HVAC to the Premises during periods
other than the hours and days set forth above ("Overtime Periods").
Accordingly, if Landlord shall furnish such HVAC to the Premises at the request
of Tenant during Overtime Periods, Tenant shall pay Landlord additional rent
for such services at the standard rates then fixed by Landlord for the
Building, or if no such rates are then fixed, at reasonable rates. Landlord
shall not be required to furnish any such services during any Overtime Periods
unless Landlord has received advance notice from Tenant requesting such
services prior to 2:00 P.M. of the day upon which such services are requested
or by 2:00 P.M, of the last preceding Business Day if such Overtime Periods are
to occur on a day other than a Business Day. If Tenant fails to give Landlord
such advance notice, then, failure by Landlord to furnish or distribute any
such services during such Overtime Periods shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any
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abatement or diminution of Rental, or relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business or otherwise. If more than one tenant
utilizing the same system as Tenant requests the same Overtime Periods for the
same services as Tenant, the charge to Tenant shall be adjusted pro rata.
Section 28.4. Provided Tenant shall keep the Premises in order,
Landlord, at Landlord's expense, subject to recoupment pursuant to Article 27
hereof, shall cause the Premises, excluding any portions thereof used for the
storage, preparation, service or consumption of food or beverages, to be
cleaned, substantially in accordance with the standards set forth in Schedule B
annexed hereto and made a part hereof. Tenant shall pay to Landlord the cost of
removal of any of Tenant's refuse and rubbish from the Premises and the Building
to the extent that the same exceeds the refuse and rubbish usually attendant
upon the use of such Premises as offices. Bills for the same shall be rendered
by Landlord to Tenant at such time as Landlord may elect and shall be due and
payable when rendered as additional rent. Tenant, at Tenant's sole cost and
expense, shall cause all portions of the Premises used for the storage,
preparation, service or consumption of food or beverages to be cleaned daily in
a manner satisfactory to Landlord, and to be exterminated against infestation
by vermin, rodents or roaches regularly and, in addition, whenever there shall
be evidence of any infestation. Any such exterminating shall be done at
Tenant's sole cost and expense, in a manner satisfactory to Landlord, and by
Persons approved by Landlord. If Tenant shall perform any cleaning services in
addition to the services provided by Landlord as aforesaid, Tenant shall employ
the cleaning contractor providing cleaning services to the Building on behalf
of Landlord or such other cleaning contractor as shall be approved by Landlord.
Tenant shall comply with any recycling program and/or refuse disposal program
(including, without limitation, any program related to the recycling,
separation or other disposal of paper, glass or metals) which Landlord shall
impose or which shall be required pursuant to any Requirements.
Section 28.5. If the New York Board of Fire Underwriters or the
Insurance Services Office or any Governmental Authority, department or
official of the state or city government shall require or recommend that any
changes, modifications, alterations or additional sprinkler heads or other
equipment be made or supplied by reason of Tenant's business, or the location of
the partitions, trade fixtures, or other contents of the Premises, Landlord, at
Tenant's cost and expense, shall promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment.
Section 28.6. Landlord reserves the right to stop service of the HVAC
System or the elevator, electrical, plumbing or other Building Systems when
necessary, by reason of accident or emergency, or for repairs, additions,
alterations, replacements or improvements in the judgment of Landlord desirable
or necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed (which repairs, additions, alterations,
replacements and improvements shall be performed in accordance with Section
4.3 hereof). Landlord shall have no responsibility or liability for
interruption, curtailment or failure to supply HVAC, elevator, electrical,
plumbing or other Budding Systems when prevented by Unavoidable Delays or by
any
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Requirement of any Governmental Authority or due to the exercise of its right
to stop service as provided in this Article 28. The exercise of such right or
such failure by Landlord shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any compensation or to any
abatement or diminution of Rental, or relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise.
Section 28.7. Landlord shall make available to Tenant the computerized
directory in the lobby of the Building for up to (---) listings. The initial
programming shall be without charge to Tenant. From time to time, but not more
frequently than once every three (3) months, Landlord shall reprogram the
computerized directory to reflect such changes in the listings therein as
Tenant shall request, and Tenant promptly after request shall pay to Landlord a
reasonable reprogramming charge for each reprogramming Tenant requests. If
Landlord replaces the computerized directory with a standard directory in the
lobby of the Building, Tenant shall be entitled to Tenant's Share of such
listings on such directory.
ARTICLE 29
PARTNERSHIP TENANT
If Tenant is a partnership (including, without limitation, a limited
liability partnership) or a limited liability company or a professional
corporation (or is comprised of two (2) or more Persons, individually or as
co-partners of a partnership (including, without limitation a limited liability
partnership), as members of a limited liability company or as shareholders of a
professional corporation) or if Tenant's interest in this Lease shall be
assigned to a partnership (including, without limitation, a limited liability
partnership) a limited liability company or a professional corporation (or to
two (2) or more Persons, individually or as co-partners of a partnership, as
members of a limited liability company or shareholders of a professional
corporation) pursuant to Article 12 hereof (any such partnership, professional
corporation and such Persons are referred to in this Article 29 as "Partnership
Tenant"), the following provisions shall apply to such Partnership Tenant: (a)
the liability of each of the parties comprising Partnership Tenant shall be
joint and several; (b) each of the parties comprising Partnership Tenant hereby
consents in advance to, and agrees to be bound by (x) any written instrument
which may hereafter be executed by Partnership Tenant or any successor entity,
changing, modifying, extending or discharging this Lease, in whole or in part,
or surrendering all or any part of the Premises to Landlord, and (y) any
notices, demands, requests or other communications which may hereafter be given
by Partnership Tenant or by any of the parties comprising Partnership Tenant;
(c) any bills, statements, notices, demands, requests or other communications
given or rendered to Partnership Tenant or to any of such parties shall be
binding upon Partnership Tenant and all such parties; (d) if Partnership Tenant
shall admit new partners, shareholders or members, as the case may be,
Partnership Tenant shall give Landlord notice of such event not later than ten
(10) Business Days prior to the admission of such partner(s), shareholder(s) or
member(s) together with an assumption agreement in form and substance
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satisfactory to Landlord pursuant to which each of such new partners,
shareholders or members, as the case may be, shall, by their admission to
Partnership Tenant, agree to assume joint and several liability for the
performance of all of the terms, covenants and conditions of this Lease (as the
same may have been or thereafter be amended) on Tenant's part to be observed
and performed; it being expressly understood and agreed that each such new
partner, shareholder or member (as the case may be) shall be deemed to have
assumed joint and several liability for the performance of all of the terms,
covenants and conditions of this Lease (as the same may have been or thereafter
be amended), whether or not such new partner, shareholder or member shall have
executed such assumption agreement, and that neither Tenant's failure to
deliver such assumption agreement nor the failure of any such new partner or
shareholder, as the case may be, to execute or deliver any such agreement to
Landlord shall vitiate the provisions of this clause (d) of this Article 29).
ARTICLE 30
VAULT SPACE
Notwithstanding anything contained in this Lease or indicated on any
sketch, blueprint or plan, any vaults, vault space or other space outside the
boundaries of the Real Property are not included in the Premises. Landlord
makes no representation as to the location of the boundaries of the Real
Property. All vaults and vault space and all other space outside the boundaries
of the Real Property which Tenant may be permitted to use or occupy are to be
used or occupied under a revocable license, and if any such license shall be
revoked, or if the amount of such space shall be diminished or required by any
Governmental Authority or by any public utility company, such revocation,
diminution or requisition shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Rental, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord. Any fee, tax or charge imposed by any
Governmental Authority for any such vaults, vault space or other space occupied
by Tenant shall be paid by Tenant.
ARTICLE 31
SECURITY
Tenant shall deposit with Landlord on the signing of this Lease an
amount equal to Fifty Thousand Forty-Two and 50/100 Dollars ($50,042.50), or at
Tenant's option, a "clean," unconditional, irrevocable and transferable letter
of credit (the "Letter of Credit") in the same amounts, satisfactory to
Landlord, issued by and drawn on a bank satisfactory to Landlord and which is a
member of the New York Clearing House Association, for the account of Landlord,
for a term of not less than one (1) year, as security for the faithful
performance and observance by Tenant of the terms, covenants, conditions and
provisions of this Lease, including, without limitation, the surrender of
possession of the Premises to Landlord as herein provided. If an Event of
Default shall occur and be continuing, Landlord may apply the whole or any
part of the security so deposited, or present the Letter of Credit for payment
and apply the whole or any part
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of the proceeds thereof, as the case may be, (i) toward the payment of any
Fixed Rent, Escalation Rent or any other item of Rental as to which Tenant is
in default, (ii) toward any sum which Landlord may expend or be required to
expend by reason of Tenant's default in respect of any of the terms, covenants
and conditions of this Lease, including, without limitation, any damage,
liability or expense (including, without limitation, reasonable attorney's fees
and disbursements) incurred or suffered by Landlord, and (iii) toward any
damage or deficiency incurred or suffered by Landlord in the reletting of the
Premises, whether such damages or deficiency accrue or accrues before or after
summary proceedings or other re-entry by Landlord. If Landlord applies or
retains any part of the proceeds of the Letter of Credit or the security so
deposited, as the case may be, Tenant, upon demand, shall deposit with Landlord
the amount so applied or retained so that Landlord shall have the full deposit
on hand at all times during the Term. If Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Lease, the Letter of Credit or the security, as the case may be, shall be
returned to Tenant after the Expiration Date and after delivery of possession
of the Premises to Landlord. In the event of a sale or leasing of the Real
Property or the Building, Landlord shall have the right to transfer the Letter
of Credit or security, as the case may be, to the vendee or lessee and Landlord
shall thereupon be released by Tenant from all liability for the return of such
security or the Letter of Credit as the case may be, and Tenant shall cause the
bank which issued the Letter of Credit to issue an amendment to the Letter of
Credit or issue a new Letter of Credit naming the vendee or lessee as the
beneficiary thereunder. Tenant shall look solely to the new landlord for the
return of the Letter of Credit or the security, as the case may be. The
provisions hereof shall apply to every transfer or assignment of the Letter of
Credit or security made to a new landlord. Tenant shall not assign or encumber
or attempt to assign or encumber the monies deposited herein as security and
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant
shall renew any Letter of Credit from time to time, at least thirty (30) days
prior to the expiration thereof, and deliver to Landlord a new Letter of Credit
or an endorsement to the Letter of Credit and any other evidence required by
Landlord that the Letter of Credit has been renewed for a period of at least
one (1) year. If Tenant shall fail to renew the Letter of Credit as aforesaid,
Landlord may present the Letter of Credit for payment and retain the proceeds
thereof as security in lieu of the Letter of Credit.
ARTICLE 32
CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof
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ARTICLE 33
PARTIES BOUND
The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective legal
representatives, successors, and, except as otherwise provided in this Lease,
their assigns.
ARTICLE 34
BROKER
Each party represents and warrants to the other that it has not dealt
with any broker or Person in connection with this Lease other than Julien J.
Studley, Inc. ("Broker") The execution and delivery of this Lease by each party
shall be conclusive evidence that such party has relied upon the foregoing
representation and warranty. Tenant shall indemnify and hold Landlord harmless
from and against any and all claims for commission, fee or other compensation
by any Person (other than Broker) who shall claim to have dealt with Tenant in
connection with this Lease and for any and all costs incurred by Landlord in
connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. Landlord shall indemnify and hold Tenant
harmless from and against any and all claims for commission, fee or other
compensation by Broker and any Person who shall claim to have dealt with
Landlord in connection with this Lease and for any and all costs incurred by
Tenant in connection with such claims, including, without limitation,
reasonable attorneys' fees and disbursements. The provisions of this Article 34
shall survive the Expiration Date.
ARTICLE 35
INDEMNITY
Section 35.1. (A) Tenant shall not do or permit any act or thing to be
done upon the Premises which may subject Landlord to any liability or
responsibility for injury, damages to persons or property or to any liability
by reason of any violation of any Requirement, and shall exercise such control
over the Premises as to fully protect Landlord against any such liability.
Tenant shall indemnify and save the Indemnitees harmless from and against (a)
all claims of whatever nature against the Indemnitees arising from any act,
omission or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees or visitors, (b) all claims against the Indemnitees
arising from any accident, injury or damage whatsoever caused to any person or
to the property of any person and occurring during the Term in or about the
Premises, (c) all claims against the Indemnitees arising from any accident,
injury or damage occurring outside of the Premises but anywhere within or about
the Real Property, where such accident, injury or damage results or is claimed
to have resulted from an act, omission or negligence of Tenant or Tenant's
contractors, licensees, agents, servants, employees, invitees or visitors, and
(d) any breach, violation or non-performance of any covenant, condition or
agreement in this Lease set forth and contained on the part of Tenant to be
fulfilled, kept, observed and performed. This
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indemnity and hold harmless agreement shall include indemnity from and against
any and all liability, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof but except with respect to claims with respect to
bodily injury or death, shall be limited to the extent any insurance proceeds
collectible by Landlord under policies owned by Landlord or such injured party
with respect to such damage or injury are insufficient to satisfy same. Tenant
shall have no liability for any consequential damages suffered either by
Landlord or by any party claiming through Landlord.
(B) Except as provided in Articles 4, 9, 10, 13, 28, 36
and 37 hereof and otherwise as expressly provided herein, Landlord shall
indemnify and save Tenant its shareholders, directors, officers, Partners,
employees and agents harmless from and against all claims against Tenant
arising from any direct damage to the Premises and any bodily injury to
Tenant's employees, agents or invitees resulting from the acts, omissions or
negligence of Landlord or its agents. This indemnity and hold harmless
agreement shall include indemnity from and against any and all liability,
fines, suits, demands, costs and expenses of any kind or nature (including,
without limitation, reasonable attorneys' fees and disbursements) incurred in
or in connection with any such claim or proceeding brought thereon, but shall
be limited to the extent any insurance proceeds collectible by Tenant or such
injured party with respect to such damage or injury are insufficient to satisfy
same. Landlord shall have no liability for any consequential damages suffered
either by Tenant or by any party claiming through Tenant.
Section 35.2. If any claim, action or proceeding is made or brought
against either party, which claim, action or proceeding the other party shall
be obligated to indemnify such first party against pursuant to the terms of
this Lease, then, upon demand by the indemnified party, the indemnifying party,
at its sole cost and expense, shall resist or defend such claim, action or
proceeding in the indemnified party's name, if necessary, by such attorneys as
the indemnified party shall approve, which approval shall not be unreasonably
withheld. Attorneys for the indemnifying party's insurer are hereby deemed
approved for purposes of this Section 35.2. Notwithstanding the foregoing, an
indemnified party may retain its own attorneys to defend or assist in defending
any claim, action or proceeding involving potential liability of Five Million
Dollars ($5,000,000) or more, and the indemnifying party shall pay the
reasonable fees and disbursements of such attorneys. The provisions of this
Article 35 shall survive the expiration or earlier termination of this Lease.
ARTICLE 36
ADJACENT EXCAVATION-SHORING
If an excavation shall be made upon land adjacent to the Premises, or
shall be authorized to be made, Tenant, upon reasonable advance notice, shall
afford to the person causing or authorized to cause such excavation, a license
to enter upon the Premises for the purpose of doing such work as said person
shall deem necessary to preserve the wall or the Building from injury or damage
and to support the same by proper foundations, without any claim for damages
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or indemnity against Landlord, or diminution or abatement of Rental, provided
that Tenant shall continue to have access to the Premises and the Building.
ARTICLE 37
MISCELLANEOUS
Section 37.1. This Lease is offered for signature by Tenant and it is
understood that this Lease shall not be binding upon Landlord or Tenant unless
and until Landlord and Tenant shall have executed and unconditionally delivered
a fully executed copy of this Lease to each other.
Section 37.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale,, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Building or the Real Property, as the case may be, and in the event of
any such sale, conveyance, assignment or transfer, Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder. The members, partners, shareholders, directors, officers and
principals, direct and indirect comprising Landlord (collectively, the
"Parties") shall not be liable for the performance of Landlord's obligations
under this Lease. Tenant shall look solely to Landlord to enforce Landlord's
obligations hereunder and shall not seek any damages against any of the Parties.
The liability of Landlord for Landlord's obligations under this Lease shall be
limited to Landlord's interest in the Real Property and Tenant shall not look to
any other property or assets of Landlord or the property or assets of any of the
Parties in seeking either to enforce Landlord's obligations under this Lease or
to satisfy a judgment for Landlord's failure to perform such obligations.
Section 37.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Escalation Rent,
additional rent or Rental, shall constitute rent for the purposes of Section
502(b)(7) of the Bankruptcy Code.
Section 37.4. Tenant's liability for all items of Rental shall survive
the Expiration Date
Section 37.5. Tenant shall reimburse Landlord as additional rent,
within ten (10) days after rendition of a statement, for all expenditures made
by, or damages or fines sustained or incurred by, Landlord, due to any default
by Tenant under this Lease, with interest thereon at the Applicable Rate.
Section 37.6. This Lease shall not be recorded.
Section 37.7. Tenant hereby waives any claim against Landlord which
Tenant may have based upon any assertion that Landlord has unreasonably
withheld or unreasonably delayed any consent or approval requested by Tenant,
and Tenant agrees that its sole remedy shall be an action or proceeding to
enforce any related provision or for specific performance, injunction or
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declaratory judgment. In the event of a determination that such consent or
approval has been unreasonably withheld or delayed, the requested consent or
approval shall be deemed to have been granted; however, Landlord shall have no
liability to Tenant for its refusal or failure to give such consent or
approval. Tenant's sole remedy for Landlord's unreasonably withholding or
delaying consent or approval shall be as provided in this Section 37.7.
Section 37.8. This Lease contains the entire agreement between the
parties and supersedes all prior understandings, if any, with respect thereto.
This Lease shall not be modified, changed, or supplemented, except by a written
instrument executed by both parties.
Section 37.9. Tenant hereby (a) irrevocably consents and submits to
the jurisdiction of any Federal, state, county or municipal court sitting in
the State of New York in respect to any action or proceeding brought therein by
Landlord against Tenant concerning any matters arising out of or in any way
relating to this Lease; (b) irrevocably waives personal service of any summons
and complaint and consents to the service upon it of process in any such action
or proceeding by mailing of such process to Tenant at the address set forth
herein and hereby, irrevocably designates _________________________ or other
law firm located in Manhattan if disclosed to Landlord in writing (or if not so
located, then upon any member of the law firm of _____________________, or
their successor, if so located in Manhattan), to accept service of any process
on Tenant's behalf and hereby agrees that such service shall be deemed
sufficient; (c) irrevocably waives all objections as to venue and any and all
rights it may have to seek a change of venue with respect to any such action or
proceedings; (d) agrees that the laws of the State of New York shall govern in
any such action or proceeding and waives any defense to any action or
proceeding granted by the laws of any other country or jurisdiction unless such
defense is also allowed by the laws of the State of New York; and (e) agrees
that any final judgment rendered against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law. Tenant further agrees that
any action or proceeding by Tenant against Landlord in respect to any matters
arising out of or in any way relating to this Lease shall be brought only in
the State of New York, county of New York. In furtherance of the foregoing,
Tenant hereby agrees that its address for notices given by Landlord and service
of process under this Lease shall be the Premises. Notwithstanding the
foregoing provisions of this Section 37.9, Tenant may, by written notice to
Landlord, change the designated agent for acceptance of service of process to
any other law firm located in the City, county and State of New York.
Section 37.10. Unless Landlord shall render written notice to Tenant
to the contrary in accordance with the provisions of Article 26 hereof, MRC
Management LLC is authorized to act as Landlord's agent in connection with the
performance of this Lease, including, without limitation, the receipt and
delivery of any and all notices and consents in accordance with Article 26.
Tenant shall direct all correspondence and requests to, and shall be entitled
to rely upon correspondence received from, MRC Management LLC, as agent for the
Landlord in accordance with Article 26. Tenant acknowledges that MRC Management
LLC, is acting solely as agent for Landlord in connection with the foregoing,
and neither MRC Management LLC nor any of its direct or indirect members,
partners, officers, shareholders, directors or employees shall have any
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liability to Tenant in connection with the performance of Landlord's
obligations under this Lease and Tenant waives any and all claims against any
such party arising out of, or in any way connected with, this Lease or the Real
Property.
Section 37.11. (A) All of the Schedules and Exhibits attached hereto are
incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Schedules and Exhibits hereto, the terms and provisions of
this Lease shall control. Wherever appropriate in this Lease, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural. All Article and Section references set forth herein shall, unless the
context otherwise specifically requires, be deemed references to the Articles
and Sections of this Lease.
(B) If any term, covenant, condition or provision of this lease, or
the application thereof to any person or circumstance, shall ever be held to be
invalid or unenforceable, then in each such event the remainder of this Lease
or the application of such term, covenant, condition or provision to any other
Person or any other circumstance (other than those as to which it shall be
invalid or unenforceable) shall not be thereby affected, and each term,
covenant, condition and provision hereof shall remain valid and enforceable to
the fullest extent permitted by law,
(C) All references in this Lease to the consent or approval of
Landlord shall be deemed to mean the written consent or approval of Landlord
and no consent or approval of Landlord shall be effective for any purpose
unless such consent or approval is set forth in a written instrument executed
by Landlord.
ARTICLE 38
RENT CONTROL
If at the commencement of, or at any time or times during the Term of
this Lease, the Rental reserved in this Lease shall not be fully collectible by
reason of any Requirement, Tenant shall enter into such agreements and take
such other steps (without additional expense to Tenant) as Landlord may request
and as may be legally permissible to permit Landlord to collect the maximum
rents which may from time to time during the continuance of such legal rent
restriction be legally permissible (and not in excess of the amounts reserved
therefor under this Lease). Upon the termination of such legal rent restriction
prior to the expiration of the Term, (a) the Rental shall become and thereafter
be payable hereunder in accordance with the amounts reserved in this Lease for
the periods following such termination, and (b) Tenant shall pay to Landlord,
if legally permissible, an amount equal to (i) the items of Rental which would
have been paid pursuant to this Lease but for such legal rent restriction less
(ii) the rents paid by Tenant to Landlord during the period or periods such
legal rent restriction was in effect.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this Lease
as of the day and year first above written
ELEVEN PENN PLAZA LLC, Landlord
By: Vornado M 393 L.L.C., member
By: Vornado Realty L.P., member
By: Vornado Realty Trust, general partner
By: /s/
-----------------------------
Irwin Goldberg
Vice President and Chief Financial Officer
By: M 393 Associates LLC, member
By: Vornado M 393 L.L.C.
By: Vornado Realty L.P., member
BY: Vornado Realty Trust, general partner
By: /s/
-----------------------------
Irwin Goldberg
Vice President and Chief Financial Officer
PNV.NET, INC., Tenant
By: /s/
--------------------------
Name: Stephen L. Conkling
Title: President
Fed. Id. No.
--------------
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STATE OF NEW YORK )
) s.s.:
COUNTY OF NEW YORK )
On the 19 day of July, 1999, before me personally came Stephen Conkling
to me known, who, being by me duly sworn did depose and say that he/she resides
at 11711 NW 39th St. Coral Springs, FL that he/she is the President of PNV.NET,
RIC., the _____________ described and which executed the foregoing instrument;
that he/she signed his/her name thereto by order of the ____________________ of
said _______________.
---------------------------------------
Notary Public
TERESA PIRIANO GLICK
State of Florida
My Comm. Exp: 02/27/00
Comm#: CC635542
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Schedule A
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by Tenant
or used for any purpose other than ingress and egress to and from the Premises
and for delivery of merchandise and equipment in prompt and efficient manner,
using elevators and passageways designated for such delivery by Landlord.
(2) NO AWNINGS, air-conditioning units, fans or other projections shall
be attached to the outside walls of the Building. No curtains, blinds, shades,
or screens, other than those which conform to Building standards as established
by Landlord from time to time, shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without the prior written
consent of Landlord which shall not be unreasonably withheld or delayed. Such
awnings, projections, curtains, blinds, shades, screens or other fixtures must
be of a quality, type, design and color, and attached in the manner reasonably
approved by Landlord. All electrical fixtures hung in offices or spaces along
the perimeter of the Premises must be of a quality, type, design and bulb
color approved by Landlord, which consent shall not be withheld or delayed
unreasonably unless the prior consent of Landlord has been obtained for other
lamping.
(3) No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or Building or on the inside of the Premises if the same can be seen
from the outside of the Premises without the prior written consent of Landlord
except that the name of Tenant may appear on the entrance door of the Premises.
In the event of the violation of the foregoing by Tenant, if Tenant has refused
to remove same after reasonable notice from Landlord, Landlord may remove same
without any liability, and may charge the expense incurred by such removal to
Tenant. Interior signs on doors and directory tablet shall be of a size, color
and style reasonably acceptable to Landlord.
(4) The exterior windows and doors that reflect or admit light and air
into the Premises or the halls, passageways or other public places in the
Building, shall not be covered or obstructed by Tenant.
(5) No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules, nor shall any article obstruct any air-conditioning supply or
exhaust without the prior written consent of Landlord.
(6) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by Tenant.
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(7) Subject to the provisions of Article 3 of this Lease, Tenant shall
not mark, paint, drill into, or in any way deface any part of the Premises or
the Building. No boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed, and as Landlord may direct.
(8) No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of
any kind at auction or otherwise.
(9) Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any musical instrument, radio, television set, talking machine, unmusical
noise, whistling, singing, or in any other way.
(10) Tenant, or any of Tenant's employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance except such as are
incidental to usual office occupancy.
(11) No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in existing locks
or the mechanism thereof, unless Tenant promptly provides Landlord with the key
or combination thereto. Tenant must, upon the termination of its tenancy,
return to Landlord all keys of stores, offices and toilet rooms, and in the
event of the loss of any keys furnished at Landlord's expense, Tenant shall pay
to Landlord the cost thereof.
(12) No bicycles, vehicles or animals of any kind except for seeing eye
dogs shall be brought into or kept by Tenant in or about the Premises or the
Building.
(13) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place in the manner and
during the hours which landlord or its agent reasonably may determine from time
to time. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
(14) Tenant shall not occupy or permit any portion of the Premises
demised to it to be occupied as an office for a public stenographer or typist
or for the possession, storage, manufacture, or sale of liquor, narcotics,
dope, or as a barber or manicure shop, or as an employment bureau. Tenant shall
not engage or pay any employees on the Premises, except those actually working
for Tenant at the Premises, nor advertise for labor giving an address at the
Premises.
(15) Tenant shall not purchase spring water, ice, towels or other like
service, or accept bartering or bootblacking services in the Premises, from any
company or persons not approved
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by Landlord, which approval shall not be withheld or delayed unreasonably and
at hours and under regulations other than as reasonably fixed by Landlord.
(16) Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
(17) Landlord reserves the right to exclude from the Building between the
hours of 6 P.M, and 9 A.M. and at all hours on days other than Business Days
all persons who do not present a pass to the Building signed or approved by
Landlord. Tenant shall be responsible for a persons for whom a pass shall be
issued at the request of Tenant and shall be liable to Landlord for all acts of
such persons.
(18) Tenant shall, at its expense, provide artificial light for the
employees of Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in the Premises.
(19) The requirements of Tenant will be attended to only upon written
application at the office of the Building. Building employees shalt not perform
any work or do anything outside of the regular duties, unless under special
instructions from the office of Landlord.
(20) Canvassing, soliciting and peddling in the Building is prohibited
and Tenant shall cooperate to prevent the same.
(21) There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
side guards.
(22) Except as specifically provided in Section 2.2 of this Lease, Tenant
shall not do any cooking, conduct any restaurant, luncheonette or cafeteria for
the sale or service of food or beverages to its employees or to others, or
cause or permit any odors of cooking or other processes or any unusual or
objectionable odors to emanate from the Premises. Tenant shall not permit the
delivery of any food or beverage to the Premises, except by such persons
delivering the same as shall be approved by Landlord, which approval shall not
be unreasonably withheld or delayed.
(23) Tenant shall keep the entrance door to the Premises closed at all
times.
(24) Landlord shall have the right to require that all messengers and
other Persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such packages, papers and other materials to a Person
designated by Landlord who will distribute the same to Tenant or (ii) be
escorted by a person designated by Landlord to deliver the same to Tenant
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(25) Landlord and its agents reserve the right to inspect all packages,
boxes, bags, handbags, attache cases, suitcases, and other items carried into
the Building, and to refuse entry into the Building to any person who either
refuses to cooperate with such inspection or who is carrying any object which
may be dangerous to persons or property. In addition, Landlord reserves the
right to implement such further measures designed to ensure safety of the
Building and the persons and property located therein as Landlord shall deem
necessary or desirable.
A-4
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Schedule B
CLEANING SPECIFICATIONS
GENERAL CLEANING:
NIGHTLY
General Offices:
1. All hardsurfaced flooring to be swept using approved dustdown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste disposal cans and baskets.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
Public Lavatories (Base Building):
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill and clean all soap, towel and toilet tissue dispensers as
needed, supplies therefore to be furnished by Landlord at a
reasonable charge to Tenant. If the
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Premises consists of a part of a rentable floor, said charge to
Tenant shall be that portion of a reasonable charge for such
supplies that is reasonably allocable to Tenant.
8. Empty and clean sanitary disposal receptacles.
WEEKLY:
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a
person's reach.
3. Wipe clean all brass and other bright work.
QUARTERLY:
High dust the Premises complete, including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors
and door bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvres, ducts,
high mouldings and other high areas not reached in nightly
cleaning.
4. Dust all venetian blinds.
Wash exterior and interior of windows periodically, subject to weather
conditions and requirements of law.
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EXHIBIT "A"
FLOOR PLAN
This floor plan is annexed to and made a part of this Lease solely to indicate
the Premises by outlining and diagonal marking. All areas, conditions,
dimensions and locations are approximate.
<PAGE> 87
[FLOOR PLAN]
11 PENN PLAZA
20TH FLOOR (SPACE A)
<PAGE> 88
EXHIBIT "B"
LANDLORD'S WORK
Landlord will, at its expense, perform the following work and installations,
all of which shall be of material, design, capacity, finish and color (if
applicable) of the standard adopted by Landlord for the Building (but in no
event more than the type and quantity of work set forth below):
1 Demolish stud/rock walls in the Premises.
2. Furnish and install Building-standard stud/rock walls in the
Premises (Demised wall, split conference room into two (2) offices,
close off open area and enlarge office in southwest corner).
3. Rework 2' x 2' ceilings as necessary.
4. Relocate supply diffusers as necessary in the Premises.
5. Relocate four (4) 2'x 4' light fixtures in the Premises.
6. Provide and install seven (7) new Building-standard light switches
in the Premises.
7. Recircuit four (4) 2'x 4' light fixtures in the Premises.
8. Relocate one (1) quad receptacle in the Premises.
9. Demolish carpet and cove base in the Premises.
10. Provide and install new Building-standard carpet and
Building-standard vinyl base in the Premises. Tenant shall select
color from Landlord's Building-standard sample book.
11. Relocate one (1) door and frame in the Premises.
12. Remove wall coverings in the Premises and skim coat walls ready for
paint.
13. Demolish 3' x 7' wood and frame and provide and install new
Building-standard painted wood double door and metal frame in the
Premises (to create a finished reception area).
14. Create new opening for door in the Premises and provide and install
new painted Building-standard wood door and metal frame in such
opening.
15. Disconnect power and demolish furniture partitions in the Premises.
16. Power up new furniture partitions in the Premises.
<PAGE> 89
17. Remove all office furniture existing in the Premises.
18. Paint walls, doors, frames and convector covers throughout the
Premises with one (1) coat of Building-standard paint, one (1)
color per room. Tenant shall select color from Landlord's Building-
standard color chart.
19. Deliver Premises free and clear of debris.
<PAGE> 1
EXHIBIT 10.45
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made and entered into effective the
21st day of June, 1999, by and between PNV.Net, Inc., a Delaware corporation
(the "Company") and Mark Cleveland (the "Executive").
WHEREAS, the Company is engaged in the business of developing and
providing telecommunications, data transmission, internet, cable television and
other services to truckstops, truck drivers and truck fleet owners; and
WHEREAS, Employee desires to work for the Company under the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Executive and the Company agree as follows:
1. Term of Agreement. The term of this Agreement shall commence as of
the date and year first above written (the "Effective Date") and shall remain in
effect for the duration of the Executive's employment with the Company
(hereinafter "Term of Agreement"). The Executive's employment with the Company
and the Term of Agreement shall continue until terminated with or without cause
by either party immediately upon giving the other party written notice thereof,
or upon verbal notice confirmed thereafter in writing. Nothing herein shall be
understood as modifying or otherwise altering the Executive's at-will
relationship or in any other way creating a contract of employment with the
Executive for any stated term.
2. Position and Responsibilities. The Executive shall be employed as
Vice President, Sales of the Company. As Vice President, Sales, the Executive
shall report to the President of the Company and initially shall be responsible
for all aspects of sales and involved in formulating the marketing strategy of
the Company. Subject to Section 5(e)(ii), the Company may change the Executive's
duties and responsibilities from time to time in its sole discretion. While so
employed, the Executive agrees to devote his full working time and attention to
carrying out his duties and responsibilities under this Agreement and shall use
his best efforts, skills and abilities to further the interests of the Company.
While employed by the Company, the Executive may not work for any other entity,
in any capacity, without the prior express written consent of the Company. The
Company hereby consents to the following activities, provided such activities do
not, as determined by the Company in its discretion, interfere with the
Executive's performance of his obligations to the Company: (i) limited
consulting services for Freightliner and CH Robinson; and (ii) service for
civic, educational or charitable organizations and trade associations. In
addition: (i) Executive may serve on the board of directors of Micro Modulation
Data Systems; and (ii) Executive may, with the prior consent of the Company not
to be unreasonably withheld, serve on the board of directors or board of
advisors of one additional corporation not engaged in the business of developing
or providing telecommunications, data transmission, internet, cable television
or other competitive services to
<PAGE> 2
truckstops, truck drivers or truck fleet owners. The Executive agrees to comply
with all policies, standards and regulations of the Company now existing or
hereafter promulgated.
3. Location. The Executive acknowledges that he will work out of the
Company's headquarters in Coral Springs, Florida. The Executive further
acknowledges that the Company may, in its discretion, change the location at
which the Executive is required to perform his duties under this Agreement. In
the event the Company does require the Executive to change his residence during
the Term of Agreement, the Company shall reimburse the Executive for reasonable
moving expenses, including reasonable realtor fees incurred in selling
Executive's home in the Coral Springs area, moving expenses for Executive's
household items, and other expenses associated with the relocation.
4. Compensation and Related Matters.
(a) Salary. During the Term of Agreement, the Company shall
pay to the Executive a salary at a rate of One Hundred Sixty Thousand Dollars
($160,000.00) per annum in equal installments on the fifteenth and last day of
each month in arrears, which salary may be increased in the sole discretion of
the Compensation Committee of the Board of Directors (the "Compensation
Committee") from time to time based on periodic performance reviews (the "Base
Salary").
(b) Bonus. Beginning on July 1, 1999, for each fiscal year
during the Term of Agreement, the Executive shall be eligible for an incentive
bonus for such fiscal year (a "Bonus") upon satisfaction (as determined by the
Compensation Committee in its discretion) of goals and objectives specified by
the Chief Executive Officer of the Company. The goals and objectives for the
fiscal year beginning July 1, 1999 shall be mutually agreed to by the Executive
and the Compensation Committee prior to June 30, 1999 or as soon as
administratively possible thereafter. The Executive's Bonus shall be targeted at
forty percent (40%) of Executive's then-current Base Salary (the "Target
Amount") and calculated based on the guidelines set forth in Exhibit A.
Notwithstanding the foregoing, the Executive's Bonus for the fiscal year
beginning July 1, 1999 shall be at least 20% of Executive's Base Salary.
(c) Stock Options. The Company shall grant a nonqualified
stock option to the Executive substantially in the form of the nonqualified
stock option award agreement attached hereto as Exhibit B, which generally
provides that the Company shall grant Executive nonqualified stock options for
80,000 shares of common stock at an exercise price of Five Dollars ($5) per
share. The options will vest subject to Executive's continued employment with
the Company, the terms of the Company's equity compensation plan and the award
agreement evidencing the options at the following schedule: 16,000 shares will
vest on the Effective Date; an additional 16,000 share will vest on the first
anniversary of the Effective Date; an additional 16,000 shares will vest on the
second anniversary of the Effective Date, an additional 16,000 shares will vest
on the third anniversary of the Effective Date; and the last 16,000 shares will
vest on the fourth anniversary of the Effective Date. In addition, to the extent
that other senior-level management of the Company are granted stock options
during the Term of Agreement, the Board will consider granting additional
options to the Executive in the sole discretion of the Board.
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<PAGE> 3
(d) Moving and Related Expenses. The Company shall reimburse
the Executive for reasonable moving and related expenses associated with the
Executive's relocation to the Coral Springs, Florida area, provided such
expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company, as follows: (i) reasonable realtor fees
incurred in selling the Executive's house in Oregon; (ii) moving expenses for
the Executive's household items; (iii) travel expenses in transporting the
Executive and his immediate family to Florida; and (iv) a lump sum payment of
$15,000 for living and miscellaneous expenses associated with the relocation.
Reimbursements under subsections (i), (ii) and (iii) of this Section shall be
paid within ten (10) days of the Executive providing the Company with
documentation in a form reasonably satisfactory to the Company; the payment
provided for in subsection (iv) shall be made to the Executive within 15 days of
relocation to Florida. All amounts paid to the Executive under this Section 4(d)
shall be grossed up as necessary to compensate the Executive for any taxes
incurred by Executive with respect to the receipt of the same.
(e) Business Expenses. During the Term of Agreement, the
Company shall reimburse the Executive for all reasonable business expenses
incurred by the Executive in performing services hereunder, including travel
expenses while away from home on business, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by the Company.
(f) Vacation. In addition to all paid Company holidays, the
Executive shall be entitled to up to fifteen (15) business days paid vacation in
each full calendar year and accrued in accordance with Company policy. Any
vacation days accrued, but not used, in any calendar year shall be forfeited
without payment therefor. The Executive shall be entitled to a pro rata portion
of his vacation entitlement for the calendar year 1999.
(g) Other Benefits. The Executive shall be eligible to
participate in the Company's retirement and welfare benefit plans under the
terms and conditions established by the applicable plan documents.
(h) Joint Venture. The Company acknowledges that Executive
currently has relationships with Freightliner and CH Robinson (hereinafter
collectively referred to as the "Identified Parties") and that the Identified
Parties may be interested in forming a joint venture or entering into various
new projects with the Company. In the event the Company enters into a
transaction with the Identified Parties within six (6) months of the Effective
Date, the Company and the Executive will negotiate an appropriate economic
reward for the Executive's services in creating such new opportunity.
5. Termination.
(a) Termination during the Term of Agreement. The Company
shall have the right to terminate the Executive's employment at any time with or
without Cause (as
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<PAGE> 4
defined in Section 5(e) below). The Executive shall have the right to terminate
his employment at any time with or without Good Reason (as defined in Section
5(e) below).
(b) Termination without Cause; Termination for Good Reason.
During the Term of Agreement, if the Company terminates the employment of the
Executive without Cause (as defined in Section 5(e) below, including, but not
limited to, termination without Cause after a change in control of the Company)
or the Executive terminates his employment for Good Reason (as defined in
Section 5(e) below), the Term of Agreement shall terminate immediately
thereafter and:
(i) the Company shall pay the Executive the portion
of his Base Salary in effect at the time of termination as he may be entitled to
receive for services rendered prior to the date of such termination;
(ii) the Company shall pay the Executive for any
accrued but unused vacation;
(iii) subject to Section 6 and provided that the
termination occurs within twenty-four (24) months of the Effective Date, the
Company shall pay the Executive, at the end of each month for the first six (6)
months following the date on which the Executive executes the release described
in Section 6 below (the "Severance Period"), an amount equal to one-twelfth
(1/12) of his Base Salary;
(iv) subject to Section 6 and provided that the
termination occurs within twenty-four (24) months of the Effective Date, if the
Executive timely elects to continue coverage under the Company's health care
plan, pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, ("COBRA"), the Company shall pay Employee at the end of each month
during the Severance Period an amount equal to the monthly premium for the COBRA
coverage so elected. At such time as the Executive becomes eligible for coverage
under another employer's group health plan, all benefits under this Section
5(b)(iv) shall cease immediately. If the Executive fails to notify the Company
that he is eligible for other health coverage within thirty (30) days of
becoming eligible for such coverage, the Executive shall be considered in breach
of this Agreement and shall be required to repay to the Company all payments
made under this Section 5(b)(iv);
(v) subject to Section 6 and provided that the
termination occurs within twenty-four (24) months of the Effective Date,
notwithstanding anything to the contrary in this Agreement, the nonqualified
stock option in Section 4(c) shall continue to vest as if the Executive were
actively employed during the Severance Period; and
(vi) subject to Section 6 and provided that the: (i)
termination occurs after the second anniversary of the Effective Date; (ii)
Executive relocates to the Pacific Northwest within six (6) months of said
termination; and (iii) no other entity or organization is providing Executive
with relocation assistance, the Company shall reimburse the Executive for
reasonable moving and related expenses associated with the Executive's
relocation to the
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<PAGE> 5
Pacific Northwest, provided such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company, as
follows: (a) reasonable realtor fees incurred in selling the Executive's house
in Florida; (b) moving expenses for the Executive's household items; (c) travel
expenses in transporting the Executive and his immediate family to the Pacific
Northwest. Reimbursements under subsections (i), (ii)) and (iii) of this Section
5(b)(vi) shall be paid within ten (10) days of the Executive providing the
Company with documentation in a form reasonably satisfactory to the Company. All
amounts paid to the Executive under this Section 5(b)(vi) shall be grossed up as
necessity to compensate the Executive for any taxes incurred by Executive with
respect to the receipt of the same.
(c) Termination for Death, Retirement or Disability. During
the Term of Agreement, if the Executive's employment is terminated by the death,
Disability or Retirement (as defined in Section 5(e) below) of the Executive,
the Term of Agreement shall terminate immediately thereafter and the Company
shall pay the Executive or his beneficiary such compensation as is set forth in
Sections 5(b)(i) and 5(b)(ii) herein.
(d) Termination by the Executive without Good Reason or
Termination by the Company for Cause. During the Term of Agreement, if the
Executive terminates his employment without Good Reason (as defined in Section
5(e) below), or the Company terminates the Executive's employment for Cause (as
defined in Section 5(e) below), the Term of Agreement shall terminate
immediately thereafter and the Company shall pay the Executive or his
beneficiary such compensation as is set forth in Sections 5(b)(i) and 5(b)(ii)
herein.
(e) Definitions.
(i) Cause. For purposes of this Agreement, the term
"Cause" shall be limited to the following events: (i) theft, embezzlement or
other similar act by the Executive of any tangible or intangible asset of the
Company or any customer, supplier or investor of the Company if, in the good
faith determination of the Board, such act causes or is likely to cause material
damage to the business or reputation of the Company; (ii) commission of a
felony, or other crime involving moral turpitude by the Executive, (whether or
not the Executive is prosecuted and convicted) if, in the good faith
determination of the Board, such act causes or is likely to cause material
damage to the business or reputation of the Company; or (iii) willful failure by
the Executive to follow the instructions of the Board, to the extent such
instructions are reasonably related to the business of the Company, are given in
good faith to promote the interest of the Company, would not require the
Executive to commit any illegal act and are not given to provide the Company
with cause for terminating the Executive, and if such failure has continued for
thirty (30) days after Executive has been notified in writing by the Company of
the nature of Executive's failure to follow such instructions. This definition
of Cause shall not create in the Executive any right to employment or cause of
action on account of termination of the Executive's employment with the Company
without Cause.
(ii) Good Reason. For purposes of this Agreement, the
term "Good Reason" shall be limited to the following events: (i) a material
breach by the Company of this
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Agreement; or (ii) a material diminution in the Executive's title, duties or
responsibilities, provided that the Executive has given the Company written
notice of his objection to this diminution and the Company has failed to adjust
the Executive's title, duties or responsibilities to correct any such diminution
within thirty (30) days.
(iii) Disability. For purposes of this Agreement, the
Executive's employment with the Company shall be deemed to have terminated on
account of "Disability" on the date on which the Executive is eligible to
receive, and commences receipt of, benefits under the Company's program of
long-term disability insurance.
(iv) Retirement. For purposes of this Agreement, the
term "Retirement" means the Executive's election to separate from service with
the Company upon or after having attained the normal retirement age specified in
the Company's tax-qualified retirement plan.
6. Condition on Payment of Benefits: The Executive agrees that he shall
be entitled to payments and benefits under the terms of Section 5(b)(iii),
5(b)(iv) and 5(b)(v) above, as applicable, only if he executes a complete and
general release in a form substantially comparable to the release set forth in
Exhibit C hereto and incorporated herein by reference or in such other form as
is determined to be necessary or desirable by the Company in its discretion,
which release shall at least contain a release by the Executive and any
beneficiary of the Executive entitled to receive all or any portion of the
benefits specified in such Sections of any claims arising from the Executive's
employment or associations with the Company or otherwise existing against the
Company and its officers, directors, agents, employees, shareholders, and
representatives at the time of execution of the release.
7. Representations.
(a) The Executive warrants and represents that the Executive's
performance of all of the terms of this Agreement and as an employee does not
and will not breach any agreement to keep in confidence proprietary information
acquired by the Executive in confidence or in trust prior to the Executive's
employment by the Company. The Executive represents that the Executive has not
entered into, and agrees not to enter into, any agreement either oral or written
in conflict herewith.
(b) The Executive warrants and represents that the Executive
has not brought and will not bring with the Executive to the Company, or use in
the performance of the Executive's responsibilities for the Company, any
materials or documents of a former employer which are not generally available to
the public, unless the Executive has obtained written authorization from the
former employer or other owner for their possession and use and provided the
Company with a copy of such authorization.
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(c) The Executive understands that during the Executive's
employment for the Company the Executive is not to breach any obligation of
confidentiality that the Executive has to a former employer or any other person
or entity.
8. Other Agreements. This Agreement supersedes all prior agreements and
understandings, oral or written, between the Company and the Executive with
respect to the subject matter hereof. Notwithstanding the foregoing, Executive
will adhere to and honor all obligations to the Company as described in the
Confidentiality and Assignment of Inventions Agreement attached hereto as
Exhibit D and executed simultaneously herewith.
9. Amendment. No change, modification, termination or attempted waiver
of any of the provisions of this Agreement shall be binding upon any party
hereto unless reduced to writing and signed by the party against whom
enforcement is sought.
10. Assignment. The Company shall have the right to assign this
contract to a successor or surviving entity, and all covenants and agreements
hereunder shall inure to the benefit of and be enforceable by or against its
successors and assigns. The Executive's obligations under this Agreement shall
not be transferable by assignment or otherwise by the Executive and any attempt
to do any of the foregoing shall be null and void.
11. Counterparts. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and all of
which, together, shall constitute one and the same instrument.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without reference to its
conflict of law provisions.
13. Venue. Any litigation under this Agreement may be brought by the
Company in the State of Florida, notwithstanding that the Executive is not at
that time a resident of the State of Florida and cannot be served process within
that state. The Executive hereby irrevocably consents to the jurisdiction of the
courts of Florida (whether federal or state courts) over his or her person.
14. Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their heirs,
assigns and successors in interest.
15. Withholding of Taxes. The Company may withhold from any payments
made under this Agreement all federal, state, city, or other taxes as shall be
required pursuant to any law, regulation or ruling.
16. Headings. The headings contained in this Agreement are for
reference purposes only and shall not be deemed interpretation of this
Agreement.
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<PAGE> 8
17. Representation. The Executive represents and warrants that the
performance of the Executive's duties under this Agreement, and the execution of
this Agreement by him, will not violate any agreement between the Executive and
any other person, firm, partnership, Company or any other organization.
18. Notices. Any notice given to either party hereto shall be in
writing and shall be deemed to have been given when delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested, duly
and properly addressed to the party concerned at the address indicated below or
to such changed address as party may subsequently give notice of:
If to the Company:
11711 NW 39th Street
Coral Springs, Florida 33065
If to the Executive, to Executive's last known address as shown on the
Company's records, which currently is listed as
P.O. Box 8733
Coral Springs, Florida 33075
with a facsimile copy thereof to Executive's counsel at (541)
344-0845 and a further copy to:
R.W. Cleveland, Esq.
1165 Debrick
Eugene, Oregon 97401
19. Arbitration. The parties agree that any and all disputes that they
have with one another which arise out of the Executive's employment or under the
terms of this Agreement shall be resolved through final and binding arbitration,
as specified herein. This shall include, without limitation, disputes relating
to this Agreement, the Executive's employment by the Company or the termination
thereof, claims for breach of contract or breach of the covenant of good faith
and fair dealing, and any claims of discrimination or other claims under any
federal, state or local law or regulation now in existence or hereinafter
enacted and as amended from time to time concerning in any way the subject of
Executive's employment with the Company or its termination. The only claims not
covered by this Section 19 are claims for benefits under the workers'
compensation laws or claims for unemployment insurance benefits, which will be
resolved pursuant to those laws. Binding arbitration will be conducted in
Broward County, Florida, in accordance with the rules and regulations of the
American Arbitration Association. Each party will bear one half of the cost of
the arbitration filing and hearing fees, and the cost of the arbitrator. The
Executive understands and agrees that the arbitration shall be instead of any
civil litigation and that the arbitrator's decision shall be final and binding
to the fullest extent permitted by law and enforceable by any court having
jurisdiction thereof.
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20. Mitigation. The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable pursuant to Sections 5(b)(iii)
and 5(b)(iv) and, except as specifically provided in Section 5(b)(iv), any such
employment obtained by the Executive shall not reduce or affect the amounts
payable under Sections 5(b)(iii) and 5(b)(iv).
21. Waiver of Breach. Any waiver of any breach of this Agreement shall
not be construed to be a continuing waiver or consent to any subsequent breach
on the part either of the Executive or of the Company.
22. Severability. To the extent any provision of this Agreement or
portion thereof shall be invalid or unenforceable, it shall be considered
deleted therefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect.
23. Survival. The Executive and the Company agree that the provisions
of Sections 6-23 herein shall survive the termination of this Agreement and the
termination of the Executive's employment hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE EXECUTIVE:
/s/ Mark Cleveland (Seal)
------------------------------
Mark Cleveland
THE COMPANY:
PNV.NET, INC.
By: /s/ Steve Conkling
--------------------------------
Steve Conkling, President
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EXHIBIT A
Calculation of Bonus
The Executive's entitlement to a Bonus will be calculated based on his
achievement of the Sales Goals and, Corporate Goals and General Goals set by the
Compensation Committee of the Company each year. The portion of the Target
Amount to which the Executive is entitled as a Bonus will be calculated as
follows:
1. Sales Goals. 60% of the Target Amount for a given year will be based
on achievement of Sales Goals. If the Executive achieves from 91% to
100% of the Sales Goals, he will receive at least 60% of the Target
Amount (the "Sales Target Bonus"). In the event the Executive achieves
less than 91% or more than 100% of the Sales Goals, the amount of the
Sales Target will be calculated as follows:
85% or less of Sales Goals: 0% of the Sales Target
86 - 90% of Sales Goals: 86 - 90% of the Sales Target
91 - 100% of Sales Goals: 100% of the Sales Target
101 - 120% of Sales Goals: 125% of the Sales Target
121% or more of Sales Goals: 135% of the Sales Target
2. Corporate Goals. 40% of the Target Amount for a given year will be
based on achievement of Corporate Goals. If the Executive achieves from
91% to 100% of the Corporate Goals, he will receive at least 40% of the
Target Amount (the "Corporate Target"). In the event the Executive
achieves less than 91% or more than 100% of the Corporate Goals, the
amount of the Corporate Target will be calculated as follows:
<TABLE>
<S> <C>
85% or less of Corporate Goals: 0% of the Corporate Target
86 - 90% of Corporate Goals: 86 - 90% of the Corporate Target
91 - 100% of Corporate Goals: 100% of the Corporate Target
101 - 120% of Corporate Goals: 125% of the Corporate Target
121% or more of Corporate Goals: 135% of the Corporate Target
</TABLE>
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EXHIBIT 10.46
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
UNDER THE PARK 'N VIEW, INC.
STOCK OPTION PLAN
THIS AWARD AGREEMENT is made and entered into this 23rd day of June,
1999, by and between PNV.Net, Inc., a Delaware corporation (the "Company"), and
Mark Cleveland (the "Eligible Participant").
WHEREAS, the Eligible Participant is a valuable and trusted employee to
the Company; and
WHEREAS, the Board considers it desirable and in the best interests of
the Company that the Eligible Participant be given an opportunity to acquire a
proprietary interest in the Company as an incentive to advance the interests of
the Company; and
WHEREAS, on June 23, 1999 (the "Option Grant Date") the Board granted
the Eligible Participant, effective upon commencement of employment, a
nonqualified stock option to purchase shares of the common stock of the Company
(the "Stock"), in accordance with the Park 'N View, Inc. Stock Option Plan
adopted by the Company on August 26, 1996 and approved by the shareholders of
the Company (the "Plan") (capitalized terms used herein which are not otherwise
defined herein shall have the meanings ascribed to them under the Plan).
WHEREAS, this Award Agreement memorializes the grant of such
nonqualified stock option to the Eligible Participant.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, it is agreed by and between the parties as follows:
1. Grant of Nonqualified Stock Option. The Company granted to the
Eligible Participant a nonqualified stock option (the "Option") to purchase
80,000 shares of Stock (the "Shares") at the purchase price of $5.00 per share
in the manner and subject to the terms and conditions hereinafter provided.
2. Time of Exercise of Option; Vesting. Subject to the termination
provisions set forth in Section 5 below, to the extent the Option has vested as
provided below, it may be exercised, in whole or in part, at any time and from
time to time but not later than June 22, 2009 (the "Exercise Period"). Any
unvested portion of the Option may not be exercised. Provided that the Option
shall vest with respect to an increment as specified only if Eligible
Participant is employed with the Company on the specified date for such
increment, the Option shall vest as follows:
<PAGE> 2
(a) One-fifth (1/5th) of the Shares shall vest and be
exercisable on June 23, 1999.
(b) One-fifth (1/5th) of the Shares shall vest and be
exercisable on June 21, 2000.
(c) One-fifth (1/5th) of the Shares shall vest and be
exercisable on June 21, 2001;
(d) One-fifth (1/5th) of the Shares shall vest and be
exercisable on June 21, 2002; and
(e) One-fifth (1/5th) of the Shares shall vest and be
exercisable on June 21, 2003.
The schedule set forth above is cumulative, so that Shares as to which
the Option has become vested and exercisable on and after a date indicated by
the schedule may be purchased pursuant to exercise of the Option at any
subsequent date prior to termination of the Option.
Notwithstanding the provisions of Section 2, the Option shall continue
to vest and be exercisable in accordance with the schedule set forth above
during the period, not to exceed nine (9) months, in which the Eligible
Participant is receiving severance payments pursuant to Section 5(b)(iii) of the
Employment Agreement dated June 21, 1999.
Notwithstanding the provisions of Section 2, the Option shall vest and
become exercisable, to the extent not already vested and exercisable, upon a
Change in Control (as defined in Section 6 below). In the event of a Change in
Control, the Company shall send Eligible Participant prior written notice of the
effectiveness of such event and the last day on which Eligible Participant may
exercise the Option. Eligible Participant may, upon compliance with all of the
terms of this Award Agreement and the Plan, purchase any or all of the Shares
with respect to which the Option is vested and exercisable on or prior to the
last day specified in such notice and, to the extent the Option is not
exercised, it shall terminate at 5:00 p.m., eastern standard time, on the last
day specified in such notice.
3. Method of Exercise. The Option shall be exercised by written notice
directed to the Board, a form of which is attached hereto as Exhibit A and
incorporated herein by reference, accompanied by a check in payment of the price
specified in Section 1 above for the number of Shares specified, unless the
Board shall authorize an alternative form of payment. For the purposes of this
Section 3, payment also may be made by delivery of shares of Common Stock held
by the Eligible Participant having an aggregate Fair Market Value (as defined
below) equal to the amount of cash that would otherwise be required to pay the
full option price, or by authorizing a third party to sell a portion of the
shares acquired upon
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<PAGE> 3
exercise of the Option and remit to the Company a sufficient portion of the
sales proceeds to pay the full option price. Payment also may be made by
combining the above methods. To the extent that shares are used in making a full
or partial payment of the option price, each such share will be valued at the
Fair Market Value thereof as of the date of exercise. Any overpayment will be
promptly refunded, and any underpayment will be deemed an exercise of such
lesser whole number of shares as the amount paid is sufficient to purchase.
As soon as practicable following receipt of such notice from the
Eligible Participant, the Board shall notify the Eligible Participant of any
payment or other allocation required under Section 4 below. Upon receipt of
notice from the Board that the Eligible Participant has paid the price specified
in Section 1 above and paid or made any allocation required under Section 4
below, the Company shall make immediate delivery of such Shares; provided,
however, that if any law or regulation requires the Company to take any action
with respect to the Shares specified in such notice before the issuance thereof,
then the date of delivery of such Shares shall be extended for the period
necessary to take such action.
The term "Fair Market Value" on any date will mean the last sale price
on such date of the shares of the Common Stock or, in case no such sale takes
place on such day, the average of the closing bid and asked prices of the shares
of the Common Stock, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the shares of the Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which
shares of the Common Stock are listed or admitted to trading or, if shares of
the Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted sale price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the NASDAQ Stock Market or such other system then in use, or, if on
any such date shares of the Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares of the Common Stock
selected by the Board. If shares of the Common Stock are not publicly held or so
listed or publicly traded, the "Fair Market Value" shall be an amount determined
in good faith by the Board as the fair market value of a share of Common Stock
which amount may be different from the fair market value of shares of Common
Stock used for purposes of stock option grants.
4. Payment to Satisfy Withholding Obligations. Notwithstanding any
other provision of this Award Agreement, any rights of the Eligible Participant
to exercise the Option shall be conditioned upon the Eligible Participant
forwarding to the Company, in addition to the price per share specified in
Section 1 above, cash payment of an amount equal to the amount the Company is
required by law or regulation of any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with such
exercise of the Option, if any, as determined by the Board in its discretion.
The amount of
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<PAGE> 4
such payment shall be communicated to the Eligible Participant by the Board as
soon as practicable following the Board's receipt of the notice specified in
Section 3. In lieu of payment specified in this Section 4, the Board may in its
discretion agree with the Eligible Participant to another means of satisfying
the Company's withholding obligation in connection with the exercise of the
Option.
5. Termination of Option. Except as otherwise stated herein, the Option
shall terminate and cease to be exercisable upon the first to occur of the
following:
(a) the date all Shares available for purchase under this
Award Agreement have been so purchased;
(b) upon the expiration of three (3) years following the
Eligible Participant's Termination of Employment for any reason including by
reason of death or Disability; or
(c) at 5:00 p.m., eastern standard time, on the last date
specified in the notice described in Section 2 above in the event of a Change in
Control; or
(d) upon the expiration of the Exercise Period set forth in
Section 2 above.
6. Change in Control. For purposes of this Agreement, the term "Change
in Control" shall be deemed to have occurred if:
(a) Tender Offer or Acquisition. Any "person" as defined in
section 3(a)(9) of the Securities Exchange Act of 1934 (the "Act"), including a
"group" (as that term is used in sections 13(d)(3) and 14(d)(2) of the Act), but
excluding the Company and any employee benefit plan sponsored or maintained by
the Company, including any trustee of such plan acting as trustee, who:
(i) makes a tender or exchange offer for any shares
of the Company's stock pursuant to which at least fifty percent (50%) of the
Company's stock is purchased; or
(ii) together with its "affiliates" and "associates"
(as those terms are defined in Rule 12b-2 under the Act) becomes the "beneficial
owner" (within the meaning of Rule 13d-3 under the Act) of at least fifty
percent (50%) of the Company's stock; or
(b) Merger or Consolidation. The happening of any one (1) of
the following events: (i) the dissolution or liquidation of the Company; (ii) a
reorganization, merger or consolidation involving the Company, unless (A) the
transaction involves only the Company and one or more of the Company's parent
corporation and wholly-owned (excluding interests held by employees, officers
and directors) subsidiaries; or (B) the shareholders who had the power to elect
a majority of the board of directors of the Company
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<PAGE> 5
immediately prior to the transaction have the power to elect a majority of the
board of directors of the surviving entity immediately following the
transaction; (iii) the sale of all or substantially all of the assets of the
Company to another company, person or business entity; or (iv) an acquisition of
Company stock, unless the shareholders who had the power to elect a majority of
the board of directors of the Company immediately prior to the acquisition have
the power to elect a majority of the board of directors of the Company
immediately following the transaction.
7. Rights Prior to Exercise of Option. The Eligible Participant shall
have no rights as a stockholder with respect to the Shares except to the extent
he has exercised the Option, paid the price specified in Section 1 and received
delivery of such Shares as herein provided.
8. Non-Transferable. During the Eligible Participant's lifetime, this
Option shall be exercisable only by him and neither it nor any right thereunder
shall be transferable except by will or laws of descent and distribution (and
shall be exercisable by such transferee only as provided in Sections 2 and 5
above), or be subject to attachment, execution or other similar process. In the
event of any attempt by the Eligible Participant to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right hereunder, except as
provided for herein, or in the event of the levy of any attachment, execution or
similar process upon the rights or interest hereby conferred, the Board may
terminate the Option by notice to the Eligible Participant, and the Option shall
thereupon become null and void.
9. Covenants and Representations of Eligible Participant. The Eligible
Participant represents, warrants, covenants and agrees with the Company as
follows:
(a) The Option is being received for the Eligible
Participant's own account, and not for the account of any other person, with the
intent of holding the Option and the Shares issuable pursuant thereto for
investment and not with the intent of participating, directly or indirectly, in
a distribution or resale of the Shares or any portion thereof.
(b) The Eligible Participant is not acquiring the Option or
any Shares based upon any representation, oral or written, by any person with
respect to the future value of, or income from, the Shares, but rather upon
independent examination and judgment as to the prospects of the Company.
(c) The Eligible Participant has had the opportunity to ask
questions of and receive answers from the Company and its executive officers and
to obtain all information necessary for the Eligible Participant to make an
informed decision with respect to the investment in the Company represented by
the Option and any Shares issued upon its exercise.
5
<PAGE> 6
(d) The Eligible Participant is able to bear the economic risk
of any investment in the Shares, including the risk of a complete loss of the
investment, and the Eligible Participant acknowledges that he or she must
continue to bear the economic risk of any investment in Shares received upon
exercise of the Option for an indefinite period.
(e) The Eligible Participant understands and agrees that the
Shares subject to the Option may be issued and sold to the Eligible Participant
without registration under any state or federal laws relating to the
registration of securities, and the Shares will be issued and sold in reliance
upon exemptions from registration under appropriate state and federal laws based
in part upon the representations of the Eligible Participant made herein.
(f) Shares issued to the Eligible Participant upon exercise of
the Option will not be offered for sale, sold or transferred by the Eligible
Participant other than pursuant to: (1) an effective registration under
applicable state securities laws or in a transaction which is otherwise in
compliance with those laws; (2) an effective registration under the Securities
Act of 1933 or in a transaction otherwise in compliance with such Act; and (3)
evidence satisfactory to the Company of compliance with all applicable state and
federal securities laws. The Company shall be entitled to rely upon an opinion
of counsel satisfactory to it with respect to compliance with the foregoing
laws.
(g) A legend in substantially the following form, indicating
that the Shares issued pursuant to the Option have not been registered under any
federal or state securities laws, may be placed on the certificate or
certificates delivered to the Eligible Participant, and any transfer agent of
the Company may be instructed to require compliance with all legends on such
certificates:
The securities represented hereby have not been registered under the
Securities Act of 1933, or the securities laws of any state. The
securities represented hereby may no be resold unless registered under
the Securities Act of 1933 and any applicable state securities laws
unless an exemption from registration exists.
In addition, the shares of Stock issued to the Eligible Participant
will be subject to the terms of that certain Securityholders' Agreements dated
November 2, 1995 and November 13, 1996 and the certificate or certificates
delivered to the Eligible Participant shall include a legend in substantially
the following form:
The shares represented by this certificate are subject to certain
Securityholders' Agreements dated as of November 2, 1995 and November
13, 1996 by and between Park 'N View, Inc., a Delaware corporation, and
its shareholders restricting the free transferability of said shares.
Copies of such Securityholders' Agreements are on file in the office of
the Secretary of the Company.
6
<PAGE> 7
(h) The Eligible Participant has not relied upon the Board,
the Company, or an employee or agent of the Company with respect to any tax
consequences related to the grant or exercise of this Option, or the disposition
of Shares purchased pursuant to exercise of the Option. The Eligible Participant
acknowledges that, as a result of the grant and/or exercise of the Option, the
Eligible Participant may incur a substantial tax liability. The Eligible
Participant assumes full responsibility for all such consequences and the filing
of all tax returns and elections the Eligible Participant may be required to or
find desirable to file in connection therewith. In the event any valuation of
the Option or Shares purchased pursuant to its exercise must be made under
federal or state tax laws and such valuation affects any return or election of
the Company, the Eligible Participant agrees that the Company may determine such
value and that the Eligible Participant will observe any determination so made
by the Company in all returns and elections filed by the Eligible Participant.
(i) The agreements, representations, warranties and covenants
made by the Eligible Participant herein with respect to the Option shall also
extend to and apply to all of the Shares issued to the Eligible Participant from
time to time pursuant to exercise of the Option. Acceptance by the Eligible
Participant of any certificate representing Shares shall constitute a
confirmation by the Eligible Participant that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at such time.
10. Sale or Other Disposition by Majority Interest. The Eligible
Participant hereby irrevocably appoints the Company and its President, or either
of them, as the Eligible Participant's agents and attorneys-in-fact, with full
power of substitution for and in the Eligible Participant's name, to sell,
exchange, transfer or otherwise dispose of all or a portion of the Shares and to
do any and all things and to execute any and all documents and instruments
(including, without limitation, any stock transfer powers) in connection
therewith, such powers of attorney not to become operable until such time as the
holder or holders of a majority of the issued and outstanding shares of Stock
sell, exchange, transfer or otherwise dispose of, or contract to sell, exchange,
transfer or otherwise dispose of, all or a majority of the issued and
outstanding shares of Stock. Any sale, exchange, transfer or other disposition
of all or a portion of Shares pursuant to the foregoing powers of attorney shall
be made upon substantially the same terms and conditions (including sale price
per share) applicable to a sale, exchange, transfer or other disposition of
shares of Stock owned by the holder or holders of a majority of the issued and
outstanding shares of Stock. For purposes of determining the sale price per
share of the Shares under this Section 9, there shall be excluded the
consideration (if any) paid or payable to the holder or holders of a majority of
the issued and outstanding shares of Stock in connection with any employment,
consulting, noncompetition or similar agreements which such holder or holders
may enter into in connection with or subsequent to such sale, transfer, exchange
or other disposition. The foregoing power of attorney shall not impose or be
deemed to impose any fiduciary duty or any other duty (except as set forth in
this Section 9) or obligation on either the Company or its President, shall be
irrevocable and coupled with an interest and shall not terminate by
7
<PAGE> 8
operation of law, whether by the death, bankruptcy or adjudication of
incompetency or insanity of the Eligible Participant or the occurrence of any
other event.
11. Binding Effect. This Award Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
12. Gender and Number. All terms used in this Award Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
13. Terms and Conditions of Plan. The terms and conditions included in
the Plan are incorporated by reference herein, and to the extent that any
conflict may exist between any term or provision of this Award Agreement and any
term or provision of the Plan as in effect from time to time, such term or
provision of the Plan shall control.
14. Entire Agreement. This Award Agreement (including the Plan which is
incorporated herein by reference) sets forth, as of the date hereof, all of the
promises, agreements, conditions, understandings, warranties and representations
between the parties hereto with respect to the Option and the Shares, and as of
the date hereof, there are no promises, agreements, conditions, understandings,
warranties or representations, oral or written, express or implied, between them
with respect to the Option or the Shares other than as set forth therein or
herein. This Award Agreement supersedes and replaces any and all prior
agreements between the parties hereto with respect to the Option or the Shares.
Except as set forth in the Plan, this Award Agreement is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the Option and the Shares.
15. Invalid or Unenforceable Provision. The invalidity or
unenforceability of any particular provision of this Award Agreement shall not
affect the other provisions hereof, and this Award Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
16. Governing Law. This Award Agreement shall be construed and enforced
in accordance with the laws of Delaware, without reference to its conflicts of
laws rules or the principles of the choice of law.
17. Miscellaneous.
(a) Neither the granting of this Option, the exercise thereof
nor any other provision of this Award Agreement shall be construed as conferring
upon the Eligible Participant any right to be employed or continue to be
employed by the Company or any of its subsidiaries or to otherwise continue in
the service of such corporations, or as interfering with
8
<PAGE> 9
or restricting in any way the right of such corporations to terminate their
relationship with the Eligible Participant at any time.
(b) The Company, the Board and any employees or agents thereof
are relieved from any liability for the non-issuance or non-transfer, or any
delay in the issuance or transfer, of any of the Shares which results from the
inability of the Company to obtain, or in any delay in obtaining, from each
regulatory body having jurisdiction all requisite authority to issue or transfer
the Stock of the Company in satisfaction of this Option if counsel for the
Company deems such authorization necessary for the lawful issuance or transfer
of any such Shares.
(c) No Stock acquired by exercise of this Option shall be sold
or otherwise disposed of in violation of any federal or state securities law or
regulation. Stock certificates evidencing the shares issuable upon exercise of
this Option may contain a legend regarding resale limitations, including the
requirement that the Eligible Participant deliver an opinion of counsel to the
Company.
(d) This Option shall be exercised in accordance with the
terms of the Plan and such administrative regulations as the Board may from time
to time adopt. All acts, determinations and decisions of the Board with respect
to the interpretation, construction and application of the Plan and/or this
Award Agreement shall be conclusive and binding upon the Eligible Participant
and all other persons.
(e) The Board shall be entitled to amend this Award Agreement
at any time provided that the Award Agreement, as amended, is consistent with
the provisions of the Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Award
Agreement to be executed as of the day and year first above written.
PNV.Net, Inc.
By: /s/ Steve Conkling
---------------------------------
Steve Conkling, President
ELIGIBLE PARTICIPANT
/s/ Mark Cleveland
-------------------------------------
Mark Cleveland
9
<PAGE> 10
EXHIBIT A
Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Attention: Board of Directors
Re: Exercise of Nonqualified Stock Option
Dear Board Members:
Pursuant to the terms and conditions of the Nonqualified Stock Option
Award Agreement dated as of _________________, 19__ (the "Award Agreement")
between _____________________________ and Park 'N View, Inc. (the "Company"), I
hereby agree to purchase _______ shares of the Stock of the Company and tender
payment in full for such shares in accordance with the terms of the Award
Agreement. I hereby consent to being a party to the Securityholders' Agreements
as is required by the Award Agreement.
I hereby reaffirm that the representations and warranties made in the
Award Agreement are true and correct on the date hereof as if made on the date
hereof.
Very truly yours,
---------------------------------
Print Name: ---------------------
Date:
-----------------------
10
<PAGE> 1
EXHIBIT 10.47
[*] - Confidential Treatment Requested Pursuant to Rule 406.
SECOND AMENDMENT TO
CABLE TELEVISION AND TELEPHONE SERVICE AGREEMENT
THIS SECOND AMENDMENT TO CABLE TELEVISION AND TELEPHONE SERVICE
AGREEMENT (this "Second Amendment") is entered into effective as of the 28th day
of June, 1999, by and between PNV.net, Inc., formerly known as Park 'N View,
Inc. ("PNV") and Pilot Corporation ("Operator").
STATEMENT OF PURPOSE:
PNV and the Operator entered into a Cable Television and Telephone
Service Agreement, dated as of February 1996 (the "Original Agreement"). PNV and
the Operator amended the Original Agreement pursuant to the Amendment to Cable
Television and Telephone Service Agreement, dated as of March 11, 1998 (the
"First Amendment"). Unless otherwise defined in this Second Amendment,
capitalized terms contained in this Second Amendment have the meaning ascribed
to them in the Original Agreement.
PNV and the Operator now desire to amend the Original Agreement, as
amended by the First Amendment, to: (i) provide compensation to the Operator
pursuant to the terms and conditions of this Second Amendment; and (ii)
establish certain programs, products and services to be provided or made
available to PNV by the Operator pursuant to the terms and conditions of this
Second Amendment.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Second Amendment, PNV and the Operator, intending to be
mutually bound, mutually agree as follows:
1. Compensation Program.
(a) Notwithstanding any terms of the Original Agreement, as
amended by the First Amendment, to the contrary, PNV will pay the Operator
(except as otherwise provided in this Second Amendment), as the Operator's sole
revenues with respect to the Services provided by PNV and/or the System during
the twelve (12) month period beginning August 1, 1999, quarterly (on August 1,
1999, November 1, 1999, February 1, 2000 and May 1, 2000 respectively) the
following: (i) [*] (the "Base Amount"), multiplied by (ii) 50 (which represents
the number of Truckstops at which the System has or should be installed as of
August 1, 1999), multiplied by (iii) 3 (which represents the number of months in
the applicable quarter).
(b) In addition to the amounts payable to the Operator
pursuant to Section 1 (a), during the Term (as defined in Section 1(i)), the
Operator shall be entitled to earn each month an additional amount equal to the
sum of:
<PAGE> 2
(A) Subject to Sections 1(e) and 1(g), (i) [*] (the
"Incentive Amount"), multiplied by (ii) 50 (which represents the number of
Truckstop at which the System has or should be installed as of August 1, 1999);
(B) With respect to each Truckstop at which PNV has
the exclusive right to install PIADs and PNV has installed one (1) PIAD, the
greater of (i) [*]; or (ii) [*] multiplied by [*];
(C) With respect to each Truckstop at which PNV has
the exclusive right to install PIADs and PNV has installed more than one (1)
PIAD, the greater of (i) [*]; or (ii) [*] multiplied by [*]; and
(D) With respect to each Truckstop at which PNV does
not have the exclusive right to install PIADs, subject to item 10 on Schedule B,
[*] multiplied by [*].
The amounts due to Operator pursuant to this Section 1(b) shall be paid
by PNV monthly in arrears.
(c) During each of the four (4) fiscal years commencing on
August 1, 2000, August 1, 2001, August 1, 2002 and August 1, 2003, the amounts
payable to Operator pursuant to Sections 1(a) and (b)(A) shall be adjusted and
PNV will pay the Operator (except as otherwise provided in this Second
Amendment), as the Operator's sole revenues with respect to the Services
provided by PNV and/or the System during the twelve (12) month period beginning
each August 1st during such four (4) year period, (i) quarterly (on August 1st,
November 1st, February 1st and May 1st respectively) an amount equal to: (A) the
Base Amount, multiplied by (B) the number of Truckstops at which the System is
installed as of such August 1st of such fiscal year, multiplied by (C) 3, and
(ii) monthly an amount equal to: (A) the Incentive Amount, multiplied by (B) the
number of Truckstops at which the System is installed as of such August 1st of
such fiscal year.
For the purposes of this Section 1(c), the parties
acknowledge and agree that, if PNV installs the System at any Truckstops after
August 1st during any applicable twelve (12) month period, PNV will not pay to
the Operator any additional amounts as a result of such installations (except as
may apply in the succeeding annual periods as a result of an increase in the
number of Truckstops as of August 1st of such twelve (12) month period).
(d) In addition to any amounts due and payable pursuant to
Sections 1(a), (b) or (c) of this Second Amendment, PNV will pay to the
Operator, on or before the tenth (10th) business day of each calendar month, [*]
generated by PNV during the prior calendar month from nonexclusive document
imaging services provided by PNV at any Truckstop.
(e) Notwithstanding the terms of Sections 1(b) or 1(c) of this
Second Amendment, if the Operator fails to perform its obligations specified by
Schedule A attached to this Second Amendment with respect to any Truckstop, the
amount PNV will pay to the Operator pursuant to Sections 1(b) or 1(c) of this
Second Amendment will be reduced as specified in Schedule A (which the parties
have calculated by reference to the Incentive Amount).
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<PAGE> 3
(f) If the Operator fails to perform one or more of its
obligations described in Schedule C attached to this Second Amendment, PNV may
deduct from the amount due to the Operator in the next quarter pursuant to
Section 1(a) of this Agreement an amount equal to: (i) [*], multiplied by (ii)
the number of Truckstops at which the Operator failed to perform its obligations
described in Schedule C during such quarter, multiplied by (iii) 3. If the
Operator fails to perform one or more of its obligations described in Schedule B
attached to this Second Amendment five (5) times at any Truckstop during any
twelve (12) consecutive calendar months, then PNV may terminate the rights and
obligations of the Operator pursuant to this Second Amendment with respect to
such Truckstop by thirty (30) days prior written notice to the Operator at any
time after the fifth (5th) occurrence; in such event, the Operator will
immediately pay to PNV, with respect to each such Truckstop, (i) (A) the Base
Amount, multiplied by (B) the number of full and partial calendar months
remaining in the three (3) month quarterly period; and (ii) the Incentive
Amount. If, pursuant to the terms of the foregoing sentence of this Section
1(f), PNV terminates this Agreement with respect to the lesser of: (i)
twenty-five percent (25%) of the Truckstops, or (ii) twenty (20) Truckstops,
then PNV may elect, in its sole discretion, to terminate this Second Amendment
with respect to all Truckstops by thirty (30) days prior written notice to the
Operator; in such event, the Operator will immediately pay to PNV the sum of:
(i) (A) the Base Amount, multiplied by (B) the number of full and partial
calendar months remaining in the three (3) month quarterly period, multiplied by
(C) the number of Truckstops at which the System was installed as of August 1st
of the applicable twelve (12) month period; and (ii) (A) the Incentive Amount,
multiplied by (B) the number of Truckstops at which the System was installed on
August 1st of the applicable twelve (12) month period.
(g) The parties acknowledge and agree that the obligations
described in Schedule A represent an incentive program established by PNV and
that PNV may amend the nature and scope of the incentive program and Schedule A
from time to time; any such incentive program that may be established from time
to time will be similarly tied to the Incentive Amount. The incentive program
will be evaluated by PNV and Operator every six (6) months. Any amendments made
by PNV to the incentive program and Schedule A would be subject to Pilot's prior
approval, which shall not be unreasonably withheld.
(h) The manager of each Truckstop, as designated by the
Operator, will perform a weekly review to ensure performance of the Operator's
obligations described in Schedule A, Schedule B and Schedule C. The Operator
will, on or before the tenth day of each month, provide written certification to
PNV of Operator's compliance with its obligations pursuant to Schedule A,
Schedule B and Schedule C during the prior month.
(i) The terms of this Second Amendment will apply during the
five (5) year period commencing August 1, 1999 and ending July 31, 2004 (the
"Term"). On or before July 31, 2004, the Parties will agree to a mutually
acceptable means of compensating the Operator and/or allocating revenues and
profits relating to the sale of Services. If the Parties fail to agree, the
terms and conditions of Schedule A to the First Amendment will govern the
allocation of revenues and profits relating to the sale of the Services at the
Truckstops at any time on and after August 1, 2004.
3
<PAGE> 4
2. Representations and Warranties of the Operator. The Operator
represents and warrants to PNV as follows: (i) the Operator has all requisite
power to enter into this Second Amendment (including without limitation items 7,
8, 9 and 10 on Schedule B hereto) and to carry out and perform its obligations
under the terms of this Second Amendment; (ii) all action on the part of the
Operator necessary for the performance of the Operator's obligations under the
Second Amendment has been taken; (iii) this Second Amendment is a valid and
binding obligation of the Operator, enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and the availability or lack of availability of specific
performance and other equitable remedies; and (iv) the execution, delivery and
performance by the Operator of this Second Amendment and all other documents
contemplated hereby, the fulfillment of and compliance with the respective terms
and provisions hereof and thereof, and the consummation by the Operator of the
transactions contemplated hereby and thereby (including without limitation items
7, 8, 9 and 10 on Schedule B hereto), do not and will not: (A) conflict with, or
violate any provision of, any law having applicability to the Operator or any of
its assets, or any provision of the charter or bylaws of the Operator; (B)
conflict with, or result in any breach of, or constitute a default under any
agreement to which the Operator is a party or by which it or any of its assets
may be bound; or (C) result in or require the creation or imposition of or
result in the acceleration of any indebtedness, or of any encumbrance of any
nature upon, or with respect to, the Operator or any of the assets now owned or
hereafter acquired by the Operator.
3. Effect of this Second Amendment. This Second Amendment shall amend
the Original Agreement, as amended by the First Amendment, solely with respect
to the matters addressed herein. All other terms and provisions of the Original
Agreement, as amended by the First Amendment, will remain in full force and
effect. Notwithstanding any term or condition of this Second Amendment to the
contrary, this Second Amendment will not affect or alter the Term (as defined in
the Original Agreement). If either party terminates this Second Amendment due to
breach of the other party or otherwise, the Original Agreement, as amended by
the First Amendment, shall be reinstated in full.
(The remainder of this page is intentionally left blank.)
4
<PAGE> 5
IN WITNESS WHEREOF, PNV and the Operator have caused this Second
Amendment to be executed pursuant to appropriate legal authority duly given, as
of the day and year first above written.
PILOT CORPORATION PARK `N VIEW, INC.
By: /s/ Mark A. Hazelwood By: /s/ Steve Conkling
---------------------------- ----------------------------
Name: Mark A. Hazelwood Steve Conkling, President
Title: Executive Vice President
5
<PAGE> 6
SCHEDULE A
Schedule A to Second Amendment to Cable Television and Telephone
Services Agreement, dated as of June 7, 1999.
Product and/or Service
to be Provided by the Operator Applicable Payment by PNV
------------------------------ -------------------------
1. Retail sale of the Monthly Membership Quota *
(as defined below) of PNV memberships at
each Truckstop, which the Operator will
offer at each Truckstop, including, without
limitation, Truckstops at which the System
has not been installed.
* For the purposes of this Schedule A, the term "Monthly Membership
Quota" with respect to each Truckstop at which the System has been
installed will equal: (i) the number of days in the applicable calendar
month, multiplied by (ii) five (5). If the Operator fails to sell a
number of PNV memberships greater than or equal to the Monthly
Membership Quota at any Truckstop at which the System has been
installed during any calendar month during the twelve (12) month period
beginning August 1st, the Incentive Amount PNV will pay to the Operator
pursuant to the terms and conditions of Section 1(a) of the Second
Amendment will be reduced as follows:
Incentive Amount to Be Paid
by PNV for Each Truckstop
at which the System is
Percentage of Monthly Membership Quota Sold Installed on August 1st
------------------------------------------- -----------------------
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
2. Pursuant to the current incentive program set forth on this Schedule A,
PNV shall sell starter kits to Operator at $5.00 per unit. Operator's
employees shall resell such starter kits to customers in connection
with the sale of PNV memberships.
6
<PAGE> 7
SCHEDULE B
Schedule B to Second Amendment to Cable Television and Telephone
Services Agreement, dated as of June 7, 1999.
Product and/or Service to be Provided by the Operator
1. Maintenance of each parking lot and face plates at the Truckstops for
proper operation of the System as per the specification set forth on
Schedule C hereto.
2. Placement of appendages and/or snipes advertising PNV and/or the
Services on all Operator billboards, at PNV's cost. PNV will provide
artwork for repaint cycles.
3. Premium placement of end caps, vending machines, point of sale
equipment, and other equipment used in connection with the retail sale
and promotion of the Services at each Truckstop.
4. References to PNV and/or the Services on entrance signs at each
Truckstop.
5. Premium placement of at least one (1) poster advertising PNV and/or the
Services in or around phone rooms at each Truckstop (not to exceed 46'
x 60'); PNV will send to each Truckstop no more frequently than monthly
the poster(s) to be placed by the Operator.
6. PNV will have the exclusive right to (i) all phone frames in and around
the PIADs; and (ii) one side of each Pilot dual frame located at red
courtesy phones.
7. Retail sale of PNV pre-paid phone cards on a nonexclusive basis at each
Truckstop where the System has been installed upon
Transcommunications', Pilot's exclusive provider of prepaid phone
cards, approval.
8. At PNV's option, connection of the AT&T phones to the PNV switch and
T-1 at any Truckstop to which current contracts between the Operator
and AT&T apply.
9. All action necessary for PNV to serve as a nonexclusive provider of
long-distance telephone service to fleet customers of the Operator.
10. Exclusive rights to place PIADs in all Truckstops, which PIADs will be
placed in a prominent location at each Truckstop; provided that PNV
will not have the exclusive right to place PIADs at up to thirty-five
(35) Truckstops that currently have valid contracts with US
Communications for Pay Net Kiosks; further provided, however, that the
Operator will not extend or renew any such contracts with US
Communications or any other internet kiosk provider.
7
<PAGE> 8
SCHEDULE C
Maintenance Specifications
Schedule C to Second Amendment to Cable Television and Telephone
Services Agreement, dated as of June 7, 1999.
1. Sweep Parking Lot
All parking lots will be swept at least four (4) times per
month on regular intervals (such as the 5th, 10th, 20th and
25th of each month,
2. Conduct Routine Maintenance.
Routine maintenance shall consist of no less frequently than
once a week (i) checking the face plates on bollards (and
changing them when there is no dial tone or picture, or if
they are damaged or missing), and (ii) cleaning of the area
around the bollard to remove grit and garbage.
3. Observe all TV's on premises and make sure tape player in on.
On a daily basis (i) make sure all TV's are turned on
(especially after a power outage); (ii) make sure the tape
player has a current tape in and that it is on tape loop play
mode; and (iii) report any TV's that are not operating to PNV
for exchange.
4. Keep the equipment area clear of all materials and accessible at all
times.
The Equipment Area (as defined in the original agreement) must
be kept clear of all materials and boxes; the air conditioner
must be on and running; and PNV must have a clear path to its
equipment in the Equipment Area at all times.
5. Parking lot management when removing snow around the bollards.
During the winter months for those sites affected by snow, the
maintenance personnel will direct snow removal equipment
around the bollards. The maintenance personnel will clear any
snow left around the bollards once the lot has been cleared.
8
<PAGE> 1
EXHIBIT 10.48
[*] - Confidential Treatment Requested Pursuant to Rule 406.
PRE-PAID PHONE CARD AGREEMENT
THIS PRE-PAID PHONE CARD AGREEMENT (this "Agreement") is entered into
this 16th day of July, 1999, effective as of April 1, 1999 by and between
PNV.Net, Inc. (formerly known as Park 'N View, Inc.), a Delaware corporation
("PNV"), with its headquarters at 11711 NW 39th Street, Coral Springs, Florida
33065 and Transcommunications Incorporated, a Tennessee corporation ("TI"), with
its headquarters at 5751 Uptain Road, Suite 200, Chattanooga, TN 37411.
WHEREAS, PNV has designed and developed the concept and equipment to
provide various telecommunications services at truckstops (the "System"), with
which PNV has (or from time to time will have) entered into contracts (singly, a
"Truckstop" or collectively, the "Truckstops"), including, among other things,
pre-paid phone cards (the "Telecards") and desires to engage TI to provide
various services with respect to the Telecards using TI's pre-paid phone card
platform;
WHEREAS, PNV shall install pre-paid phone card vending machines at
locations throughout the United States (such machines individually being
referred to as a "Telecard Machine" or collectively, the "Telecard Machines");
and
WHEREAS, TI shall provide certain services relating to the Telecard
machines to be installed and the Telecards to be issued at certain Truckstops.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, TI and PNV (hereinafter collectively being referred to as the
"Parties" and individually as a "Party"), intending to be legally bound, hereby
mutually agree as follows:
1. Purpose. The Parties hereby agree that PNV shall enter into
contracts with the owners of Truckstops from time to time and that TI shall,
subject to the terms and conditions of this Agreement, provide the services
specified in this Agreement (the "TI Services").
2. Matters Related to Telecard Machines. PNV shall, at its sole cost
and expense, purchase and install one or more Telecard Machines at each
Truckstop, and shall continually ensure each such Telecard Machine is
functioning, has an adequate number of Telecards available for dispensing, and
has excess cash removed. The Telecard Machines shall remain the sole property of
PNV. Except as otherwise provided herein, PNV shall pay all property taxes or
other fees related to ownership of the Telecard Machines. The Parties
acknowledge that the contracts with Truckstop owners and certain aspects of the
System, the Telecard Machines, the TI Services, and the manner of their
respective operation and installation are proprietary to PNV and/or TI.
Accordingly, PNV and TI shall use their best efforts to ensure that the terms of
the contracts with Truckstop owners and all material confidential information
and data concerning the System, the Telecard Machines, and the TI Services shall
not be divulged. The Parties agree that the
<PAGE> 2
obligations imposed under this Section 2 shall apply to all confidential
information, except where such confidential information: (a) is or becomes
public knowledge or publicly available to TI or PNV through no fault of TI or
PNV; (b) is learned by TI or PNV from a third party entitled to disclose it; (c)
was already known to TI or PNV as evidenced by prior written records; (d) is
shown by TI or PNV to have been independently developed by TI or PNV as
evidenced by written records; or (e) is or becomes publicly available as a
result of issuance of a patent or publication of a foreign pending patent
application. TI further agrees that the "Park 'N View" and "PNV.Net" names and
logos shall be and remain the property of PNV and all references by TI to the
System or the TI Services shall incorporate and/or refer to PNV by its full name
(PNV.Net), whether in literature, electronic or print displays, articles,
advertising, billboards, banners or otherwise. The names "Park 'N View" and
"PNV.Net" are, or shall be, a registered service mark of PNV and to the extent
required by PNV, TI shall execute a no-cost limited license agreement for the
use of such service marks.
3. Services to Be Provided by TI; Related Matters.
(a) TI Services.
(i) TI shall maintain and administer the network and
systems necessary to provide, account for, and manage the long distance phone
time usage in connection with the Telecards issued from time to time through the
Telecard Machines, including, without limitation, (A) all services necessary for
the activation of the Telecards purchased from Telecard Machines from time to
time, (B) the call center for the 800 numbers (all such 800 numbers shall be
obtained by TI and shall remain the sole property of PNV during the Term (as
defined in Section 5) and at all times thereafter) to be used by holders of
Telecards to use the long distance phone minutes on such Telecards, which
support shall be available 24 hours a day, 7 days a week, (C) the tracking,
monitoring and recording of long distance phone time used in connection with the
Telecards issued from time to time through the Telecard Machines, and (D) all
services necessary for the recharge of Telecards by telephone and through
recharge coupons purchased using the Telecard Machines.
(ii) The telecommunications platform provided by TI
in connection with the Telecards shall include information services and customer
support services (accessible via telephone) at least equivalent to such
information services and customer support services provided by TI in connection
with other pre-paid phone cards issued by TI from time to time, which shall
include voice mail services, information services, enhanced services (i.e.
conference calling, etc.), and recharge services.
(iii) TI shall create, administer, and manage the
personal identification and access numbers associated with the Telecards issued.
(iv) TI shall track the usage of the Telecards and
shall provide PNV with a monthly summary statement including such information as
PNV may reasonably request from time to time, but that shall in any event
contain detailed information regarding billable usage, estimated tax liability,
and payphone surcharges assessed. Such summary statement shall be
2
<PAGE> 3
delivered to PNV with the weekly invoice to be delivered to PNV on or before the
tenth (10th) day following the end of any calendar month.
(b) Related Matters.
(i) TI shall use its best efforts to assist PNV to
establish a relationship with Atlantax, a tax consultant based in Atlanta,
Georgia, that will assist PNV with the payment procedures and the reporting of
taxes.
(ii) PNV shall purchase, at PNV's sole expense, the
Telecards reasonably necessary for use in connection with the Telecard Machines
and the System. TI shall use its best efforts to assist PNV to establish a
relationship with vendors of the plastic card stock and the printing companies
with which TI has an existing relationship. TI shall supply the appropriate
printing company(ies) with the necessary access and control numbers to be
printed on the Telecards. PNV shall be listed as the telephone service provider
on the back of each Telecard. PNV shall cause the vendor of the Telecards to
deliver the Telecards to TI's premises. PNV assumes (as between PNV and TI only)
all risks and responsibilities of loss, theft, destruction, or damage to any
Telecards from every cause and nature whatsoever, while such Telecards are in
transit to or from TI. TI shall, at its sole expense, keep accurate daily
records of all Telecards delivered pursuant to this Agreement, including,
without limitation, the date the Telecards were delivered to and removed from
TI's premises. TI shall hold and care for the Telecards as the property of PNV,
it being expressly agreed that title to the Telecards shall remain with PNV at
all times. TI shall keep the Telecards free of any lien, security interest, or
encumbrance of any kind by any person or entity claiming by or through TI and
shall cause such Telecards to be appropriately marked or otherwise identified as
the property of PNV at all times while such Telecards are held at TI's premises.
Upon receipt of the Telecards, TI shall segregate and store the Telecards. Upon
receiving a request for Telecards from PNV's field staff, TI shall ship the
requested Telecards to the requested location, at PNV's expense, within
twenty-four (24) hours of receipt of such request. TI shall maintain and
administer the system by which, upon placement of the Telecards in the Telecard
Machines, PNV or its representatives shall call TI at the 800 number to be
provided by TI and TI shall then cause the activation of such Telecards.
(iii) TI shall deduct from a Telecard balance, and
shall advise PNV of any federal, state, or local taxes (including, without
limitation, excise taxes) and universal service charges incurred in connection
with the telephone time used. PNV, or its agents, shall be responsible for
payment of any and all federal, state, or local time (including without
limitation, excise taxes) and universal service charges. In addition, PNV or its
designee shall be responsible for payment of any sales taxes which may be due on
the sale of Telecards at any particular Truckstop.
4. Financial Terms.
(a) PNV shall establish and maintain a credit card merchant
identification number and use a third party credit card processing entity
selected by TI (with the consent of PNV). TI shall credit such merchant
identification number when Telecards are recharged using Visa, MasterCard,
American Express, and/or NOVUS cards. PNV shall pay TI a credit card
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<PAGE> 4
processing fee of [*] for each recharge that uses TI's customer service (which
processing fee shall be reevaluated by the Parties ninety (90) days after the
date of this Agreement). In addition, PNV shall reimburse TI for any costs
associated with the processing of credit card transactions that may be assessed
by the credit card associations or any of their agents. TI shall invoice PNV
weekly and payment is due thirty (30) days from the invoice date.
(b) Except for calls which (i) originate from a truckstop at
which PNV has installed its switch; and (ii) are covered under either options 1,
2 or 3 set forth in Section 4(g), PNV shall pay TI for each completed telephone
call made using a Telecard, at the rate of [*] per minute rounded to [*] second
increments with a [*] second minimum. If, at any time during the term of this
Agreement, [*], then the rates charged to PNV pursuant to this Agreement shall
be [*] (for example, if the [*] by [*] from to [*], then the rates charged to
PNV pursuant to this Agreement also would be [*], or to [*] per minute). TI
shall invoice PNV weekly and payment is due thirty (30) days from the invoice
date.
(c) PNV shall reimburse TI [*] (or such amount as may be paid
from time to time) for each long distance call made with a Telecard pursuant to
which TI makes a payment for dial-around compensation ("DAC"). TI shall deduct
from the Telecards [*] (or such other amount requested by PNV) for each
telephone call subject to DAC. TI shall invoice PNV weekly and payment is due
thirty (30) days from the invoice date.
(d) In consideration for (i) the creation, administration, and
management of the personal identification and access numbers associated with the
Telecards, (ii) the reporting, management, and delivery of Telecard inventory,
and (iii) the reporting of Telecard activation and usage, PNV shall pay to TI a
monthly fee of [*]. TI shall invoice PNV at the end of each month and payment is
due twenty (20) days from the invoice date.
(e) The rates and charges provided in this Section 4 may be
changed from time to time by letter agreement signed by both TI and PNV.
(f) Subject to Section 11 of this Agreement, delay in payment
shall be grounds for termination of this Agreement.
(g) With respect to all calls made under pre-paid phone cards
issued by PNV, PNV and TI shall make a reasonable commercial effort to develop,
using one or a combination of the options listed below, a method whereby holders
of Telecards can make direct dial calls over PNV's switch at Truckstops at which
the System has been installed. PNV agrees and warrants that such a method shall
have the same level of quality as provided to users of pre-paid phone cards
issued by TI. The Parties acknowledge that the options and amounts payable to TI
under each option shall be as follows:
(i) Option #1 - ("Call Redirect"). For prepaid
traffic originating from a site that PNV has installed a switch, the local PNV
switch will send to TI's debit platform in Chattanooga, Tennessee, either
through the public network or a Frame relay circuit routed through PNV's hub in
Coral Springs, Florida, an inquiry to verify the PIN and the outstanding
balance, and then shall provide TI's debit platform the originating/destination
numbers. The call
4
<PAGE> 5
will be placed by PNV's switch using PNV's carrier. Upon completion of a valid
telephone call, the PNV switch shall close the call by informing the TI debit
platform the number of minutes to deduct from the PIN balance. This will create
a "one-legged call" using PNV's carrier. PNV will pay TI [*] per minute for all
calls handled under this Option #1.
(ii) Option #2 - ("Redirect with Remote Platform
Location"). TI will install a voice recognition unit/switch ("VRU") at PNV's hub
in Coral Springs, Florida, that can be remotely accessed by TI. For prepaid
traffic originating from a site that PNV has installed a switch, the local PNV
switch will send an inquiry to TI's debit platform to verify the PIN and the
outstanding balance, and then send the originating/destination numbers, via
frame relay circuit, to TI's debit platform. The telephone call will be placed
by the VRU using TI's carrier. This will create a "one-legged call" using TI's
carrier. PNV will pay TI [*] per minute for all calls handled under this Option
#2.
(iii) Option #3 - ("Private Switched Network"). For
prepaid traffic originating from a site that PNV has installed a switch, the PNV
switch will send an inquiry to TI's debit platform at PNV's hub in Coral
Springs, Florida to verify the PIN and the outstanding balance, and then send
the originating/destination numbers, via frame relay circuit to TI's debit
platform. The telephone call will be sent via a frame relay circuit to a
switching site local to the destination phone number being requested. Upon
completion of a valid telephone call, the PNV switch shall close the call by
informing the TI debit platform the number of minutes to deduct from the PIN
balance. The call will be "local" and thus avoid any carrier transport charges.
PNV will pay TI [*] per minute for all calls under this Option #3.
(h) With respect to all calls made under prepaid phone cards
issued by TI that TI elects to route over the System, if (a) TI uses Option #2
above, TI will pay PNV an amount equal to the sum of: (i) the number of minutes
used, multiplied by the sum of (ii)(A) [*] less (B) [*] per minute; or (b) if TI
uses Option #3 above, TI will pay PNV an amount equal to the sum of: (i) the
number of minutes used, multiplied by the sum of (ii) (A) [*] plus (B) [*] less
(C) [*] per minute.
(i) TI shall permit PNV to repurchase from TI long distance
service at a rate equal to [*], plus [*] per minute.
5. Term. Subject to Section 11, the term of this Agreement, shall be
for a period of for (4) years commencing on April 1, 1999 and terminating on
March 30, 2003 (the "Term"); provided, however, either Party may terminate this
Agreement upon six (6) months prior written notice to the other Party.
Notwithstanding the foregoing: (i) prior to termination of this Agreement, TI
agrees to provide PNV with all PIN numbers and account balance data for all
active prepaid phone cards issued by PNV (all such PIN numbers and account
balance data shall remain the sole property of PNV during the Term and at all
times thereafter); and (ii) upon termination of this Agreement TI agrees, at the
request of PNV, to continue, for a period of up to 12 months, to service any and
all active prepaid phone cards issued by PNV which are outstanding on the date
of termination of this Agreement in return for payment of the amounts set forth
in Section 4(g).
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<PAGE> 6
6. Representations and Warranties of PNV.
(a) PNV is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has full power and
authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery, and performance of this Agreement
by PNV has been duly authorized by all necessary action of PNV. This Agreement
and each of the other documents to be executed and delivered by PNV pursuant to
this Agreement have been duly executed and delivered by PNV and are the valid
and binding obligations of PNV enforceable in accordance with their respective
terms, subject only as to enforceability affected by bankruptcy, insolvency, or
similar laws affecting the rights of creditors generally and by general
equitable principles. The execution, delivery, and performance of this Agreement
and the other documents to be executed, delivered, and performed by PNV pursuant
to this Agreement shall not: (i) conflict with or violate any provision of PNV's
organizational documents, or any law, ordinance, or regulation or any decree or
order of any court or administrative or other governmental body that is either
applicable to, binding upon or enforceable against PNV; or (ii) result in any
breach of or default under or cause the acceleration of performance of any
mortgage, contract, agreement, indenture, or other instrument which is either
binding upon or enforceable against PNV.
(c) PNV shall obtain the approval, consent, or waiver of any
other person or entity required for the execution, delivery, or performance of
this Agreement.
(d) All of the information contained in the representations
and warranties of PNV set forth in this Agreement or in any of the documents
delivered or to be delivered herewith or after the execution hereof as set forth
in any provision of this Agreement is true, accurate, and complete.
7. Representations and Warranties of TI.
(a) TI is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Tennessee and has full power and
authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery, and performance of this Agreement
by TI has been duly authorized by all necessary action of TI. This Agreement and
each of the other documents to be executed and delivered by TI pursuant to this
Agreement have been duly executed and delivered by TI and are the valid and
binding obligations of TI enforceable in accordance with their respective terms,
subject only as to enforceability affected by bankruptcy, insolvency, or similar
laws affecting the rights of creditors generally and by general equitable
principles. The execution, delivery, and performance of this Agreement and the
other documents to be executed, delivered, and performed by TI pursuant to this
Agreement shall not: (i) conflict with or violate any provision of TI's
organizational documents, or any law, ordinance, or regulation or any decree
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<PAGE> 7
or order of any court or administrative or other governmental body which is
either applicable to, binding upon or enforceable against TI; or (ii) result in
any breach of or default under or cause the acceleration of performance of any
mortgage, contract, agreement, indenture, or other instrument which is either
binding upon or enforceable against TI.
(c) TI shall obtain the approval, consent, or waiver of any
other person or entity required for the execution, delivery, or performance of
this Agreement.
(d) All of the information contained in the representations
and warranties of TI set forth in this Agreement or in any of the documents
delivered or to be delivered herewith or after the execution hereof as set forth
in any provision of this Agreement is true, accurate, and complete.
8. Insurance. TI will maintain during the Term of this Agreement (or
any renewal term), at its sole cost and expense, comprehensive business
interruption insurance in the minimum amount of $1,000,000 and will ensure that
PNV is named as an additional insured in respect of such insurance or is
otherwise covered as its interest may appear. TI will provide PNV with evidence
of insurance and thirty (30) days prior written notice of cancellation or
amendment to TI's insurance policies. In no event shall TI be liable to PNV for
damages other than those directly related to failure to provide the TI Services
set forth herein or pay to PNV amounts due hereunder.
9. Force Majeure. Neither Party shall have any liability for the
failure to perform or a delay in performing any of its obligations if such
failure or delay is the result of any legal restriction, labor dispute, strike,
boycott, flood, fire, public emergency, revolution, insurrection, riot, war,
unavoidable mechanical failure, interruption in the supply of electrical power,
or any other cause, not resulting from mechanical or system failures, beyond the
control of any Party acting in a reasonable business-like manner, whether
similar or dissimilar to the causes enumerated above ("Force Majeure
Conditions"). If any Force Majeure Condition occurs, the affected Party shall
give immediate notice to the other Party, and, if the Force Majeure Condition
continues for ninety (90) days, such other Party may elect, at its sole option,
to terminate this Agreement.
10. Assignment. TI shall have the right to transfer or assign its
rights and duties hereunder (i) to an acquirer of all or substantially all of
the assets or capital stock of TI, (ii) to an affiliate or subsidiary of TI, or
(iii) otherwise as agreed in writing by PNV, which approval shall not be
unreasonably withheld. PNV shall have the right to transfer or assign its rights
and duties hereunder (i) to an acquirer of all or substantially all of the
assets or capital stock of PNV, (ii) to an affiliate or subsidiary of PNV, or
(iii) otherwise as agreed in writing by TI, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, either Party shall have
the absolute right to withhold consent to any proposed assignment or transfer by
the assigning Party to a competitor of the nonassigning Party (or to a
competitor of a customer of the nonassigning Party).
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11. Breach.
(a) In the event that either Party fails in any material
respect to perform any obligation under this Agreement, the other Party may in
writing notify the non-performing Party that such failure constitutes a breach.
If the breach is not remedied or cured within thirty (30) days following receipt
of the notice of breach, without limiting any other remedy which may be
available, the non-breaching Party may terminate this Agreement by notice to the
breaching Party.
(b) TI shall be in breach under this Agreement if: (i)
proceedings in bankruptcy, or for reorganization of TI under the Bankruptcy
Code, as amended, or under any other laws, whether state or federal, for the
relief of insolvent debtors, now or hereafter existing, commences against TI and
is not discharged within sixty (60) days of its commencement; (ii) a receiver,
custodian, or trustee under the Bankruptcy Code is appointed for TI or for any
substantial part of its assets, or any proceedings are instituted for the
dissolution or the full or partial liquidation of TI, and such receiver,
custodian, or trustee is not discharged within ninety (90) days of his or her
appointment, or such proceedings is not discharged within ninety (90) days of
its commencement; or (iii) TI discontinues business or materially changes the
nature of its business.
12. General Provisions.
(a) Notices. All notices required or permitted hereunder shall
be in writing and, may either be delivered by overnight courier or transmitted
by facsimile, as follows:
To PNV: Steve Conkling
President
PNV.Net, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Fax Number: (954) 745-7899
With a copy to: James M. O'Connell, Esq.
Kilpatrick Stockton LLP
4101 Lake Boone Trail,
Suite 400
Raleigh, North Carolina 27607
Fax Number: (919) 420-1800
To TI: James Coppinger
Chief Executive Officer
Transcommunications Incorporated
5751 Uptain Road, Suite 200
Chattanooga, Tennessee 37411
Fax Number: (423) 954-9973
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With a copy to: Michael O. Dunn, Esq.
Scudder Law Firm, P.C.
411 S. 13th Street, Suite 200
Lincoln, Nebraska 68508
Fax Number: (402) 435-4333
All notices shall be deemed delivered only upon actual receipt. Any Party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to the terms of this Section 12(a).
(b) Expenses. Each Party agrees to pay, without right of
reimbursement from any other Party, its costs relating to the preparation of
this Agreement and the performance of its obligations hereunder, including
without limitation, fees and disbursements of counsel, accountants, and
consultants employed by such Party in connection herewith.
(c) Books, Records and Payments. The books and records of any
calendar month of TI and PNV related to the subject matter of this Agreement
shall be open for inspection and audit during normal hours by a third party
representative of either TI or PNV upon five (5) business days notice to said
Party.
(d) Actions; Further Assurances. Subject to the terms and
conditions of this Agreement, each Party agrees to: (i) take or cause to be
taken as promptly as practicable all actions and obligations arising herein; and
(ii) do or cause to be done all things to fulfill and comply with its
obligations to consummate the transactions contemplated herein.
(e) Press Releases. PNV and TI shall consult with each other
as to the form and content of all press releases and other public disclosures of
matters relating to this Agreement, the System, the Telecard Machines, and the
TI Services. Nothing in this section shall prohibit PNV or TI from making any
disclosure which its legal counsel deems necessary or advisable to fulfill such
Party's disclosure obligations under applicable law. All public disclosures
shall be transmitted by facsimile to the other Party or its counsel as provided
in Section 12(a) for approval prior to publication or dissemination.
(f) Section Headings. The section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
(g) Applicable Law. This Agreement shall be governed by the
laws of the State of Florida.
(h) Modification. This Agreement shall not be modified or
amended except by an instrument in writing executed by the Parties to this
Agreement.
(i) Successors And Assigns. This Agreement shall apply to, and
be binding upon, the parties and their respective successors and permitted
assigns (as determined under Section 10).
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<PAGE> 10
(j) Severability. If any part or sub-part of this Agreement is
found or held to be invalid, the Parties shall mutually agree to such changes as
are reasonably necessary such that the part or sub-part of this Agreement found
or held to be invalid is valid; provided, however, that if any such reasonably
necessary changes do not permit a Party to perform its obligations pursuant to
this Agreement such that such Party's revenues and/or expenses are reasonably
consistent with anticipated revenues and/or expenses, then such Party may
terminate this Agreement.
(k) Arbitration. Any controversy, dispute, or question arising
out of, or in connection with, or in relation to this Agreement or the
interpretation, performance, or non-performance or any breach thereof shall be
determined by arbitration conducted in the city in which the home office of the
Party not bringing the claim is located in accordance with the then existing
rules of the American Arbitration Association. PNV and TI shall each select one
arbitrator, and the two arbitrators shall select a third with the same
qualifications. Any decision rendered shall be binding upon the Parties;
however, the arbitrators shall have no authority to grant any relief that is
inconsistent with this Agreement. The expense of arbitration shall be shared
equally by the Parties.
(l) Integration; Entire Agreement. This Agreement (including
Exhibits, documents, and instruments referenced herein) constitutes the entire
agreement among the Parties and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matters hereof.
(m) Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, TI and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
PNV.Net, INC., a TRANSCOMMUNICATIONS INCORPORATED,
Delaware corporation a Tennessee corporation
By: /s/ Steve Conkling By: /s/ James B. Coppinger
----------------------------- ---------------------------------------
Steve Conkling, President James B. Coppinger, Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.49
FLEET SERVICE AGREEMENT
THIS FLEET SERVICE AGREEMENT (this "Agreement") is entered into as of
August 19, 1999 (the "Effective Date") by and between Park 'N View, Inc.
("PNV"), with its headquarters at 11711 NW 39th Street, Coral Springs, Florida
33065 and US Xpress, with its headquarters at 4080 Jenkins Road, Chattanooga, TN
37421;
WHEREAS, Fleet currently employs or has contracted for the services of
professional truck drivers to operate its fleet of trucks; and
WHEREAS, PNV has designed and developed the concept and equipment to:
(a) enable truck drivers to receive and/or have access to cable television
services and telecommunications services; and (b) provide such truck drivers
programming consisting of video and audio services, and telephone, voice mail,
fax or other data transmission services while remaining in their vehicles parked
at truckstops; (collectively, the "Services"); and
WHEREAS, PNV provides the Services to truck drivers through various
membership programs pursuant to which each member is entitled to use the
Services purchased at each truckstop at which they are provided in return for a
monthly membership fee; and
WHEREAS, Fleet desires to purchase and PNV desires to provide
membership to certain of Fleet's drivers to entitle them to use the Services
described on Exhibit A hereto.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, Fleet and PNV (hereinafter collectively being referred to as
the "Parties"), intending to be legally bound, hereby mutually agree as follows:
1. Purpose. The Parties hereby agree that PNV shall provide and Fleet
shall purchase memberships for certain of Fleet's drivers pursuant to the terms
of this Agreement.
2. Number of Memberships-Drivers. Fleet desires to purchase from PNV
4500 memberships for use by certain of its professional truck drivers for the
Term (as defined in Section 4) of this Agreement. Each member shall be entitled
to use those Services set forth on Exhibit A at each truckstop at which they are
provided. PNV shall provide to Fleet free of charge, for distribution to its
drivers, 4500 PNV starter kits which shall consist of a phone, a 25 foot coaxial
and telephone cable and instructions to allow the members to use the Services
set forth on Exhibit A. Upon execution of this Agreement, Fleet shall provide
PNV with the name and a unique all-numeric number of each such driver to enable
PNV to activate each driver's membership. Fleet shall provide to PNV, on or
before the twenty-fifth (25th) day of each month, the name and unique
all-numeric numbers of all drivers to be included in the following months PNV
membership file and for which Fleet shall purchase a membership. If Fleet does
not provide PNV with an updated list on a timely basis, PNV shall bill
memberships for the following month based upon the most recent list provided by
Fleet. Notwithstanding anything contained herein to
<PAGE> 2
the contrary, the number of memberships to be purchased by Fleet each month
during the Term shall be the greater of : (i) 4500; or (ii) the number of
drivers on the active driver list.
3. Fees.
(a) Fleet agrees to pay to PNV the monthly fee set forth on
Exhibit A attached (plus applicable taxes) for each membership purchased by
Fleet (collectively the "Monthly Fee"). PNV shall invoice Fleet for the Monthly
Fee on the first day of each month for the purchase of memberships for its
drivers for the previous month. Fleet shall pay the Monthly Fee to PNV on or
before the tenth (10th) day of the month. Monthly Fees not paid on or before the
tenth (10th) day of the month shall accrue interest at the rate of 1.5% per
month until paid in full and PNV may terminate the membership of Fleet's drivers
if the Monthly Fee is not received by the last day of the month. If Fleet
desires to terminate the membership of any driver, PNV shall cancel the
membership of the terminated driver upon receipt of the terminated driver's name
and unique all-numeric number. If Fleet desires to provide memberships for
additional drivers effective during the month (as opposed to the first day of
the month), PNV shall, provide additional cards that will provide access to the
system upon receipt of the additional driver's name and unique all-numeric
number.
4. Term. Subject to Section 5, the term of this Agreement shall be for
a period of one (1) year commencing on the Effective Date (the "Term"). Upon
termination of the Agreement for any reason, PNV shall be entitled to retain
without offset or repayment all amounts paid to PNV by Fleet as of the date of
termination.
5. Breach. In the event that either Party shall fail in any material
respect to perform any obligation under this Agreement, the other Party may in
writing notify the non-performing Party that such failure constitutes a breach.
If the breach is not remedied or cured within ten (10) days following receipt of
the notice of breach, without limiting any other remedy which may be available,
the non-breaching Party may terminate this Agreement by notice to the breaching
Party.
6. General Provisions.
(a) Notices. All notices required or permitted hereunder shall
be in writing and, may either be delivered by overnight courier, transmitted by
facsimile, or delivered by the United States Mail, postage prepaid, to the
address for each Party listed above. All notices shall be deemed delivered only
upon actual receipt. Any party may change its address for purposes of this
Agreement by giving notice of such change to the other parties pursuant to the
terms of this Section 6(a).
(b) Miscellaneous. The section headings in this Agreement are
for convenience of reference only and shall not be deemed to alter or affect any
provision hereof. This Agreement shall be governed by the laws of the State of
Florida. This Agreement shall not be modified or amended except by an instrument
in writing executed by the parties to this
2
<PAGE> 3
Agreement. Except as required by law, the Parties agree to keep the terms and
provisions of this Agreement and all information received by either Party
pursuant to this Agreement strictly confidential. This Agreement shall apply to,
and be binding upon, the parties and their respective successors and permitted
assigns. If any part or sub-part of this Agreement is found or held to be
invalid, that invalidity shall not affect the enforceability and binding nature
of any other part of this Agreement. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Fleet and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
PARK 'N VIEW, INC., a
Delaware corporation
By: /s/
-------------------------------
Steve Conkling, President
US Xpress, a
Nevada Corporation
By: /s/
-------------------------------
3
<PAGE> 4
Exhibit A
Fleet Premium Program
MONTHLY FEE: $5 per driver. Drivers are encouraged by Fleet and PNV to add cable
service through payroll deduction at $20 per month.
FLEET FUNDED SERVICES: The $5 basic membership card includes full phone access
with free 800 calls (without DAC charges), local calls, voice mail messaging
(accessible from any phone), incoming calls, wake up call service. Does not
include cable access or any free long distance phone minutes. Internet access is
provided if driver has internet service provider account with a third party. Fax
capability is provided if vehicle has a facsimile machine.
Driver Funded Services: The drivers will have the option to purchase, through a
payroll deduct of $20 per month, premium cable TV and an hour of prepaid long
distance each month.
At the conclusion of the first six months, Fleet may elect to terminate the $5
value and allow the drivers to participate at the level they choose.
The $5 fee will be waived for Fleet during the introductory period comprised of
the first six months.
PNV will pay Fleet an administrative fee of $42,000 within thirty days of the
sale of the Services to Fleet and its drivers to cover costs incurred by Fleet
with respect to such implementation.
<PAGE> 1
EXHIBIT 10.50
[*] - CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 406
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY
NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE COMPANY
OR HOLDER'S COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144.
PNV.NET, INC.
WARRANT
THIS CERTIFIES that, subject to the terms and conditions of this
Warrant, [*] (the "Warrantholder"), for value received, is entitled to subscribe
for and purchase up to Four Thousand (4,000) fully-paid and non-assessable
shares (the "Shares") of the Common Stock (the "Stock"), of PNV.net, Inc., a
Delaware corporation (the "Company"), at the exercise price of Ten Dollars and
Fifty cents ($10.50) per share (the "Initial Exercise Price"), which number of
Shares and Initial Exercise Price will be adjusted pursuant to the provisions of
Section 7 hereof (the "Exercise Price").
1. Term. Except as otherwise provided for herein, the term of this
Warrant and the right to purchase shares as granted herein will be exercisable,
at any time and from time to time, during the period commencing on August 30,
1999 (the "Warrant Grant Date") and terminating at 5:00 p.m. on the fifth
anniversary of the Warrant Grant Date (the "Termination Date"), unless earlier
terminated pursuant to Section 2(c) of this Warrant.
2. Exercise of Purchase Rights.
(a) Exercise. The purchase rights represented by this Warrant
are exercisable by the Warrantholder, in whole or in part, at any time, or from
time to time during the period set forth in Section 1 above, by tendering the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit A (the "Notice of Exercise"), duly completed and executed. Upon
receipt of the Notice of Exercise and the payment of the Exercise Price in
accordance with the terms set forth below, the Company will issue to the
Warrantholder a certificate for the number of shares of Stock of the Company
purchased and will execute the Notice of Exercise indicating the number of
shares of Stock which remain subject to future purchases, if any. The person or
persons in whose name(s) any certificate(s) representing shares of Stock will be
issued upon exercise of this Warrant will be deemed to have become the holder(s)
of, the Shares represented thereby (and such shares will be deemed to have been
issued) immediately prior to the close of business on the date or dates upon
which this Warrant is exercised. In the event of any exercise of the rights
represented by this Warrant, certificates for the Shares so purchased will be
delivered to the Warrantholder or its designee as soon as practical and in any
event within thirty (30) days after receipt of such notice
<PAGE> 2
and, unless this Warrant has been fully exercised or expired, a new Warrant
representing the remaining portion of the Shares, if any, with respect to which
this Warrant will not then have been exercised will also be issued to the
Warrantholder as soon as possible and in any event within such thirty (30) day
period.
(b) Method of Exercise. The purchase rights hereby represented
may be exercised, at the election of the Warrantholder, by the tender of the
Notice of Election and the surrender of this Warrant at the principal office of
the Company and by the payment to the Company, by check, cancellation of
indebtedness or other form of payment acceptable to the Company, of an amount
equal to the then applicable Exercise Price per share multiplied by the number
of Shares then being purchased.
(c) Termination in the Event of Initial Public Offering.
Notwithstanding any other term or provision of this Warrant, this Warrant will
terminate immediately upon the effectiveness of a registration statement under
the Securities Act of 1933, as amended, and sale of the Company's Stock in a
firm commitment underwritten public offering. The Company will give written
notice thereof to the Warrantholder stating the date on which such event is to
take place (which will be at least ten (10) days after the giving of such
notice). The Warrantholder may condition exercise of this Warrant upon the
Securities and Exchange Commission declaring the registration statement
effective.
3. Reservation of Shares.
(a) Authorization and Reservation of Shares. The Company will
at all times have authorized and reserved a sufficient number of Shares to
provide for the exercise of the rights to purchase Stock as provided herein.
(b) Registration or Listing. If any shares of Stock required
to be reserved for purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or State law
(other than any registration under the Securities Act of 1933, as then in
effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer), or listing on any domestic securities
exchange, or if at the time of exercise the class of Stock into which this
Warrant is then exercisable is listed on any domestic securities exchange, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
4. No Fractional Shares. No fractional shares or scrip representing
fractional shares will be issued upon the exercise of the Warrantholder's rights
to purchase Stock, but in lieu of such fractional shares the Company will make a
cash payment therefor upon the basis of the fair market value of a share of that
stock at the time of Exercise.
2
<PAGE> 3
5. No Rights as Shareholder. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a shareholder of the
Company prior to the exercise of the Warrantholder's rights to purchase Stock as
provided for herein.
6. Warrantholder Registry. The Company will maintain a registry showing
the name and address of the registered holder of this Warrant.
7. Adjustment Rights. The Exercise Price and the number of Shares of
Stock purchasable hereunder are subject to adjustment from time to time, as
follows:
(a) Reclassification or Merger. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant into the same or a different number of securities of
any other class or classes, or in case of any merger of the Company with or into
another corporation (other than a merger with another corporation in which the
Company is the acquiring and the surviving corporation and which does not result
in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), or in case of any sale of all or substantially all of
the assets of the Company, the Company, or such successor or purchasing
corporation, as the case may be, will duly execute and deliver to the holder of
this Warrant, so that the holder of this Warrant will have the right to receive,
at a total purchase price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the Shares of Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of Shares of Stock
then purchasable under this Warrant. Such new Warrant will provide for
adjustment that will be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The provisions of this subparagraph
(a) will similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Subdivision or Combination of Shares. If the Company at
any time will subdivide its Stock, the Exercise Price will be proportionately
decreased and the number of Shares issuable pursuant to this Warrant will be
proportionately increased. If the Company at any time will combine its Stock,
the Exercise Price will be proportionately increased and the number of Shares
issuable pursuant to this Warrant will be proportionately decreased.
(c) Stock Dividends. If the Company at any time will pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of Stock,
then the Exercise Price will be adjusted, from and after the date of
determination of stockholders entitled to receive such dividend or distribution
of stockholders to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which will be the total number of shares of Stock outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which will be the total number of shares of Stock outstanding immediately after
such dividend or distribution. The Warrantholder will thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
Shares of Stock (calculated to the nearest whole share) obtained by multiplying
(i) the Exercise Price in effect immediately prior to such adjustment
3
<PAGE> 4
by (ii) the number of Shares of Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(d) Reserved Shares Adjustment. The number of shares reserved
for issuance pursuant to this Warrant will automatically be adjusted without
further action by the Company in the event of any adjustment of the number of
Shares issuable pursuant to this Warrant.
8. Compliance with Securities Act; Disposition of Warrant or Shares of
Stock.
(a) Compliance with Securities Act. The Warrantholder, by
acceptance hereof, agrees that this Warrant, and the Shares of Stock to be
issued upon exercise hereof, are being acquired for investment and that such
Warrantholder will not offer, sell or otherwise dispose of this Warrant, or any
Shares of Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "Securities Act"), or any applicable state securities laws. At the time of
exercise, the Warrantholder will execute an Investment Letter in the form
attached hereto as Exhibit B stating (among other things) that the shares issued
pursuant to the Warrant have not been registered under federal or state
securities laws, and that such shares may not be transferred unless the shares
are so registered or unless the Company has received an opinion of the Company's
counsel or such holder's counsel reasonably acceptable to the Company that such
transfers are exempt from registration.
(b) This Warrant and all shares of Stock issued upon exercise
of this Warrant (unless registered under the Securities Act and any applicable
state securities laws) will be stamped or imprinted with a legend in
substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO UNDER SAID ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144."
(c) Representations and Warranties of Warrantholder. In
addition, in connection with the issuance of this Warrant, the Warrantholder
specifically represents to the Company by acceptance of this Warrant as follows:
(i) The Warrantholder is aware of the Company's
business affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The Warrantholder is acquiring this Warrant for its own account
for investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof in violation of the Securities Act.
4
<PAGE> 5
(ii) The Warrantholder understands that this Warrant
has not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of the Warrantholder's investment intent as expressed herein.
(iii) The Warrantholder further understands that this
Warrant and any shares of Stock to be issued upon exercise hereof must be held
indefinitely unless subsequently registered under the Securities Act and
qualified under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available.
(d) Disposition of Warrant or Shares. Subject to the terms and
conditions of Section 8(e), with respect to any offer, sale or other disposition
of this Warrant or any Shares of Stock acquired pursuant to the exercise of this
Warrant prior to registration of such Warrant or Shares, the holder agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with an opinion of the Company's counsel or such holder's
counsel reasonably satisfactory to the Company, or other evidence, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the
Securities Act as then in effect or any federal or state securities law then in
effect) of this Warrant or such shares of Stock and indicating whether or not
under the Securities Act certificates for this Warrant or such shares of Stock
to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Promptly upon receiving such written notice and reasonably
satisfactory opinion or other evidence, if so requested, the Company, as
promptly as practicable but no later than five (5) days after receipt of the
written notice, will notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Stock, all in accordance with the
terms of the notice delivered to the Company. Notwithstanding the foregoing,
this Warrant or such shares of Stock may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 or 144A under the
Securities act, provided that the Company will have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Stock thus transferred
(except a transfer pursuant to Rule 144 or 144A) will bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the Company or the
Warrantholder or pursuant to Rule 144 or 144A, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instruction to its transfer agent in connection with such restrictions.
Notwithstanding the foregoing, (i) until a public market develops for the
securities of the Company, neither the Warrantholder nor any subsequent
transferee may transfer the Warrant or any Warrant Shares to any competitor of
the Company; and (ii) any transferee of the Warrantholder and any subsequent
transferee will expressly agree in writing with the Company to be bound by and
to comply with all applicable provisions of this Warrant.
(e) If in connection with the initial public offering of
shares of Common Stock of the Company registered pursuant to the Securities Act,
the managing underwriter for such
5
<PAGE> 6
registration will so request, the Warrantholder will not sell, make any short
sale of, grant any option for the purchase of, or otherwise dispose of any
Warrant Shares (other than those shares of Common Stock included in such
registration) without the prior written consent of the Company for a period
designated by the Company in writing to the Warrantholder, which period will
begin not more than ten (10) days prior to the effectiveness of the registration
statement pursuant to which such public offering will be made and will not last
more than one hundred eighty (180) days (or such other period as the officers
and directors of the Company and holders of greater than ten percent (10%) of
all securities registered pursuant to the registration statement mutually agree)
after the effective date of such registration statement. The holders hereby
agree to execute such form of agreement evidencing this obligation as any
underwriter requests.
(f) Prohibition Against Transfer. This Warrant, the rights of
the Warrantholder hereunder and the Shares may not be assigned or transferred
except to a parent or subsidiary entity of the Warrantholder that, in the case
of a parent, owns at least 80% of the Warrantholder, and, in the case of a
subsidiary, is 80% owned by the Warrantholder; provided however that such
transferee shall be bound by the terms and provisions hereof and the prohibition
on transfer of the Shares in this Section 8(f) shall terminate upon the
termination of all of the Company's rights to repurchase the Shares pursuant to
Section 1 hereof.
9. Miscellaneous.
(a) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party will be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant.
(b) Governing Law. This Warrant Agreement will be governed by
and construed for all purposes under and in accordance with the laws of the
State of Delaware without respect to the principles of the choice of law or the
conflict of laws.
(c) Descriptive Headings. The descriptive headings of the
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
(d) Notices. Any notice required or permitted hereunder will
be given in writing and will be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail,
addressed (i) to the Warrantholder, at the address in the Warrant Register
maintained by the Company, and (ii) to the Company, 11711 N.W. 39th Street,
Coral Springs, Florida 33065, Attention: R. Michael Brewer, or at such other
address as any such party may subsequently designate by written notice to the
other party.
(e) Lost Warrants. The Company covenants to the Warrantholder,
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
and, in the case of any such loss, theft or destruction, upon receipt of an
indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the
6
<PAGE> 7
Company will make and deliver a new Warrant or stock certificate of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
(f) Severability. In the event any one or more of the
provisions of this Warrant will for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant will be unimpaired, and
the invalid, illegal or unenforceable provision will be replaced by a mutually
acceptable valid, legal and enforceable provision, which comes closest to the
intention of the parties underlying the invalid, illegal or unenforceable
provision.
(g) Modification and Waiver. This Warrant and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the party against whom enforcement of the same is sought.
(h) Application of Securityholders' Agreement. The
Warrantholder understands and acknowledges that there is in effect that certain
Amended and Restated SecurityHolders' and Exchange Agreement, as amended, (a
copy of which has been provided to the Warrantholder) and that the Shares and
the Warrantholder shall be subject to the terms and conditions thereof.
(i) Entire Agreement. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
IN WITNESS WHEREOF, this warrant has been duly executed and delivered
by the undersigned.
PNV.NET, INC.
By: /s/
--------------------------------
Steven L. Conkling, President
7
<PAGE> 8
EXHIBIT A
FORM OF
NOTICE OF EXERCISE
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant according to the conditions thereof, and herewith makes payment
of $__________ therefor.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following denominations:
- -----------------------------------
[Type Name of Holder]
By:
--------------------------------
Title:
-----------------------------
Dated:
-----------------------------
8
<PAGE> 9
EXHIBIT B
FORM OF
INVESTMENT LETTER
-----------, -----
PNV.net, Inc.
11711 N.W. 39th Street
Coral Springs, Florida 33065
Attention: R. Michael Brewer
Gentlemen:
The undersigned, ________________________ ("Purchaser") intends to
acquire up to _________ shares (the "Shares") of the Common Stock of PNV.net,
Inc. (the "Company") from the Company pursuant to the exercise of certain
Warrant held by Purchaser. The Shares will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with such purchase and in order to comply with the exemption from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
1. Purchaser is acquiring the Shares for Purchaser's own account, to
hold for investment, and Purchaser will not make any sale, transfer or other
disposition of the Shares in violation of the 1933 Act or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission or
in violation of any applicable state securities law.
2. Purchaser has been advised that the issuance of the Shares is not
being registered under the 1933 Act on the ground that this transaction is
exempt from registration under Section 3(b) or 4(2) of the 1933 Act, as not
involving any public offering, and that reliance by the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter. Purchaser also has been advised that neither the Shares nor the
issuance thereof are being registered under the securities laws of any state.
3. Purchaser has been informed that the Shares must be held
indefinitely unless subsequently registered under the 1933 Act and applicable
state securities laws, or unless exemptions from such registration are available
with respect to any proposed transfer or disposition by Purchaser of the Shares.
Purchaser understands and agrees that the Company, as a condition to the
transfer of any of the Shares, may require that the request for transfer be
accompanied by an opinion of counsel satisfactory to the Company, in form and
substance satisfactory to the Company, to the effect that the proposed transfer
is exempt from registration under 1933 Act and applicable state securities laws,
unless such transfer is covered by an effective registration statement under the
1933 Act and all applicable state securities laws.
9
<PAGE> 10
4. Purchaser understands and agrees that there will be placed on the
certificates for the Shares, or any substitutions therefor, a legend stating in
substance:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO UNDER SAID ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144."
5. Purchaser has been furnished with or has had access to the
information it has requested from the Company in connection with the investment
represented by the Shares and has had an opportunity to discuss with the
officers and management of the Company the Company's business and financial
affairs. Purchaser has such knowledge and experience in business and financial
matters and with respect to investments in securities or in privately held
companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto.
Very truly yours,
------------------------------------
Name:
-------------------------------
Accepted as of the _____ day of ____________, 19____.
PNV.NET, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
10
<PAGE> 1
EXHIBIT 10.51
SERIES D 7% CUMULATIVE CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
Dated as of August 27, 1999
<PAGE> 2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 27, 1999
by and between PNV.net, Inc., a Delaware corporation (the "Company"), and those
persons and entities listed on Exhibit A hereto (collectively, the "Purchasers"
and each, individually, a "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Purchasers and the
Purchasers desire to purchase from the Company up to the aggregate number of
shares set forth on Exhibit A hereto (as amended from time to time pursuant to
the terms of this Agreement) of its authorized but unissued Series D 7%
Cumulative Convertible Preferred Stock, par value $.01 per share (the "Series D
Preferred Stock"), upon the terms and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. SALE AND PURCHASE OF THE SERIES D PREFERRED STOCK
(a) Subject to the terms and conditions hereof and in reliance upon the
representations and warranties contained herein, the Company agrees to sell to
the Purchasers, and each Purchaser agrees to purchase from the Company on the
Closing Date specified in Section 2 hereof, the number of shares of Series D
Preferred Stock set forth opposite such Purchaser's name on Exhibit A hereto
(being an aggregate of up to a maximum of 3,000,000 shares of Series D Preferred
Stock) at a price of $10.50 per share for a maximum aggregate purchase price of
Thirty-one Million Five Hundred Thousand Dollars ($31,500,000.00). The sales of
the shares of Series D Preferred Stock to the Purchasers as aforesaid are
several and separate sales and none of the Purchasers shall be responsible for,
or obligated with respect to, any act or default by any other Purchaser. The
shares of Series D Preferred Stock being purchased pursuant to this Agreement
are collectively referred to herein as the "Shares", containing rights and
privileges as more fully set forth in the Certificate of Designation for the
Series D Preferred Stock (the "Series D Certificate of Designation") attached
hereto as Exhibit B.
(b) The aggregate purchase price to be paid to the Company by each
Purchaser for the Shares to be purchased by such Purchaser pursuant to this
Agreement shall be the amount set forth opposite that Purchaser's name on
Exhibit A hereto. No further payment shall be required from the Purchaser for
the Shares.
SECTION 2. THE CLOSING
Subject to the terms and conditions hereof, the initial closing
hereunder with respect to the purchase and sale of the Shares shall take place
at the offices of Kilpatrick Stockton LLP,
<PAGE> 3
4101 Lake Boone Trail, Suite 400, Raleigh, North Carolina on or before September
30, 1999, or such other location, time and date as the parties hereto shall
mutually agree upon (the "Closing"). As soon as practicable following the
Closing, the Company will deliver to each Purchaser purchasing Shares a
certificate registered in the Purchaser's name (or the name of its nominee, if
any, as specified on Exhibit A hereto) evidencing the number of Shares set forth
opposite the Purchaser's name on Exhibit A dated as of the Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers as
follows as of the date hereof and as of the Closing as follows:
3.1 Corporate Existence, Power and Authority
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any material property or in which
the conduct of its business requires it to so qualify or be so licensed, except
where the failure to so qualify or be licensed would not have a material adverse
effect on the Company. The Company has all requisite corporate power, authority
and legal right to own or to hold under lease and to operate the properties it
owns or holds and to conduct its business as it is now being conducted and as it
is proposed to be conducted except where the failure to have such requisite
power, authority and legal right would not have a material adverse effect on the
Company.
(b) Subject to (x) obtaining the approval of the Company's existing
stockholders to the amendment of the Company's Amended Certificate of
Incorporation (the "Certificate of Amendment"), (y) the approval of the
Company's existing stockholders to and the filing of the Certificate of
Amendment, the Certificate of Amendment to the Certificate of Designation
relating to the Series A Preferred Stock, the Certificate of Amendment to the
Certificate of Designation relating to the Series B 7% Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock"), the Certificate of Amendment
to the Certificate of Designation relating to the Series C 7% Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock"), and the Series D
Certificate of Designation, and (z) obtaining all necessary waivers and consents
of stockholders of, and lenders to, the Company under other agreements, the
Company has all requisite power and authority to enter into this Agreement, the
Securities Restriction Agreement, dated as of November 13, 1996, as amended (the
"Securities Restriction Agreement"), the Amended and Restated Securityholders'
Agreement and Exchange Agreement, dated as of November 13, 1996, as amended (the
"Securityholders' Agreement"), and the Registration Rights Agreement, dated as
of November 13, 1996, as amended (as such agreement is defined in Section 3.18
below, together with this Agreement, the Securities Restriction Agreement, the
Securityholders' Agreement and the Series D Certificate of Designation,
collectively, the "Transaction Documents"), to sell the Series D Preferred Stock
hereunder and to carry out and perform its obligations under the terms of the
Transaction Documents. Each of the Transaction Documents has been duly executed
and delivered by the Company and constitutes the legal, valid
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and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
3.2 Capitalization
(a) Immediately prior to the Closing, the authorized capital stock of
the Company will consist of 58,750,000 shares of capital stock, of which
50,000,000 shares will be classified as common stock (the "Common Stock"), of
which 4,328,614 shares (as adjusted for the conversion of convertible preferred
stock and exercises of options and warrants to purchase shares of Common Stock
after the date of this Agreement) will be issued and outstanding, and 8,750,000
shares will be classified as preferred stock (the "Preferred Stock"), of which
(i) 627,630 shares will be designated as Series A Preferred Stock, of which
388,065 shares will be issued and outstanding, (ii) 1,372,370 shares will be
designated as Series B Preferred Stock, of which 1,372,370 shares will be issued
and outstanding (as adjusted for conversions after the date of this Agreement);
(iii) 3,750,000 shares will be designated as Series C Preferred Stock, of which
2,351,543 shares will be issued and outstanding (as adjusted for conversions
after the date of this Agreement); and (iv) 3,000,000 shares will be designated
as Series D Preferred Stock, none of which will be issued and oustanding. As of
the Closing, all outstanding shares of Common Stock and Preferred Stock will
have been duly authorized and validly issued, will be fully paid and
non-assessable, and will have been issued in compliance with all applicable
state and federal laws concerning the issuance of securities. Immediately prior
to the Closing (as adjusted for the conversion of convertible preferred stock
after the date of this Agreement), there will be reserved for issuance: (i)
1,875,000 shares of Common Stock which may be issued upon conversion of shares
of Series B Preferred Stock; (ii) 2,351,543 shares of Common Stock which may be
issued upon conversion of shares of Series C Preferred Stock; (iii) the
aggregate number of shares set forth on Exhibit A hereto (as amended from time
to time pursuant to the terms of this Agreement) of Common Stock which may be
used upon conversion of shares of Series D Preferred Stock; (iv) 1,759,396
shares of Common Stock which may be issued pursuant to the exercise of options
previously granted to present and former employees and consultants of the
Company (as adjusted for grants, exercises and terminations of options occurring
after the date of this Agreement); (v) 414,338 shares of Common Stock which are
available for future grants of options under the Company's Stock Option Plan (as
adjusted for grants, exercises and terminations of options occurring after the
date of this Agreement); (vi) 885,774 shares of Common Stock which may be issued
pursuant to the exercise of warrants previously issued by the Company (as
adjusted for the exercise of such warrants and the grant of up to 12,000 shares
of Common Stock which may be issued pursuant to the exercise of warrants that
may be issued by the Company after the date of this Agreement); and (vii) up to
75,000 shares of Common Stock which may be issued pursuant to the exercise of a
warrant or warrants to be granted to Volpe Brown Whelan & Company, LLC (the
"Agent") at the Closing (the "Agent's Warrant"). A complete list of all persons
who are registered owners of the capital stock of the Company as indicated in
the Company's stock ledger and similar records as of the date of this Agreement
is attached hereto as Schedule 3.2(a).
(b) Immediately after the Closing, the authorized capital stock of the
Company will consist of 58,750,000 shares of capital stock, comprised of
50,000,000 shares of Common Stock, of which 4,328,614 shares (as adjusted for
the conversion of convertible preferred stock and
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exercises of options and warrants to purchase shares of Common Stock after the
date of this Agreement) of Common Stock will be issued and outstanding and
8,750,000 shares of Preferred Stock, of which (i) 627,630 shares will be
designated as Series A Preferred Stock, of which 388,065 shares will be issued
and outstanding, (ii) 1,372,370 shares will be designated as Series B Preferred
Stock, of which 1,372,370 shares will be issued and outstanding (as adjusted for
conversions after the date of this Agreement); (iii) 3,750,000 shares will be
designated as Series C Preferred Stock, of which 2,351,543 shares will be issued
and outstanding (as adjusted for conversions after the date of this Agreement);
and (iv) 3,000,000 shares will be designated as Series D Preferred Stock, of
which the aggregate number of shares set forth on Exhibit A hereto (as amended
from time to time pursuant to the terms of this Agreement) will be issued and
outstanding. Immediately after the Closing (as adjusted for the conversion of
convertible preferred stock after the date of this Agreement), there will be
reserved for issuance: (i) 1,875,000 shares of Common Stock which may be issued
upon conversion of shares of Series B Preferred Stock; (ii) 2,351,543 shares of
Common Stock which may be issued upon conversion of shares of Series C Preferred
Stock; (iii) the aggregate number of shares set forth on Exhibit A hereto (as
amended from time to time pursuant to the terms of this Agreement) of Common
Stock which may be issued upon conversion of shares of Series D Preferred Stock;
(iv) 1,759,396 shares of Common Stock which may be issued pursuant to the
exercise of options previously granted to present and former employees and
consultants of the Company (as adjusted for grants, exercises and terminations
of options occurring after the date of this Agreement); (v) 414,338 shares of
Common Stock which are available for future grants of options under the
Company's Stock Option Plan (as adjusted for grants, exercises and terminations
of options occurring after the date of this Agreement); (vi) 885,774 shares of
Common Stock which may be issued pursuant to the exercise of warrants previously
issued by the Company (as adjusted for the exercise of such warrants and the
grant of up to 12,000 shares of Common Stock which may be issued pursuant to the
exercise of warrants that may be issued by the Company after the date of this
Agreement); and (vii) up to 75,000 shares of Common Stock which may be issued
pursuant to the exercise of the Agent's Warrant.
(c) Except as contemplated by (i) the Company's Stock Option Plan; (ii)
warrants to purchase up to 885,774 shares of Common Stock previously issued by
the Company (as adjusted for the exercise of such warrants and the grant of up
to 12,000 shares of Common Stock which may be issued pursuant to the exercise of
warrants that may be issued by the Company after the date of this Agreement);
(iii) the Securities Restriction Agreement; (iv) that certain Securities
Restriction Agreement dated November 2, 1995, as amended; (v) the
Securityholders' Agreement; and (vi) those certain Securities Purchase
Agreements dated November 2, 1995 and November 13, 1996, respectively, by and
among the Company and certain investors, there are no outstanding rights,
options, calls, warrants, conversion rights, antidilution protections or other
adjustment provisions, agreements or preemptive rights to purchase or other-wise
acquire shares of capital stock of the Company and/or obligations of the Company
to grant, extend or enter into any such right, option, call, warrant, conversion
right or agreement.
(d) Except as contemplated by (i) the Securities Restriction Agreement;
(ii) the Securities Restriction Agreement dated November 2, 1995, as amended;
(iii) the Securityholders' Agreement; and (iv) those certain Securities Purchase
Agreements dated November 2, 1995 and November 13, 1996, respectively, by and
among the Company and certain investors, there is no
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agreement, restriction or encumbrance (including, without limitation, any right
of first refusal, right of first offer or voting trust agreement) with respect
to the sale or voting of any shares of the Company's capital stock (whether
outstanding or issuable upon conversion or exercise of outstanding securities).
3.3 Subsidiary
The Company (i) does not control or own, directly or indirectly, any
shares or proprietary interest in any corporation or business entity, (ii) is
not under common control with, or controlled by, any other corporation or other
business entity and (iii) does not have any letter of intent, agreement in
principle or other binding or non-binding agreement to acquire any control of,
or equity interest in, any other corporation or other business entity.
3.4 No Defaults or Conflicts
(a) The Company is not in violation or default under any indenture,
agreement or instrument to which it is a party or by which it or its properties
may be bound, which violation or default would have a material adverse effect on
the Company. The Company is not in violation of or default under any law, rule,
regulation, order, writ, injunction, judgment, decree, award or other action of
any court or governmental authority or arbitrators, which violation or default
would have a material adverse effect on the Company. The Company is not
restricted from carrying out its business anywhere in the continental United
States by any agreement or administrative or judicial order, decree or process
in any action or proceeding in which the Company or any of its predecessors is a
party. The Company is not in violation of its Amended Certificate of
Incorporation or By-Laws.
(b) The execution, delivery and performance by the Company of the
Transaction Documents and any of the transactions contemplated hereby or thereby
does not and will not (i) violate or conflict with any provision of (A) the
Amended Certificate of Incorporation or By-Laws of the Company, subject to
obtaining the approval of the existing stockholders of the Company to the
Certificate of Amendment, or (B) any law, rule, regulation or order of any
federal, state, county, municipal or other governmental authority, or any
judgment, writ, injunction, decree, award or other action of any court or
governmental authority or arbitrators), or any or any agreement, indenture or
other instrument applicable to any of the properties or assets of the Company,
(ii) result in the creation of any lien, charge, security interest or
encumbrance upon any of the Company's properties, assets or revenues, (iii)
require the comment, waiver, approval, order or authorization of, or
declaration, registration, qualification or filing with any person or entity
(whether or not a governmental authority and including, without limitation, any
stockholder approval) except for required securities law filings, the filing of
a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and board of director and stockholder approvals and certain consents
which approvals, consents and waivers have been obtained or (iv) cause
anti-dilution clauses of any outstanding securities to become operative or give
rise to any preemptive or similar rights of purchase which have not been waived
by the holders prior to the date hereof.
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3.5 Authorization of Securities
(a) All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the sale and issuance of the Series D
Preferred Stock and the performance by the Company of its obligations under the
Transaction Documents has been taken or will be taken prior to the Closing. The
Company has or will have prior to the Closing duly reserved an aggregate of up
to the aggregate number of shares set forth on Exhibit A hereto (as amended from
time to time pursuant to the terms of this Agreement) of Common Stock for
issuance upon conversion of the Series D Preferred Stock included in the
Closing.
(b) The Series D Preferred Stock, when issued, sold and delivered in
accordance herewith, will be duly authorized, validly issued and outstanding,
fully paid and non-assessable and will not be subject to any preemptive or other
preferential rights or similar statutory or contractual rights of others arising
pursuant to any statute, rule or regulation or agreement or instrument to which
the Company is a party, except as disclosed in Schedule 3.5 hereto. The issuance
and delivery of shares of Common Stock to be issued pursuant to the exercise of
the Agent's Warrant will have been duly authorized by all requisite corporate
action on the part of the Company, and, when so issued, such shares of Common
Stock will be duly authorized, validly issued and outstanding, fully paid and
non-accessible and will not be subject to any preemptive or other preferential
rights or similar statutory or contractual rights of others arising pursuant to
any statute, rule or regulation or agreement or instrument to which the Company
is a party or otherwise, except as disclosed in Schedule 3.5 hereto.
3.6 Securities Exemptions
Assuming the accuracy of the representations and warranties of the
Purchasers, the Shares will be issued in transactions exempt from registration
under Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"), and will not require registration or qualification or filings under the
Securities Act or any state securities of "Blue Sky" law or any regulation
thereunder, except for such registration or qualification or filings under any
such state securities or "Blue Sky" laws or regulations thereunder which shall
have been obtained or made on or prior to the Closing or which the Company shall
obtain or make within the requisite time period following the Closing.
3.7 Disclosure Materials: Other Information
(a) The audited historical financial statements with respect to fiscal
years ended June 30, 1997 and June 30, 1998 previously furnished by the Company
to the Purchasers are true and correct, in accordance with the books and records
of the Company, fairly present the financial condition of the Company, as of the
respective dates thereof, and the results of operations of the Company for such
periods, and have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP"), except that any unaudited statements
may omit footnotes and may be subject to normal year-end adjustments which in
the aggregate are not material. Certain financial projections and other
forward-looking statements, including, without limitation, those contained in
the Confidential Executive Summary delivered to the Purchasers by
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the Agent (the "Executive Summary"), were prepared by the Company in good faith
based upon assumptions which the Company believes to be reasonable in light of
facts known to the Company.
(b) Except as otherwise described in Schedule 3.7 hereto, since March
31, 1999 (i) the business of the Company has been conducted in the ordinary
course, and (ii) there has been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company. As of the Closing and as
of the date hereof, there are no material liabilities of the Company which would
be required to be provided for in a balance sheet of the Company as of either
such date prepared in accordance with GAAP, other than liabilities provided for
in the financial statements referred to in Section 3.7(a) above and other than
liabilities incurred in the ordinary course of business.
(c) The Company is not aware of any material liabilities, contingent or
otherwise, of the Company that have not been disclosed in the financial
statements (including the footnotes thereto) referred to in Section 3.7(a) above
or other than liabilities incurred in the ordinary course of business.
(d) Nothing has come to the attention of the Company that would cause
it to believe that any information provided by or on behalf of the Company to
the Purchasers, including, without limitation, the information described in
Schedule 3.7(d) attached hereto, contained or contains a false or misleading
statement of a material fact or omits to state any material fact necessary in
order to make the statements made therein not misleading in light of the
circumstances under which they were made; provided that, with respect to
projections and other forward-looking statements, the Company represents only
that such portions of the information provided by or on behalf of the Company to
the Purchasers were prepared by the Company in good faith based upon assumptions
which the Company believes to be reasonable in light of facts known to the
Company.
3.8 Certain Events
Except as disclosed in Schedule 3.8 hereto, since March 31, 1999, to
the best of the Company's knowledge, there has been no material adverse
legislative or regulatory change relating to the Company's business, and the
Company has not to any material extent: (a) borrowed any funds or incurred or
become subject to any obligations or liabilities (absolute or contingent),
except as incurred in the ordinary course of business (in amounts consistent
with prior operations); (b) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the financial statements previously
furnished by or on behalf of the Company to the Purchasers; (c) declared or paid
any dividends or distributions to its stockholders of any kind whatsoever; (d)
entered into any agreements or arrangements granting any preferential rights to
purchase any of the assets, properties or rights of the Company, or requiring
the consent of any party-to a transfer or assignment of such assets, properties
or rights, or providing for the merger or consolidation of the Company into or
with another corporation or other business entity; (e) except in the ordinary
course of business, made or permitted any amendment or termination of any
material contract,
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agreement or license to which it is a party; (f) changed any accounting methods
or practice, including, without limitation, any change in depreciation or
amortization policies or rates; (g) made any loan to any person or entity,
including, without limitation, to any officer, director or employee of the
Company, or increased the compensation or benefits payable, or to become
payable, to any of the officers, directors or employees of the Company,
including, without limitation, in respect of any bonus payment or deferred
compensation; (h) entered into any transaction other than in the ordinary course
of business; or (i) entered into an agreement to do any of the foregoing
described in clauses (a) through (h) above.
3.9 Contracts, Agreements
Except as disclosed in Schedule 3.9 hereto, the Company is not a party
to any material written or oral (a) contract for employment which may not be
terminated by the Company, as the case may be, on not more than ninety (90)
days' notice without liability to the Company; (b) pension or profit-sharing
plans, retirement plans, bonus plans, stock purchase or stock option plans or
any similar plans, formal or informal, whether covering one or more directors,
officers or present or former employees; (c) contracts involving payment by or
to the Company of more than $100,000 in the aggregate or in any one year or the
performance of which may extend more than ninety (90) days from the date hereof,
or (d) other contracts, agreements or understandings material to the Company.
All such material contracts, agreements and understandings are in full force and
effect except as disclosed in Schedule 3.9 hereto, and the Company or any other
party thereto has not received any notice of default or is in default, and no
condition now exists which, with notice or the lapse of time or both, would
render the Company or, to the knowledge of the Company, any other party, in
default under any material contracts, understandings or agreements to which the
Company is or may be a party. Except as disclosed in Schedule 3.9 hereto, there
are no disputes or proceedings relating to any such material contract,
understanding or agreement and the Company has not received any notice or
indication that any party to any such material contract, understanding or
agreement intends to cancel or terminate such contract, understanding or
agreement or intends to exercise or not exercise any options under such material
contract, understanding or agreement.
3.10 Title to Properties: Leasehold Interests
The Company has good and marketable title to each of the properties and
assets owned by it. The Company does not own any real property. Certain real
property used by the Company in the conduct of its business is held under lease,
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate or materially alter any such lease.
Except as set forth on Schedule 3.10, none of the properties owned or leased by
the Company is subject to any security interest, mortgage, lien, encumbrance or
charge which could reasonably be expected to materially and adversely affect the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. Each lease or
agreement to which the Company is a party and pursuant to which the Company
holds properties and assets is a valid and subsisting agreement without any
material default of the Company thereunder and, to the best of the Company's
knowledge, without any material default thereunder of any other party thereto.
No event has occurred and is continuing which, with due notice or lapse of time
or both, would constitute a default or event of default by
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the Company under any such lease or, to the best of the Company's knowledge, by
any party thereto, except for such defaults that would not individually or in
the aggregate have a material adverse effect on the Company. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim adverse to its rights in such leasehold interests
has been asserted against it.
3.11 Litigation
Except as disclosed in Schedule 3.11 hereto, there is no action, suit,
proceeding, investigation or claim pending against the Company or, to the
knowledge of the Company, threatened against the Company in law, equity or
otherwise before any federal, state, municipal or local court, administrative
agency, commission, board, bureau, instrumentality or arbitrator which (i)
questions the validity of any of the Transaction Documents or any action taken
or to be taken pursuant hereto or thereto, (ii) might reasonably be expected to
adversely affect the right, title or interest of any Purchaser to the Shares, or
(iii) might reasonably be expected to result in a material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. Except as
disclosed in Schedule 3.11 hereto, there is no action or suit by the Company
currently pending or that the Company intends to initiate against others.
3.12 Licenses, Permits and Approvals
The Company owns or possesses and holds free from restrictions or
conflicts with the rights of others all franchises, licenses, permits, consents,
approvals and other authority (governmental or otherwise), and all rights and
privileges with respect to the foregoing, as are necessary for the conduct of
its business as it is now being conducted, and as proposed to be conducted,
except where the failure to own or possess and hold such franchises, licenses,
permits, consents, approvals and other authority (governmental or otherwise)
would not have a material adverse effect upon the Company. The Company is not in
default in any material respects under any of such franchises, licenses,
permits, consents, approvals or other authority.
3.13 Taxes
Except as disclosed in Schedule 3.13 hereto, (a) the Company has filed
all federal, state, and local and other tax returns and reports, and any other
material returns and reports with any governmental authorities (federal, state
or local), required to be filed by it, (b) the Company has paid or caused to be
paid all taxes (including interest and penalties) that are due and payable,
except those which are being contested by it in good faith by appropriate
proceedings and in respect of which adequate reserves are being maintained on
its books in accordance with generally accepted accounting principles
consistently applied, and (c) the Company does not have any material liabilities
for taxes other than those incurred in the ordinary course of business and in
respect of which adequate reserves are being maintained by it in accordance with
generally accepted accounting principles consistently applied. Federal and state
income tax returns for the Company have not been audited by the Internal Revenue
Service or state authorities. No deficiency assessment with respect to, or
proposed adjustment of, the Company's federal, state, local or other tax returns
is pending or, to the best of the Company's knowledge, threatened.
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There is no tax lien, whether imposed by any federal, state, local or other tax
authority outstanding against the assets, properties or business of the Company.
There are no applicable taxes, fees or other governmental charges payable by the
Company in connection with the execution and delivery of this Agreement, except
for governmental fees paid in connection with state and federal securities law
filings.
3.14 Employees; ERISA
The Company has no knowledge of any pending or threatened work
stoppage, or union organizing effort involving the employees of the Company. The
Company has no knowledge as to any intention of any key employee or any group of
employees to leave the employ of the Company. Other than as disclosed in
Schedule 3.14 hereto, the Company has not established, sponsored, maintained,
made any contributions to or been obligated by law to establish, maintain,
sponsor or make any contributions to any "employee pension benefit plan" or
"employee welfare benefit plan" (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including,
without limitation, any "multi-employer plan". Any such plans have been
established and are being operated in compliance with ERISA, and there exist no
unfunded obligations of the Company with respect to any such plan, except as
could not reasonably be expected to have a material adverse effect on the
Company. The Company has complied with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with ERISA except to the extent that noncompliance would not
reasonably be expected to have a material adverse effect on the Company, and the
Company is not aware of any pending or threatened claim against the Company with
respect to the foregoing.
3.15 Disaster
Neither the business nor the properties of the Company are currently
affected (or has been affected at any time since December 31, 1998) by any fire,
explosion, accident, strike, lockout or other dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), of a kind which (individually or in the
aggregate) has materially adversely affected, or could reasonably be expected to
materially adversely affect, the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
3.16 Books and Records
The books and records of the Company, including, without limitation,
all stock ledgers and minute books containing minutes of Board of Directors and
stockholders meetings, are complete and correct in all material respects. No
action has been taken which requires the approval of the Board of Directors or
the stockholders of the Company which has not been so approved and is not
accurately reflected in the Company's minute books.
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3.17 Material Changes
Except as disclosed in Schedule 3.17 hereto and except to the extent
described in this Agreement or as disclosed in the Exhibits and the Schedules
hereto, since March 31, 1999, there have been no material changes in the
employment of personnel or in the condition (financial or otherwise), operations
or prospects of the Company, except changes occurring in the ordinary course of
business which have not had (and are not reasonably anticipated to have) a
material adverse effect on the Company.
3.18 Registration Rights
Except as contemplated in the Registration Rights Agreement dated as of
November 13, 1996, as amended (and amended as of the date hereof) (the
"Registration Rights Agreement"), or pursuant to the terms of warrants to
purchase up to 280,000 shares of Common Stock previously issued by the Company
to TA Operating Corporation, or as disclosed in Schedule 3.18 hereto, no person,
other than the Purchasers and the Agent, as holder of the Agent's Warrant, has
the right to cause the Company to effect the registration under the Securities
Act of any shares of capital stock or any other securities (including debt
securities) of the Company.
3.19 Indebtedness
Schedule 3.19 hereto sets forth (i) the amount of all indebtedness of
the Company outstanding as of the Closing (excluding indebtedness in individual
amounts of less than $25,000, but not exceeding an aggregate excluded amount of
$100,000), (ii) any lien, charge, security interest or encumbrance with respect
to such indebtedness and (iii) a brief description of each instrument or
agreement governing such indebtedness. The Company has provided counsel to the
Purchasers a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No default
exists with respect to or under any such indebtedness or any instrument or
agreement relating thereto which default would reasonably be expected to have a
material adverse effect on the Company.
3.20 Insurance
The Company holds valid policies with reputable insurers covering
insurance in the amounts and type that the Company reasonably believes is
appropriate and customary for entities in the same or similar businesses to that
of the Company or that are otherwise required to be maintained by it and with
such deductibles or coinsurance as is customary, and such policies are in full
force and effect. Schedule 3.20 lists all insurance policies presently in effect
for which the Company is a named beneficiary. The Company has timely filed
claims with its insurers with respect to all material matters and occurrences
for which it believes it has coverage.
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3.21 Brokers
Except for the Agent, the Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.22 Proprietary Rights
(a) The Company owns or possesses, or has adequate and enforceable
licenses or other rights to use and license for all purposes, all proprietary
rights necessary for its business (as now conducted and as proposed to be
conducted) without any conflict with or infringement of the rights of others.
Schedule 3.22 attached hereto contains an accurate and complete list of all
proprietary rights which the Company owns or is licensed or authorized to use by
others. The Company has the rights to use and/or own and/or develop and license
the proprietary rights as such rights are set forth on such Schedule 3.22, and,
except as set forth on such Schedule 3.22, (i) no other person has been granted,
by the Company or otherwise, any rights, or has any interest, in such
proprietary rights and (ii) to the knowledge of the Company, with respect to any
proprietary rights which have been assigned to the Company, the assigning party
is fully authorized to assign such rights to the Company without thereby
creating an obligation of the Company to any person. All proprietary rights held
by the Company under licenses have been duly licensed to the Company, and,
except as set forth in such Schedule 3.22, the Company has rights to its
proprietary rights free and clear of any liens or other encumbrances. No claim
has been asserted or, to the knowledge of the Company, threatened, by any Person
regarding the use or licensing of any of the Company's proprietary rights by the
Company or challenging or questioning the validity, enforceability or
effectiveness of any licenses or agreements (including, without limitation,
assignments) relating to proprietary rights or asserting any rights in such
proprietary rights. The use of its proprietary rights by the Company does not
violate or infringe, and has not in the past violated or infringed, the rights
of any person. No claims have been asserted by the Company against any other
person claiming infringement of the Company's proprietary rights. The Company
has not granted any licenses to the Company's proprietary rights (other than
those granted as a result of the sales of any proprietary product of the Company
in the ordinary course of business), and is not aware of the third parties who
are infringing or violating any of such proprietary rights. Neither the Company
nor, to the knowledge of the Company, any other person is in default under any
license or other agreement relating to the Company's proprietary rights
(including without limitation, assignments), and all such licenses and
agreements are valid, enforceable and in full force and effect.
(b) Except as set forth on Schedule 3.22 attached hereto, the Company
has not granted rights to manufacture, produce, assemble, license, market, or
sell its products to any other person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products. No supplier of components to the
Company is a sole source of such components, except for those components that
can be obtained from another supplier at substantially the same cost and
quantities in a similar time frame.
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3.23 Related Party Transactions
(a) Except as disclosed in Schedule 3.23 hereto, no holder of the
Company's Common Stock, Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock (an "Existing Investor"), employee, officer or director
of the Company, no affiliate of any Existing Investor, employee, officer or
director of the Company, and no member of the immediate family of any Existing
Investor, employee, officer or director of the Company (any of the foregoing, a
"Related Party") is indebted to the Company.
(b) The Company is not indebted and is not committed to make loans or
extend or guarantee credit, to any Related Party.
(c) No Related Party is interested, directly or indirectly, in any
contract with the company except by reason of their ownership interest in the
Company and/or their membership on the company's Board of Directors.
(d) No Existing Investor or party to this Agreement is presently,
directly or indirectly through such party's affiliation with any other person, a
party to any transaction with the Company providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
cash payments to, any such person pursuant to an agreement that is material.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
as follows as of the date hereof and as of the Closing:
4.1 Purchaser Authority; Accredited Investor Status
(a) The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate and perform this Agreement. The
execution, delivery and performance of this Agreement by the Purchaser have been
duly authorized by all required corporate, partnership or other actions on the
part of the Purchaser. The Purchaser has duly executed and delivered this
Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.
(b) The Purchaser hereby represents to the Company that it has
substantial knowledge, skill and experience in making investment decisions of
this type, it is capable of evaluating the risk of its investment in the Shares
being purchased by it and is able to bear the economic risk of such investment,
including the risk of losing the entire investment, that (except as the
Purchaser has otherwise advised the Company and the Purchaser's counsel in
writing) it is purchasing the Shares to be purchased by it for its own account,
and that the Shares are being purchased by it for investment and not with a
present view to any distribution thereof in violation of applicable securities
laws. It is understood that the disposition of the Purchaser's property shall at
all times be within the Purchaser's control. If the Purchaser should in the
future decide to dispose of any of its Shares, it is understood that it may do
so only in compliance with the
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Securities Act, applicable state securities laws and this Agreement. The
Purchaser represents that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(c) The Purchaser has received unaudited financial statements for the
nine month period ending March 31, 1999 and has had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management.
(d) The Purchaser understands that (i) the Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) and Rule 506 promulgated under the Securities Act, (ii) the Shares
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act and any applicable state securities laws or is exempt
from such registration or registrations (and evidence satisfactory to the
Company is provided by such Purchaser of the availability of such exemptions,
including the delivery, upon request, to the Company of an opinion of counsel to
such Purchaser, which opinion and counsel are satisfactory to the Company), and
(iii) the Shares will bear a legend to such effect.
(e) The Purchaser represents that at no time was the Purchaser
presented with or solicited by or through any leaflet, public promotional
meeting, advertisement or any other form of general or public advertising or
solicitation. In addition, the Purchaser acknowledges that there has never been
any representation, guaranty or warranty made by the Company or any agent or
representative of the Company as to the amount of or type of consideration or
profit, if any, to be realized as a result of any investment by the Purchaser in
the Series D Preferred Stock or the Common Stock issuable upon conversion of the
Series D Preferred Stock.
(f) The Purchaser is a bona fide resident and domiciliary of, or legal
entity of, the state of address as set forth on Exhibit A hereto.
4.2 Reliance on Representations and Warranties by the Company and the
Agent
Each Purchaser hereby acknowledges that the Company and the Agent are
relying on the foregoing representations and warranties in connection with the
sale to such Purchaser of the Shares, and thereby agrees to indemnify and hold
harmless the Company and the Agent and their respective officers, directors,
control persons, agents, partners and affiliates harmless from and against any
and all liabilities, losses, claims, costs, damages, judgments, settlements and
expenses (including reasonable attorneys' fees and all expenses reasonably
incurred in investigating, preparing or defending against any litigation
commenced or threatened or any claim whatsoever) suffered or incurred by any of
them as a result of the breach by such Purchaser of any of such representation
and warranty. In no event, however, shall the liability of any Purchaser for
indemnification under this Section 4.2 exceed the purchase price paid by the
Purchaser to the Company in connection with such Purchaser's purchase of the
Shares.
SECTION 5. COVENANTS OF THE COMPANY
The Company covenants and agrees, so long as 20% or more of the Shares
issued hereunder are held of record by the Purchasers and have not been
converted into shares of the
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Common Stock, unless some other period is expressly provided in any subsections
of this Section 5, in which case such specific period will govern, as follows:
5.1 Financial Information
The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied. The Company will deliver the following to each
Purchaser thereof:
(i) as soon as practicable but in any event within 120 days after the
close of each fiscal year of the Company, (A) a balance sheet of the Company as
of the end of such fiscal year and (B) statements of operations and cash flows
of the Company for such fiscal year, in each case setting forth in comparative
form the corresponding financial information for the immediately preceding
fiscal year, all such balance sheets and statements to be audited by an
independent public accounting firm of recognized national standing selected by
the Company, and such statements shall be accompanied by management's discussion
and analysis of the differences between the results for such fiscal year and the
corresponding financial information for the preceding fiscal year and between
the budgeted amounts (as supplied pursuant to paragraph (ii) below) and the
results for such year and a narrative discussion of the Company's liquidity and
capital resources as of the end of such year conforming in all material respects
to the requirements contained in Item 303 of Regulation S-K under the Securities
Act. All financial statements provided under this Section 5.2(i) shall be
prepared in accordance with GAAP, consistently applied, and shall be certified
as to accuracy and completeness by the Chief Financial Officer or the Chief
Executive Officer of the Company.
(ii) as soon as reasonably practicable, and in any event within 60 days
after the close of each of the Company's first three (3) fiscal quarters, (A) an
unaudited balance sheet of the Company as of the end of such fiscal quarter and
(B) unaudited statements of operations and cash flows of the Company for the
quarter just ended and for the portion of the fiscal year ended with the end of
such quarter, in each case in reasonable detail, certified as to accuracy and
completeness by the Chief Financial Officer or the Chief Executive Officer of
the Company and setting forth in comparative form the corresponding amounts for
the comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management's discussion and analysis of
differences between such results and the corresponding financial information for
the prior period; and
(iii) as soon as reasonably practicable, such other information as may
reasonably be requested by a holder of Shares (unless reasonably objected to by
the Company), regarding the assets, properties, liabilities, business, affairs,
results of operations or conditions (financial or otherwise) of the Company. As
a condition to receiving such information from the Company, each holder (other
than any parties that are (i) agencies, instrumentalities or entities affiliated
with any state government or (ii) a government sponsored retirement system) of
Shares requesting such information shall, if requested by the Company, execute
an appropriate confidentiality agreement.
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The obligation of the Company to furnish such financial information
shall terminate when the Company becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended.
5.2 Notice of Events of Default: Litigation
Promptly, but in any event within ten (10) days after notice thereof is
received by the Company, the Company will deliver to each holder of Shares any
notice of (i) a default by the Company in the observance or performance of any
material contract or agreement to which the Company is a party, including,
without limitation, any Transaction Document, and (ii) the commencement of any
investigation, action or proceeding at law or in equity or before any federal or
state court or governmental agency to which the Company is a party an adverse
result of which would, either individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business or financial
condition of the Company.
5.3 Access to Information
At the request of holders of 20% or more of the outstanding Shares, the
Company will permit such Purchasers and any authorized representative of such
Purchasers, subject to (if requested by the Company) execution by such
Purchasers of a reasonable confidentiality agreement, full and complete access
at the Company during normal business hours and in a manner that will not
unreasonably interfere with the conduct of the Company's business, to the
properties and books and records of the Company. The Purchasers requesting such
access shall bear all costs and expenses they or their representatives incur in
connection with such request and such access.
5.4 Maintenance of Existence, Properties and Franchises; Compliance
with Law; Taxes; Insurance
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect; provided, that the Company may terminate or permit the
termination or abandonment of rights or other franchises, if in the opinion of
the Company it is no longer in the Company's best interests to maintain such
rights or other franchises and such termination or abandonment will not be
prejudicial in any material respect to the holders of the Shares;
(b) maintain its tangible assets in good repair, working order and
condition, ordinary wear and tear excepted, so far as necessary to the proper
carrying on of its business;
(c) comply with each provision of all leases to which it occupies real
or personal property if the breach of such provision would reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, or operations of the Company;
(d) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, the violation of which would reasonably be expected to
have a material adverse effect on the
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Company, provided, that such compliance shall not be necessary so long as the
applicability or validity of any such law, order, rule, ruling, certificate,
license, regulation, demand, judgment, writ, injunction or decree shall be
contested in good faith by appropriate proceedings;
(e) pay when due all taxes, fees, assessments and other government
charges imposed upon its properties, assets or income and all claims or
indebtedness (including, without limitation, materialmen's, vendor's, workmen's
and like claims) prior to such claims becoming a lien upon such properties or
assets; provided, that payment of any such tax, fee, assessment, charge, claim
or indebtedness shall not be necessary so long as (i) the applicability or
validity thereof shall be contested in good faith by appropriate proceedings and
a reserve, if appropriate, shall have been established with respect thereto and
(ii) failure to make such payment will not have a material adverse effect on the
business or financial condition of the Company; and
(f) keep adequately insured all of its respective properties of a
character customarily insured by entities in the same or similar business as
that of the Company, against loss or damage of the kinds and in amounts
customarily insured against by such entities and with such deductibles or
coinsurance as is customary.
5.5 No Change in Business.
The Company will not, without the prior written consent of the holders
owning a majority in interest of the Shares, engage in any business other than
the provision of certain advertising, entertainment, Internet access, and
communication services to long-haul professional truck drivers, truckstop
operators, fleets and constituent groups as described in the Executive Summary
or reasonable extensions or expansions thereof.
5.6 Restrictive Agreements Prohibited
The Company shall not become a party to any agreement which by its
terms restricts the Company's ability to comply with and perform its obligations
under the Transaction Documents and the Series D Certificate of Designation and
the By-Laws of the Company.
5.7 No Dividends: No Redemption
Subject to the provisions of the Transaction Documents, the Company's
Series D Certificate of Designation and the Company's existing debt instruments,
the Company will not (i) declare or make or permit to be declared or make any
payment of cash dividends on the Common Stock unless equal cash dividends are
declared and paid on the Series D Preferred Stock on the same date or (ii)
redeem or repurchase outstanding shares of Common Stock.
5.8 Consolidation, Merger and Sale
Without the consent of the holders of a majority of the outstanding
Shares, the Company will not do any of the following (or agree to do any of the
following): (a) wind up, liquidate or dissolve its affairs; (b) sell, lease,
transfer or otherwise dispose of 20% or more of its assets to any other person
other than in the ordinary course of business unless the proceeds of such
disposition are reinvested in assets of the general type used in the business of
the Company; (c)
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consolidate with, merge into or enter into a share exchange with any other
person; or (d) permit any other person (other than a wholly-owned subsidiary on
the date hereof) to merge into or sell, lease or transfer all or substantially
all of its property, assets or capital stock to the Company, unless:
(i) the surviving entity is an entity incorporated under the
laws of a State of the United States of America;
(ii) immediately after such purchase, merger or transfer, no
default with respect to any material contracts, understandings or agreements to
which the Company is or may be a party shall have occurred and be continuing;
(iii) the consolidated net worth of the surviving entity shall
be equal to or greater than the net worth of the Company immediately preceding
such purchase, merger or consolidation; and
(iv) either:
(A) the merger or consolidation is between two or
more wholly owned subsidiaries of the Company or between the
Company and one or more wholly-owned subsidiaries of the
Company; or
(B) following the merger or consolidation, the
stockholders immediately prior to the transaction hold as a
group the right to cast at least 20% of the votes of all
holders of voting securities of the resulting or surviving
entity.
5.9 Transactions with Affiliates
The Company will not, directly or indirectly, enter into any
transaction, series of transactions or agreement (including, without limitation,
the purchase, sale, distribution, lease or exchange of any property or the
rendering of any service) with any affiliate of the Company, other than a
wholly-owned subsidiary of the Company, unless such transaction, series of
transactions or agreement involves less than $100,000 per calendar year
individually or less than $500,000 per year in the aggregate and is on terms
that are no less favorable to the Company, as the case may be, than those which
might be obtained at the time of such transaction from a person who is not such
an affiliate; provided, however, that this Section 5.9 shall not limit, or be
applicable to, (i) contractual commitments of the Company that were entered into
prior to the date hereof, (ii) employment arrangements with any individual who
is an employee of the Company if such arrangements are approved by the Board of
Directors of the Company; (iii) the payment of reasonable and customary regular
fees to directors who are not employees of the Company and (iv) options
previously issued to present and former employees of the Company.
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5.10 Superior Classes or Series of Capital Stock: Amendment of Series D
Certificate of Designation, Certificate of Incorporation or
By-Laws
Without the consent of the holders of at least 60% of the then
outstanding Shares, the Company shall not (i) authorize, create, issue or sell
any class or series of equity security (other than Series A, Series B or Series
C Preferred Stock) having rights that are senior to, or pari passu with, the
Series D Preferred Stock except as authorized in the Series D Certificate of
Designation, or (ii) amend, waive or repeal any provisions of, or add any
provision to, the Series D Certificate of Designation, the Certificate of
Incorporation or any other certificate of designation filed with the Secretary
of State of Delaware by the Company with respect to its preferred stock, and/or
By-Laws of the Company.
5.11 No Dilution or Impairment: No Changes in Capital Stock
The Company will not, without the prior consent of holders owning a
majority of the outstanding Shares, by amendment of its Series D Certificate of
Designation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Transaction Documents or impair or reduce the rights of the holders of
the Shares as a class. The Company will at all times in good faith assist in the
carrying out of all such terms, and in the taking of all such action, as may be
necessary or appropriate in order to protect the rights of the holders of Shares
as such rights are set forth in the Transaction Documents and the Company's
Series D Certificate of Designation, against impairment. Without limiting the
generality of the foregoing, the Company: (a) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of the Company's Common Stock free
from all taxes, liens and charges with respect to the issue thereof, upon the
conversion of the Shares, from time to time, (b) will not take any action which
results in any adjustment of the basis of conversion of the shares described in
the Company's Series D Certificate of Designation if the total number of shares
of the Company's Common Stock issuable upon the conversion of all of the then
outstanding Shares would exceed the total number of shares of the Company's
Common Stock then designated under the Company's Series D Certificate of
Designation and authorized for the purpose of issuance upon such conversion, (c)
will not have any authorized Common Stock other than its existing authorized
class of Common Stock, (d) will not amend its Certificate of Incorporation to
change any terms of its Common Stock, (e) will not amend its Series D
Certificate of Designation in any manner to alter or change the powers,
privileges or preferences of the holders of the Series D Preferred Stock
(including without limitation amendments to its Series D Certificate of
Designation after any Shares have been called for redemption), (f) will not
create or authorize any obligation or security convertible into shares of Series
D Preferred Stock or into shares of any other class or series of stock unless
the same ranks pari passu to the Series D Preferred Stock as to the payment of
dividends and the distribution of assets on the liquidation, dissolution or
winding up of the Company, whether any such creation, authorization or increase
shall be by means of amendment to the Series D Certificate of Designation or by
merger, consolidation or otherwise and (g) after the date hereof, (i) will not
increase the number of shares of Common Stock covered under its Stock Option
Plan or any other option plan, and (ii) will not create or establish (or make
any grants or awards under) any stock, phantom stock, stock appreciation
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rights or other equity equivalent plan for employees, officers, directors,
agents or consultants of the Company whereby the Company agrees to pay any
person a percentage of, or an amount otherwise determined by reference to, the
earnings of the Company, the value of their stock or the proceeds from a sale of
their stock or upon their liquidation. Any of the foregoing may be amended or
waived with the consent of a majority in interest of the outstanding Shares.
5.12 Reservation of Shares
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of (i)
the conversion rights of the Shares provided in the Company's Series D
Certificate of Designation and (ii) the Agent's Warrant. If at any time the
number of authorized but unissued shares of Common Stock of the Company shall
not be sufficient to effect the conversion of the Shares and the exercise of the
Agent's Warrant or otherwise to comply with the terms of this Agreement, the
Company will forthwith take such corporate and stockholder action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable federal or state securities laws in connection with the issuance of
shares of Common Stock upon conversion of the Shares or exercise of the Agent's
Warrant.
5.13 Private Placement Status
Neither the Company nor any agent nor other person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares, and the issuance of Common Stock upon conversion
of the Shares, within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting requirements of any state securities law,
except for filings, notices or reports pursuant to state securities laws which
have already been made or which are contemplated in connection with the private
offering and sale of the Shares.
5.14 Regulation D Filing
The Company will file on a timely basis a Form D "Notice of Sale of
Securities Pursuant to Regulation D" and any amendments thereto required to be
filed with the Securities and Exchange Commission pursuant to Regulation D under
the Securities Act, and all notices, filings and registrations, and amendments
to any thereof as shall be required under any state securities or "Blue Sky" law
or any regulation thereunder, and will simultaneously furnish copies of such
Form D or amendment thereto and each such notice, filing registration or
amendment thereof to the Agent and to the Purchasers.
5.15 Access to Information and Documents.
Prior to the Closing, the Company shall give the Purchasers and their
respective counsel, accountants, and other representatives, reasonable access,
during normal business hours and upon
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reasonable notice, to all the properties, documents, contracts, records and
appropriate personnel of the Company. Prior to the Closing, the Company shall
furnish the Purchasers with copies of such documents and with such information
with respect to the affairs of the Company as the Purchasers may from time to
time reasonably request.
5.16 Further Assurances
Subject to the terms and conditions of this Agreement, the parties
hereto shall use best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws-and regulations to consummate and make effective the sale of the
Series D Preferred Stock pursuant to this Agreement.
5.17 Fees
The Company and each of the Purchasers shall bear their own legal and
other expenses with respect to this transaction, except that upon the Closing,
the Company shall pay (i) the fees, expenses and disbursements of Kirkland &
Ellis, counsel to the Purchasers, (ii) the Agent's expenses and cash commission,
as provided in the engagement letter dated May 12, 1999, between the Company and
the Agent (the "Engagement Letter"), and (iii) the fees payable for the filing
of the premerger notification and report form pursuant to the HSR Act, if
necessary.
5.18 Notices
The Company will give to all holders of Shares copies of all notices
given by the Company to holders of its Common Stock concurrently with the giving
of such notices to the holders of Common Stock.
5.19 Redemption Obligations
The Company acknowledges its obligation to redeem for cash all of the
Shares on the date six (6) months immediately after the payment in full and the
satisfaction of all of the obligations of the Company to the lenders who
provided financing to the Company in the aggregate principal amount of
Seventy-five Million Dollars ($75,000,000) in accordance with the terms of the
Company's Series D Certificate of Designation. If, the Company has insufficient
capital resources to redeem all such Shares, the Company covenants to use its
reasonable best efforts to obtain the funds necessary to effect such redemption
in full as soon as practicable, including engaging a nationally-known investment
banking or financial advisory firm reasonably acceptable to the holders of the
Shares to assist the Board of Directors and management in either (i) a
recapitalization of the Company or (ii) the sale of all or a portion of the
Company's assets, in order to generate sufficient funds to fully redeem such
Shares.
SECTION 6. CONDITIONS TO PURCHASERS' OBLIGATIONS
The Purchasers' obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions (any of which may be waived by the
Purchasers) as of the Closing:
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6.1 Series D Certificate of Designation; Certificate of Amendment and
Related Certificates of Designation.
(a) The Company's Series D Certificate of Designation, in form and
substance reasonably satisfactory to counsel to the Purchasers, shall have been
filed with the Delaware Secretary of State in substantially the form attached
hereto as Exhibit B and shall be in effect for the Company on and as of the date
of such Closing and the Purchasers shall have received evidence thereof
satisfactory to counsel to the Purchasers, and the Amendment to the Company's
Certificate of Incorporation to provide for an increased number of authorized
shares of the Company's capital stock shall have been duly approved in
accordance with Delaware law.
(b) The Company shall have: (i) obtained the approval of the Company's
existing stockholders to and filed with the Delaware Secretary of State the
Certificate of Amendment, the Certificate of Amendment to the Certificate of
Designation relating to the Series A Preferred Stock, the Certificate of
Amendment to the Certificate of Designation relating to the Series B Preferred
Stock, and the Certificate of Amendment to the Certificate of Designation
relating to the Series C Preferred Stock, and (ii) obtained all necessary
waivers and consents of stockholders of, and lenders to, the Company under other
agreements.
6.2 Accuracy of Representations and Warranties.
The representations and warranties of the Company in this Agreement or
in any certificate or document delivered pursuant hereto or thereto shall be
true and correct in all material respects on and as of the Closing with the same
effect as though made on and as of the Closing (after giving effect to
transactions contemplated by this Agreement).
6.3 Compliance with Agreements; Amendments to Registration Rights
Agreement, Securities Restriction Agreement, and Securityholders'
Agreement
(a) The Company shall have performed under, obtained all necessary
consents and/or waivers with respect to and complied with all agreements,
covenants and conditions contained in the Transaction Documents and any other
document contemplated hereby or thereby which are required to be performed or
complied with by the Company on or before the Closing.
(b) The Company and the requisite parties to each of the Registration
Rights Agreement, the Securityholders' Agreement and the Securities Restriction
Agreement each shall have entered into amendments to such agreements in form and
substance reasonably satisfactory to the Purchasers and their counsel.
6.4 Officers' Certificates
The Purchasers shall have received a certificate dated the Closing Date
and signed by the Chief Executive Officer and by the Chief Financial Officer of
the Company, to the effect that the conditions of this Section 6 have been
satisfied.
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6.5 Material Adverse Change
Except as disclosed in this Agreement or in any Schedule or Exhibit
hereto, there shall have been no material adverse change in the business or
financial condition or results of operations of the Company since March 31,
1999.
6.6 Proceedings
All corporate and other proceedings in connection with the transactions
contemplated by the Transaction Documents (including the issuance of the Agent's
Warrant), and all documents incident thereto, shall be in form and substance
reasonably satisfactory to the Purchasers and the Purchasers shall have received
all such originals or certified or other copies of such documents as the
Purchasers or their counsel may reasonably request.
6.7 Legality; Governmental and Other Authorization
The purchase of and payment for the Shares shall not be prohibited by
any law or governmental order, rule, ruling, regulation, release, interpretation
or opinion applicable to the Purchasers and shall not subject the Purchasers to
any penalty, tax, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any filings,
registrations or qualifications with, any governmental or administrative agency
or other person with respect to the transactions contemplated by this Agreement,
including, without limitation, any such filings or approvals as may be required
pursuant to the HSR Act, shall have been obtained or made and shall be in full
force and effect. The Company shall have delivered to the Purchasers upon their
reasonable request factual certificates or other evidence, in form and substance
reasonably satisfactory to the Purchasers and their counsel, setting forth what
is required to enable the Purchasers to establish compliance with this
condition.
6.8 No Change in Law, etc.
No legislation, order, rule, ruling or regulation shall have been
proposed, enacted or made by or on behalf of any governmental body, department
(including, but not limited to, the U.S. Department of Transportation) or
agency, and no legislation shall have been introduced in either House of
Congress, and no investigation by any governmental authority shall have been
commenced or threatened, and no action, suit or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court, other
governmental body or arbitrator, which, in any such case, in the reasonable
judgment of the Purchasers or their counsel could adversely affect, restrain,
prevent or change the transactions contemplated by this Agreement (including
without limitation the issuance of the Shares hereunder and thereunder) or
materially and adversely affect the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
6.9 Opinion of Counsel
The Purchasers shall have received an opinion of Kilpatrick Stockton
LLP, counsel for the Company, dated the Closing Date and addressed to the
Purchasers, which opinion shall be in form and substance reasonably satisfactory
to the Purchasers.
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6.10 Payment of Fees and Expenses
The Agent shall have received payment in cash via wire transfer of its
fees, commissions and expenses, as provided in the Engagement Letter.
6.11 Issuance of the Agent's Warrant (s)
The Company shall have issued to the Agent the Agent's Warrant, as
provided in the Engagement Letter.
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
7.1 Payment
Simultaneously with the Closing and as described in Section 2(b)
hereof, the Company shall receive payment of $10.50 per share of Series D
Preferred Stock being purchased at the Closing by certified or official bank
check(s) or wire transfers.
7.2 Representations and Warranties Correct
The representations and warranties made by the Purchasers in Section 5
hereof shall be true and correct in all material respects when made, and shall
be true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.
7.3 Legality.
Any necessary consents, approvals, licenses, permits, orders and
authorizations of, and any filings, registrations or qualifications with, any
governmental or administrative agency or other person with respect to the
transactions contemplated by this Agreement, including, without limitation, any
such filings or approvals as may be required pursuant to the HSR Act, shall have
been obtained or made and shall be in full force and effect.
SECTION 8. BROKERS
Except for certain fees payable to the Agent (all of which fees will be
paid by the Company subject to the terms of the Engagement Letter), the Company
represents and warrants to the Purchasers that there is no liability for (and
the Company will pay and indemnify the Purchasers against) any fees or expenses
(or claims therefor) of any investment banker, finder or broker retained by the
Company or its affiliates (or that claims it was retained by the Company or its
affiliates) in connection with this Agreement or sale of the Series D Preferred
Stock. The Company will indemnify the Purchasers against all such fees or
expenses payable to the enumerated persons in the preceding sentence and against
any other such fees, expenses or claims
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<PAGE> 26
of any person, unless such person was engaged by the Purchasers in connection
with this Agreement or any of the transactions contemplated hereby.
SECTION 9. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties (as of the date hereof and as of
the Closing), covenants and agreements of the Company and of the Purchasers
contained in this Agreement or in any document or certificate delivered pursuant
hereto or in connection herewith shall survive, and shall continue in effect
following (i) the execution and delivery of this Agreement, (ii) the Closing
hereunder, (iii) any investigation at any time made by the Purchasers or on
their behalf or by any other person, and (iv) the issuance, sale and delivery of
the Shares, any disposition thereof and any payment, conversion or cancellation
of the Shares except, that Sections 3 and 5 shall terminate upon the earlier of
(i) the consummation of a Qualifying Offering (as defined in the Series D
Certificate of Designation) or (ii) when less than 20% of the Shares remain
outstanding. All statements contained in any certificate delivered to the
Purchasers by or on behalf of the Company pursuant hereto shall constitute
representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchasers harmless
from and against, and will pay to the Purchasers the full amount of, any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) incurred by the Purchaser resulting
directly or indirectly from any material breach of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or any certificate delivered to the Purchasers pursuant hereto or in connection
herewith; provided that the Company shall only be required to indemnify the
Purchasers for attorneys' fees of one counsel to the Purchasers and provided,
further, that in no event shall the Company be liable for any amount in excess
of the proceeds received by the Company from the sale of the Shares.
SECTION 10. SPECIFIC PERFORMANCE
The parties (other than any parties that are (i) agencies,
instrumentalities or entities affiliated with any state government or (ii) a
government sponsored retirement system) agree that irreparable damage will
result in the event that this Agreement is not specifically enforced, and the
parties agree that any damages available at law for a breach of this Agreement
would not be an adequate remedy. Therefore, the provisions hereof and the
obligations of the parties hereunder shall be enforceable in a court of equity,
or other tribunal with jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies and all other remedies provided for in this Agreement
shall, however, be cumulative and not exclusive and shall be in addition to any
other remedies which a party may have under this Agreement or otherwise.
SECTION 11. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company will pay (i) the costs and expenses of the issuance of
the Shares and the furnishing of all opinions by counsel for the Company, (ii)
the fees of Kirkland & Ellis in connection with this
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<PAGE> 27
Agreement and the transactions contemplated hereby (whether or not a closing
occurs hereunder, and if a closing occurs, the Company will make such payment on
the Closing Date), (iii) subject to the Engagement Letter, the fees and
out-of-pocket expenses of the Agent, (iv) the fees and expenses (including
reasonable attorneys' fees and expenses of one counsel for all Purchasers) of
any Purchaser in enforcing its rights against the Company if the Company
materially defaults in its obligations hereunder or under the Series D
Certificate of Designation, and (v) the fees payable for the filing of the
premerger notification and report form pursuant to the HSR Act, if necessary.
(b) The Company agrees to pay, or to cause to be paid, all documentary,
stamp and other similar taxes levied under the laws of the United States of
America or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Shares and the execution and delivery of this
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Series D Certificate of Designation or this
Agreement or any such other documents or instruments and will hold the
Purchasers harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
(c) The obligations of the Company under this Section 11 shall survive
the Closing hereunder and any termination of this Agreement.
SECTION 12. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended, waived,
modified or terminated only with the written consent of the holders of a
majority of the outstanding Shares; provided, however, that, notwithstanding any
other term or condition of this Agreement to the contrary, the Company may,
prior to the Closing, amend Exhibit A to reflect the names and addresses of the
Purchasers of up to an aggregate of 3,000,000 Shares as parties to this
Agreement, but (i) the Company will not amend any reference to a particular
Purchaser or the number of shares to be purchased by such Purchaser without such
Purchaser's prior written consent, and (ii) the Company will, prior to the
Closing, notify all Purchasers of any amendment to Exhibit A. Each Purchaser
acknowledges that by operation hereof, the holders of a majority of the
outstanding Shares (which may not include such Purchaser) will have the right
and power to diminish or eliminate certain rights of such Purchaser under this
Agreement.
(b) The Company agrees that it will make reasonable efforts to notify
all holders of Shares in advance of any proposed amendment, waiver, modification
or termination, but failure to give such notice shall not in any way affect the
validity of any such amendment, waiver, modification or termination. In
addition, promptly after obtaining the written consent of the holders as herein
provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares then
outstanding, but failure to transmit copies shall not in any way affect the
validity of any such amendment, waiver, modification or termination.
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<PAGE> 28
SECTION 13. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) At any time at the request of any holder of Shares to the Company
at its address provided under Section 14 hereof, the Company at its expense
(except for any transfer tax arising out of the exchange) will issue and deliver
to or upon the order of the holder in exchange therefor a new certificate or
certificates therefor in such amount or amounts as such holder may request in
the aggregate representing the number of Shares represented by such surrendered
certificates, and registered in the name of such holder or otherwise as such
holder may direct.
(b) Any Share certificate which is converted into shares of Common
Stock in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into shares of Common Stock. The Company shall issue a new certificate with
respect to any Shares which were not converted into shares of Common Stock and
were represented by a certificate which was converted or exercised in part.
(c) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Share certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender of such Share certificate (which surrendered Share certificate
shall be canceled by the Company), the Company will issue a new Share
certificate of like tenor in lieu of such lost, stolen, destroyed or mutilated
Share certificate as if the lost, stolen, destroyed or mutilated Share
certificate were then surrendered for exchange.
SECTION 14. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), if to the Company at the address
indicated below, or if to a Purchaser at the address indicated on Exhibit A
hereto, or at such other address as a party may from time to time designate as
its address in writing to the other party to this Agreement. Whenever any notice
is required to be given hereunder, such notice shall be deemed given and such
requirement satisfied only when such notice is delivered or, if sent by telex or
telecopier, when received.
(a) If to the Company:
PNV.net, Inc
11711 NW 39th Street
Coral Springs, Florida 33065
Attention: Robert P. May, Chief Executive Officer
Fax: 954-745-7899
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with a copy to:
James M. O'Connell
Kilpatrick Stockton LLP
3737 Glenwood Avenue
Suite 400
Raleigh, North Carolina 27612
Fax: 919-420-1800
(b) If to a Purchaser, at the address of such Purchaser set forth on
Exhibit A, with a copy to the address set forth below such Purchaser's name on
Exhibit A.
SECTION 15. MISCELLANEOUS
(a) This Agreement (including all schedules and exhibits hereto) and,
upon the closing hereunder, the Series D Certificate of Designation, together
with any further agreements entered into by the Purchasers and the Company at
the Closing hereunder, contain the entire agreement between the Purchasers and
the Company, and supersede any prior oral or written agreements, commitments,
terms or understandings regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
(other than any parties that are (i) agencies, instrumentalities or entities
affiliated with any state government or (ii) a government sponsored retirement
system) hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) Unless otherwise expressly provided herein, any provision of this
Agreement relating to the consent, determination, decision or waiver of a holder
or holders of Shares means such holder's consent, determination, decision or
waiver in such holder's sole discretion.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that the Company may not assign any of its rights,
duties or obligations under this Agreement, except in connection with a
transaction permitted by Section 5.9 or with the Purchasers' written consent.
(e) In addition to any assignment by operation of law, a Purchaser may
assign, in whole or in part, any or all of its rights (and/or obligations) under
this Agreement to any permitted transferee of any or all of its Shares, except
as provided under the terms of the Registration Rights Agreement, and (unless
such assignment expressly provides otherwise) any such assignment shall not
diminish the rights the Purchaser would otherwise have under this Agreement or
with respect to any remaining Shares held by such Purchaser.
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<PAGE> 30
(f) No course of dealing and no delay on the part of any party hereto
in exercising any right, power, or remedy conferred by this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(g) The headings and captions in this Agreement are for convenience of
reference only and shall not define, limit or otherwise affect any of the terms
or provisions hereof.
(h) The Company hereby agrees that the Agent may rely upon the
Company's representations and warranties made to the Purchasers in Section 3
hereof as if such representations and warranties were made directly to the
Agent.
(i) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
Each of the parties (other than any parties that are (i) agencies,
instrumentalities or entities affiliated with any state government or (ii) a
government sponsored retirement system) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Delaware or any Federal court
sitting in the State of Delaware for purposes of any controversy, claim or
dispute arising out of or related to this Agreement.
(j) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart. The authentic
signature of any party received by facsimile transmission shall constitute a
valid and binding signature of such party.
(The remainder of this page is intentionally left blank.)
29
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COMPANY: PNV.NET, INC.
By: /s/
--------------------------------------
Robert P. May, Chief Executive Officer
PURCHASER: ABRY BROADCAST PARTNERS III, L.P.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
30
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
COMPANY: PNV.NET, INC.
By: /s/
--------------------------------------
Robert P. May, Chief Executive Officer
PURCHASER: HALPERN DENNY FUND II, L.P.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
31
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
COMPANY: PNV.NET, INC.
By: /s/
--------------------------------------
Robert P. May, Chief Executive Officer
PURCHASER: CUMMINS ENGINE COMPANY, INC.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
32
<PAGE> 34
EXHIBIT A
Schedule of Purchasers
to
Stock Purchase Agreement, dated as of August 27, 1999
Number of Aggregate
Name and Address of Purchaser Shares Purchased Purchase Price
- ----------------------------- ---------------- --------------
ABRY Broadcast Partners III, L.P. 1,904,762 $20,000,001.00
c/o ABRY Partners Incorporated
18 Newbury Street
Boston, Massachusetts 02116
Fax: (617) 859-8797
with a copy to:
John L. Kuehn
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Fax: (212) 446-4900
Halpern Denny Fund II, L.P. 619,048 $6,500,004.00
500 Boylston Street
Boston, MA 02116
Fax: (617) 536 -8535
with a copy to
Roslyn G. Daum
Choate Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Fax: (617) 248-4000
Cummins Engine Company, Inc. 476,190 $4,999,995.00
500 Jackson Street
Columbus, Indiana 47201
Atten: Kent Finkbiner
Fax: (812) 377-1309
with a copy to
Dave Wright
500 Jackson Street
Columbus, Indiana 47201
Fax: (812) 377-1309
TOTAL 3,000,000 $31,500,000
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<PAGE> 35
EXHIBIT B
FORM OF SERIES D CERTIFICATE OF DESIGNATIONS
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF PNV.NET, INC.
PNV.NET, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss. 151 of the Delaware
General Corporation Law, the Board of Directors, pursuant to unanimous written
consent dated August ___, 1999, adopted the following resolution providing for
the designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series D 7%
Cumulative Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares known as common stock, $.001 par value per
share (the "Common Stock"), and preferred stock, $.01 par value per share
("Preferred Stock"); and
WHEREAS, the Board of Directors of the Corporation is
authorized by the Certificate of Incorporation to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
deems it advisable to, and hereby does, designate a Series D 7% Cumulative
Convertible Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series D 7%
Cumulative Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series D 7% Cumulative Convertible Preferred Stock" (referred to
herein as the "Series D Stock").
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<PAGE> 36
2. Authorized Number. The number of shares constituting the Series D
Stock shall be 3,000,000.
3. Dividends. The holders of shares of Series D Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of assets legally available for such purpose, dividends at the rate of
$0.735 (i.e., 7%) (as adjusted for stock splits, and other subdivisions and
combinations of Common Stock after the date of the Purchase Agreements
("Recapitalization Events")) per share per annum, which shall be payable when
and if declared by the Board of Directors or shall accrue quarterly on the last
day of January, April, July and October in each year, commencing on October 31,
1999; provided, however, that upon an Event of Default (as hereinafter defined)
and so long as it shall continue, such dividend rate shall be $0.945 (i.e., 9%)
(as adjusted for Recapitalization Events) per share per annum. Dividends on the
Series D Stock shall be cumulative so that if, for any dividend accrual period,
cash dividends at the rate hereinabove specified are not declared and paid or
set aside for payment, the amount of accrued but unpaid dividends shall
accumulate and shall be added to the dividends payable for subsequent dividend
accrual periods and upon any redemption or conversion of shares of Series D
Stock. If any shares of Series D Stock are issued on a date which does not
coincide with a dividend payment date, then the initial dividend accrual period
applicable to such shares shall be the period from the date of issuance thereof
through whichever of January 31, April 30, July 31, or October 31 next occurs
after the date of issuance. If the date fixed for payment of a final liquidating
distribution on any shares of Series D Stock, or the date on which any shares of
Series D Stock are redeemed or converted into Common Stock, does not coincide
with a dividend payment date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend accrual period
applicable to such shares shall be the period from whichever of February 1, May
1, August 1 or November 1 most recently precedes the date of such payment,
conversion or redemption through the effective date of such payment, conversion
or redemption. Dividends paid in cash on the shares of Series D Stock (or Series
A Stock, Series B Stock or Series C Stock, which shall rank pari passu with the
Series D Stock) in an amount less than the total amount of such dividends shall
be allocated pro rata so that the total value of dividends paid on the Preferred
Stock shall in all cases bear to each other the same ratio that the total value
of accrued and unpaid dividends on the Series A Stock, the Series B Stock, the
Series C Stock and the Series D Stock bear to each other. Without the written
consent of the holders of at least 60 % of the then outstanding Series D Stock,
the Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities (as defined herein) of the Corporation unless at the time of such
declaration, payment or distribution all dividends on the Series D Stock accrued
for all past dividend accrual periods shall have been paid and the full
dividends thereon for the current dividend period shall be paid or declared and
set aside for payment. Notwithstanding any other term or condition of this
Section 3 to the contrary, upon the consummation of a Qualifying Offering (as
defined below) and in connection with the conversion of the Series D Stock
pursuant to Section 5(b) hereof, the Company may pay any and all accrued but
unpaid dividends on the Series D Stock with shares of
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<PAGE> 37
Common Stock, each share of which shall, for the purposes of determining the
number of shares of Common Stock issuable in satisfaction of such accrued but
unpaid dividends pursuant to this Section 3, be deemed to have a value equal to
the price at which the Common Stock is sold in such Qualifying Offering.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series D Stock shall be entitled, before any distribution or
payment is made upon any Common Stock or any other class or series of
stock ranking junior to the Series D Stock as to distribution of assets
upon liquidation (other than the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock of the Corporation
which shall rank pari passu with the Series D Stock), to be paid an
amount equal to $10.50 per share (as adjusted for Recapitalization
Events) plus all accrued and unpaid dividends to such date
(collectively, the "Liquidation Payments"). If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series D
Stock shall be insufficient to permit payment in full to the holders of
Series D Stock of the Liquidation Payments, then the entire assets of
the Corporation shall be distributed ratably among such holders and the
holders of any class of preferred stock ranking on a parity with the
Series D Stock in proportion to the full respective distributive
amounts to which they are entitled.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after the holders of Series D Stock shall have been paid
in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference
to the holders of Common Stock and any other class or series of stock
ranking junior to the Series D Stock as to distribution of assets upon
liquidation.
(c) Written notice of a liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Payments, the
amounts to be paid to the holders of Common Stock (both per share and
in the aggregate) upon such a liquidation, dissolution or winding up,
and the place where said Liquidation Payments shall be payable, shall
be given by mail, postage prepaid, not less than 30 days prior to the
payment date stated therein, to each holder of record of Series D Stock
at its post office address as shown by the records of the Corporation.
5. Conversion.
The holders of the Series D Stock shall have the following
conversion rights:
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<PAGE> 38
(a) Optional Conversion. Each share of Series D Stock shall be
convertible at any time, at the option of the holder of record thereof,
into fully paid and nonassessable shares of Common Stock at the
"conversion rate" (as defined in paragraph (c) below) then in effect
upon surrender to the Corporation or its transfer agent of the
certificate or certificates representing the Series D Stock to be
converted, as provided below, or if the holder notifies the Corporation
or its transfer agent that such certificate or certificates have been
lost, stolen or destroyed, upon the execution and delivery of an
agreement satisfactory to the Corporation to indemnify the Corporation
from any losses incurred by it in connection therewith.
(b) Conversion on Qualifying Offering. Upon the consummation
of a Qualifying Offering (as defined below), upon not less than ten
(10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series D Stock shall be
converted into fully paid and nonassessable shares of Common Stock at
the conversion rate then in effect. A "Qualifying Offering" means (i)
the Corporation shall have consummated a firm commitment underwritten
public offering of its Common Stock by a nationally recognized
investment banking firm pursuant to an effective registration under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock which results in gross proceeds of at least $20,000,000,
(ii) the Common Stock is quoted or listed by either The Nasdaq Stock
Market (National Market) ("Nasdaq"), the New York Stock Exchange or the
American Stock Exchange, (iii) the price at which the Common Stock is
sold in such offering is at least equal to the lesser of an amount
which (x) is 200% of the then effective conversion price or (y) would
represent, on an as converted basis, a compound annual rate of return
of 35% based upon the original issuance price of the Series D Stock,
and (iv) all outstanding shares of the Series B Preferred Stock and the
Series C Preferred Stock shall have been converted into shares of
common stock of the Company in accordance with the Certificate of
Designation relating to the Series B Preferred Stock and the Series C
Preferred Stock and all outstanding shares of the Series A Preferred
Stock shall have been redeemed in accordance with the Certificate of
Designation relating to the Series A Preferred Stock. Upon the
achievement of (i), (ii), (iii) and (iv) above and the giving of the
mandatory conversion notice by the Corporation, the outstanding shares
of Series D Stock to be converted shall be converted automatically
without any further action by the holders of such shares and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of
Series D Stock surrendered for conversion under this Section 5.
Initially, the conversion rate shall be 1.0, i.e., 1.0 share of Common
Stock for each share of Series D Stock being converted. Such conversion
rate shall be subject to adjustment as provided in Section 6 below. As
used herein, the term
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<PAGE> 39
"conversion price" shall be an amount computed by dividing $10.50 by
the conversion rate then in effect. Initially, the conversion price
shall be $10.50 per share of Common Stock. If any fractional interest
in a share of Common Stock would be deliverable upon conversion of
Series D Stock (taking into account all shares of Series D Stock being
converted by each holder), the Corporation shall pay in lieu of such
fractional share an amount in cash equal to the conversion price of
such fractional share (computed to the nearest one hundredth of a
share) in effect at the close of business on the date of conversion.
Any shares of Series D Stock which have been converted shall be
canceled and all dividends on converted shares shall cease to accrue
and the certificates representing shares of Series D Stock so converted
shall represent the right to receive (i) such number of shares of
Common Stock into which such shares of Series D Stock are convertible,
plus (ii) cash payable for any fractional share plus (iii) all accrued
but unpaid dividends relating to such shares through the immediately
preceding dividend payment date. Upon the conversion of shares of
Series D Stock as provided in this Section 5, the Corporation shall
promptly pay all then accrued but unpaid dividends to the holder of the
Series D Stock being converted. The Board of Directors of the
Corporation shall at all times reserve a sufficient number of
authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of an optional
conversion, before any holder of Series D Stock shall be entitled to
convert the same into shares of Common Stock, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or its transfer agent for the Series D Stock, and shall
give written notice to the Corporation of the election to convert the
same and shall state therein the name or names in which the certificate
of certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series D Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series D Stock in any case in which fewer than all
of the shares of Series D Stock represented by a certificate are
converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies
that the shares of Common Stock to be issued on conversion are to be
issued in a name or names other than the name or names in which such
surrendered shares stand, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series D Stock at the time of surrender of the
shares involved, the shares of Common Stock issued upon
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conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the
contrary.
6. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series D Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (including the
sale and issuance of any shares of Common Stock at any time
directly or indirectly owned or held by or for the account of
the Corporation), or deemed to be issued by the Corporation
pursuant to paragraph (g) of this Section 6, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to, the
Series B Stock, the Series C Stock or the Series D
Stock now or hereafter issued by the Corporation;
(B) up to 2,184,166 shares of Common Stock
(as reduced by previously exercised options to
purchase 10,432 shares of Common Stock) issuable upon
the exercise of options issued to officers,
directors, employees, and consultants of the
Corporation under stock option plans maintained from
time to time by the Corporation and approved by the
Board of Directors, subject to adjustment for all
subdivisions and combinations;
(C) up to 186,750 shares of Common Stock
issuable upon the exercise of the Warrant held by
Alex. Brown & Sons Incorporated;
(D) up to 505,375 shares of Common Stock
issuable upon the exercise of warrants granted to
lenders in connection with loans to the Corporation
or to guarantors or purchasers of such loans;
(E) up to 75,000 shares of Common Stock
issuable upon the exercise of the Warrant held by
Volpe Brown Whelan & Company, LLC;
(F) up to 12,000 shares of Common Stock
issuable upon the exercise of warrants to be issued
to customers in connection with contracts between the
Corporation and such customers; and
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(G) shares of Common Stock issued with
respect to adjustments of the conversion price
hereunder.
(ii) The term "Common Stock" shall be deemed to mean
(i) the Common Stock, $.001 par value, and (ii) the stock of
the Corporation of any class, or series within a class,
whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets
of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than Series B
Stock, Series C Stock and Series D Stock issued prior to the
Original Issue Date (as defined below)) or other securities
directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(iv) The term "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire
directly or indirectly Common Stock or Convertible Securities.
(v) The term "Original Issue Date" shall mean the
date of the initial issuance of the Series D Stock.
(vi) The term "Fair Market Price" shall mean with
respect to a share of Common Stock (i) prior to the first
anniversary of the Original Issue Date, the conversion price
in effect on the Original Issue Date, and (ii) subsequent to
the first anniversary of the Original Issue Date, the average
closing bid price of the Common Stock as reported by Nasdaq
(or the last sale price if the Common Stock is traded on an
exchange) for a period of thirty (30) consecutive trading days
ending on the third day prior to the date of determination,
or, if the Common Stock is not listed on Nasdaq or an
exchange, the fair market value as determined by the vote of
66 2/3% of the Corporation's Board of Directors and approved
by the holders of not less than a majority of the then
outstanding shares of Series D Stock or if the Board of
Directors cannot reach such agreement (or if not so approved
by the holders of Series D Stock), as determined by a
qualified independent investment banker appointed by the vote
of 66 2/3% of the Corporation's Board of Directors, such
banker to be approved by the holders of not less than a
majority of the then outstanding shares of Series D Stock.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from no par
value to par value or a transaction described in subsection (c) or (d)
below, each share of Series D Stock shall, after such reorganization,
share exchange or reclassification (a "Reclassification Event"), be
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convertible at the option of the holder into the kind and number of
shares of stock or other securities or other property of the
Corporation which the holder of Series D Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon
conversion of his Series D Stock immediately prior to such
reorganization, share exchange, or reclassification (subject to
adjustment as provided in this Section 6).
(c) Consolidation, Merger. In the event of a merger or
consolidation to which the Corporation is a party each share of Series
D Stock shall, after such merger or consolidation, be convertible at
the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of
such share of Series D Stock would have been entitled to receive if the
holder had held the Common Stock issuable upon con version of such
share of Series D Stock immediately prior to such consolidation or
merger (subject to adjustment as provided in this Section 6).
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is earlier.
In case outstanding shares of Common Stock shall be combined, the
conversion price shall be proportionately increased as of the effective
date of such combination, or as of the date a record is taken of the
holders of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such
dividend is declared), then the conversion price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the earliest of the date of such declaration,
payment or other distribution), to that price determined by multiplying
the conversion price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the declaration of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding as of the time of the declaration and giving
effect to such dividend or other distribution as if paid. In the event
that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
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(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (g) below) after the Original Issue Date (other
than as provided in the foregoing subsections (b) through (e)), for no
consideration or for a consideration per share less than the greater of
(i) the Fair Market Price in effect on the date of and immediately
prior to such issue or (ii) the conversion price in effect on the date
of and immediately prior to such issue, then in such event, the
conversion price shall be reduced (but not increased) as follows:
(i) For issuances of Additional Shares of Common
Stock on or before 9 months after the Original Issue Date, if
the issuance or sales price of the Additional Shares of Common
Stock is below $10.50, the conversion price shall be reduced
(but not increased) so as to equal such issuance or sales
price.
(ii) For issuances of Additional Shares of Common
Stock at any time after 9 months after the Original Issue
Date, the conversion price shall be reduced (but not
increased) concurrently with any such issuance to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number
of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the
conversion price in effect immediately prior to such
issuance or sale, plus (y) the aggregate
consideration received or deemed to be received by
the Corporation upon such issuance or sale, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or
sale.
For purposes of the formulas expressed in
paragraph 6(e) and 6(f), all shares of Common Stock issuable upon the exercise
of outstanding Options with an exercise price less than the then current fair
market value of Common Stock or issuable upon the conversion of the Series B
Stock, the Series C Stock or the Series D Stock or other outstanding Convertible
Securities with an exercise or exchange price less than the then current fair
market value of Common Stock (including Convertible Securities issued upon the
exercise of outstanding Options), shall be deemed outstanding shares of Common
Stock both immediately before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein
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designed to protect against dilution) of Common Stock issuable upon the
exercise of such Options, or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue of Options or Convertible
Securities or, in case such a record date shall have been fixed, as of
the close of business on such record date, provided that in any such
case in which Additional Shares of Common Stock are deemed to be
issued:
(i) except as provided in Section 6(g)(ii) below, no
further adjustments in the conversion price shall be made upon
the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options, or the issue
of Common Stock upon the conversion or exchange of such
Convertible Securities, in accordance with their terms;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise (or
the terms of such Options or Convertible Securities are
amended or modified to provide) for any increase or decrease
in the consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such
Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the
conversion price shall affect Common Stock previously issued
upon conversion of the Series D Stock);
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the conversion
price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as
if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor
was the consideration actually received by the
Corporation (x) for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon exercise of
the Options or (y) for the issue of all such
Convertible Securities which were actually converted
or
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exchanged plus the additional consideration, if any,
actually received by the Corporation upon the
conversion or exchange of the Convertible Securities;
and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the conversion price
to an amount which exceeds the lower of (x) the conversion
price on the original adjustment date or (y) the conversion
price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date
and such readjustment date.
(v) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the conversion price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(iii) above.
(h) Determination of Consideration. For purposes of this
Section 6, the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the Corporation;
and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of the issue, as determined by the vote of
66 2/3% of the Corporation's Board of Directors and
approved by holders of not less than a majority of
the then outstanding shares of Series D Stock or if
the Board of Directors cannot reach such agreement
(or if not so approved by the holders of Series D
Stock), by a qualified independent public accounting
firm, other than the accounting firm then engaged as
the Corporation's independent auditors, agreed upon
by the Corporation on the
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one hand and the holders of 60 % of the outstanding
shares of Series D Stock on the other hand.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to paragraph (g) above, relating to Options and
Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(i) Adjustments Based Upon EBITDA for Fiscal Year Ending June
30, 2000. If the conversion price of the Series C Stock is adjusted
pursuant to the terms and conditions of Section 6(i) of the Certificate
of Designations providing for the rights, privileges and preferences of
the Series C Stock (the "EBITDA Adjustment), then the conversion price
of the Series D Stock shall be adjusted to an amount determined by
multiplying the conversion price of the Series D Stock by a ratio (x)
the numerator of which will equal the conversion price of the Series C
Stock, as adjusted pursuant to the EBITDA Adjustment, and (y) the
denominator of which will equal $8.00. If the conversion price of the
Series C Stock is subsequently adjusted pursuant to the terms and
conditions of Section 6(i)(iv) of the Certificate of Designations
providing for the rights, privileges and preferences of the Series C
Stock, then corresponding adjustments will be made to the conversion
price of the Series D Stock.
(j) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 6, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect on the Original Issue Date, by (y) the
adjusted conversion price.
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(k) Other Provisions Applicable to Adjustment Under this
Section. The following provisions will be applicable to the adjustments
in conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for
the account of the Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding
number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable effect on
the holders of Series D Stock, the conversion price shall be
adjusted in such manner and at such time as the Board of
Directors of the Corporation on the advice of the
Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the
conversion price shall be made if the amount of any such
adjustment would be an amount less than one percent (1%) of
the conversion price then in effect, but any such amount shall
be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall
not be adjusted upward except in the event of a combination of
the outstanding shares of Common Stock into a smaller number
of shares of Common Stock or in the event of a readjustment of
the conversion price pursuant to Section 6(g)(ii) or (iii).
(l) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series D Stock.
7. Redemption.
(a) Mandatory Redemption. On the date six (6) months
immediately after the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate
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principal amount of Seventy-five Million Dollars ($75,000,000.00)
(referred to herein as the "Mandatory Redemption Date") the Corporation
shall redeem all the shares of Series D Stock originally issued
hereunder (or such lesser amount as shall then be outstanding) at the
"Redemption Price" per share defined in paragraph (c) below, payable in
each case in cash on the Mandatory Redemption Date. The Corporation
shall deliver written notice of the pending redemption to the holders
of the Series D Stock at least thirty (30) but no more than sixty (60)
days prior to the Mandatory Redemption Date.
(b) Redemption on Change of Control. Upon a "Change of
Control" of the Corporation, each holder of the then outstanding shares
of Series D Stock may elect to have the Corporation redeem all (but not
less than all) outstanding shares of Series D Stock owned by such
holder at the "Redemption Price" per share defined in paragraph (c)
below, payable in cash on any date within 100 days of the effective
date of the Change of Control (such date being herein referred to as
the "Change of Control Redemption Date"). The election shall be made by
delivering written notice to the Corporation at least thirty (30) but
no more than sixty (60) days prior to the Change of Control Redemption
Date. The Corporation will then be required to redeem all the shares of
Series D Stock owned by such holder on the Change of Control Redemption
Date. For purposes of this Section 7, "Change of Control" means any one
or more of the following events:
(i) The Corporation shall consolidate with or merge
into any other person or any person shall consolidate with or
merge into the Corporation (other than a consolidation or
merger of the Corporation and a wholly-owned subsidiary of the
Corporation in which all shares of the Corporation's Common
Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration), in either event pursuant to a transaction in
which any of the Corporation's common stock outstanding
immediately prior to the effectiveness thereof is changed into
or exchanged for cash, securities or other property; or
(ii) the Corporation shall directly or indirectly
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any
person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act") (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share
exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value
to par value; or
(iv) any person (other than the Corporation, any
subsidiary of the Corporation or an Existing Investor (as
defined in the Purchase Agreement (as
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hereinafter defined))), including a "group" (within the
meaning of Section 13(d) and 14(D)(2) of the 1934 Act) that
includes such person, shall purchase or otherwise acquire,
directly or indirectly, beneficial ownership of securities of
the Corporation and, as a result of such purchase or
acquisition, such person (together with its associates and
affiliates) shall directly or indirectly beneficially own in
the aggregate (1) more than 50% of the Common Stock, or (2)
securities representing more than 50% of the combined voting
power of the Corporation's voting securities, in each case
under subclause (1) or (2), outstanding on the date
immediately prior to the date of such purchase or acquisition
(or, if there be more than one, the last such purchase or
acquisition).
(c) The Redemption Price per share of Series D Stock shall
equal the sum of (x) $10.50 (as adjusted for Recapitalization Events)
plus (y) all accrued and unpaid dividends on such share of Series D
Stock to the Mandatory Redemption Date or Change of Control Redemption
Date, as the case may be.
(d) The term "Redemption Date" as used in this paragraph (d)
shall refer to whichever of the Mandatory Redemption Date or the Change
of Control Redemption Date is applicable in a particular circumstance.
On or prior to the Redemption Date, the Corporation shall deposit the
Redemption Price of all outstanding shares of Series D Stock to be
redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of
the holders of the shares of Series D Stock, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or
after the Redemption Date upon receipt of the certificate or
certificates of the shares of Series D Stock to be redeemed. From and
after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Series D Stock to be redeemed as holders of Series D Stock (except the
right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series D
Stock redeemed, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series D
Stock (or Series A Stock, Series B Stock and Series C Stock which shall
rank pari passu with the Series D Stock) are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date,
the Corporation will use those funds which are legally available
therefor to redeem the maximum possible number of shares of Preferred
Stock ratably among the holders of such shares to be redeemed based
upon the total amount payable by the Corporation pursuant to the
redemption of the Series D Stock, Series C Stock, Series B Stock and
Series A Stock if the Corporation had sufficient funds legally
available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series D Stock not redeemed shall remain
outstanding and entitled to all the
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rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of shares of Series D Stock such funds will immediately be
used to redeem the balance of the shares of Series D Stock to be
redeemed. No dividends or other distributions shall be declared or paid
on, nor shall the Corporation redeem, purchase or acquire any shares
of, the Common Stock or any other class or series of stock of the
Corporation unless the Redemption Price of all shares elected to be
redeemed shall have been paid in full. Until the Redemption Price for a
share of Series D Stock elected to be redeemed shall have been paid in
full, such share of Series D Stock shall remain outstanding for all
purposes and entitle the holder thereof to all the rights and
privileges provided herein, including, without limitation, that
dividends and interest thereon shall continue to accrue and, if unpaid
prior to the date such shares are redeemed, shall be included as part
of the Redemption Price as provided in paragraph (c) above.
Notwithstanding anything in this Section 7 to the contrary, even if a
notice of redemption was delivered under paragraph (a) or (b) of this
Section 7, all shares of Series D Stock shall be convertible pursuant
to Section 5 at all times prior to the Redemption Date.
(e) Notwithstanding any other term of this Certificate of
Designation, the Corporation shall not redeem (or have any obligation
to redeem) any shares of Series D Stock under any circumstances,
whether upon a Change of Control or otherwise, prior to the payment in
full and satisfaction of all of the obligations of the Corporation to
the lenders who provide financing to the Corporation in the aggregate
principal amount of $75,000,000.00. If the Corporation shall not have
paid in full or satisfied all of its obligations to such lenders on or
before any Redemption Date, upon such payment and satisfaction the
Corporation will immediately use any funds legally available therefor
to redeem the shares of Series D Stock to be redeemed.
8. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or (e) of
a Change of Control, then the Corporation shall cause to be mailed to the
recordholders of the Series D Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation, winding up or Change of Control is
expected to become effective,
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and the date as of which it is expected that holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, reorganization share
exchange, consolidation, liquidation, merger, sale, lease, exchange,
dissolution, liquidation, winding up or Change of Control.
9. Voting Rights.
(a) Holders of Series D Stock shall be entitled to notice of
any stockholder's meeting. Except as otherwise required by law or
provided herein, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any
such meeting, each outstanding share of Series D Stock shall be
entitled to the number of votes equal to the number of full shares of
Common Stock into which such share of Series D Stock is then
convertible. Except as otherwise required by law or provided herein,
the Series B Stock, the Series C Stock, the Series D Stock and the
Common Stock shall vote together on each matter submitted to
stockholders, and not by class or series.
(b) Upon an Event of Default and so long as it shall continue,
the holders of the Series B Stock, the Series C Stock and the Series D
Stock, voting together as a class, shall be entitled at any annual
meeting of the stockholders or special meeting held in place thereof,
or at a special meeting of the holders of the Series B Stock, the
Series C Stock and the Series D Stock called as hereinafter provided,
to elect a majority of the Board of Directors and such right to elect a
majority of the Board of Directors shall be in lieu of the right of the
holders of the Series B Stock and the Series C Stock (and, as may be
provided pursuant to the terms of this Certificate of Designations,
Preferences and Rights of the Series D Stock, the Series D Stock) to
each elect one director. Such right of the holders of the Series B
Stock, the Series C Stock and the Series D Stock to elect a majority of
the Board of Directors may be exercised until an Event of Default shall
be cured, if curable, or waived, and when so cured or waived, the right
of the holders of Series B Stock, the Series C Stock and the Series D
Stock to elect a majority of the Board of Directors shall cease and the
right of the holders of the Series B Stock and the Series C Stock (and,
as may be provided pursuant to the terms of this Certificate of
Designations, Preferences and Rights of the Series D Stock, the Series
D Stock) to each elect one director shall resume, but subject always to
the same provisions for the vesting of such special voting rights in
the case of any such future Event of Default. At any time when such
special voting rights shall have so vested in the holders of the Series
B Stock, the Series C Stock and the Series D Stock, the Secretary of
the Corporation may, and upon the written request of the holders of 10%
or more of the number of shares of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding addressed to him at the
principal office of the Corporation, shall, call a special meeting of
the holders of the Series B Stock, the Series C Stock and the Series D
Stock for the election of a majority of the Board of Directors to be
elected by them as provided herein, to be held in the case of such
50
<PAGE> 52
written request as soon as practicable after delivery of such request,
and in either case to be held at the place and upon the notice provided
by law and in the by-laws for the holding of meetings of stockholders.
If at any such annual or special meeting or adjournment thereof the
holders of at least a majority of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding shall be present or
represented at such meeting, the then authorized number of directors of
the Corporation shall be increased to the extent necessary to provide a
majority of new directors to be elected and the holders of the Series B
Stock, the Series C Stock and the Series D Stock shall be entitled to
elect the additional directors so provided for. The directors so
elected shall serve until the next annual meeting or until their
successors shall be elected and qualified, provided, however, that
whenever the holders of the Preferred Stock shall be divested of the
special rights to elect a majority of the Board of Directors as above
provided, the term of office of the persons so elected as directors by
the holders of the Series B Stock, the Series C Stock and the Series D
Stock as a class, or elected to fill any vacancies resulting from the
death, resignation or removal of the directors so elected by the
holders of Series B Stock, the Series C Stock and the Series D Stock,
shall forthwith terminate and the authorized number of directors shall
be reduced accordingly.
If during any interval between any special meeting of the
holders of Series B Stock, the Series C Stock and the Series D Stock
for the election of directors to be elected by them as provided above
and the next ensuing annual meeting of stockholders, or between annual
meetings of stockholders for the election of directors, and while the
holders of the Series B Stock, the Series C Stock and the Series D
Stock shall be entitled to elect a majority of the Board of Directors,
any of the directors who have been elected by the holders of the Series
B Stock, the Series C Stock and the Series D Stock shall, by reason of
resignation, death or removal, have departed from the Board, the
Secretary of the Corporation shall call a special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock and such vacancy or vacancies shall be filled at such special
meeting.
(c) In addition to any other vote or consent of stockholders
provided by law or by the Corporation's Certificate of Incorporation,
the Corporation shall not, without the approval by vote or written
consent of the holders of not less than 60 % of the then outstanding
shares of Series D Stock:
(i) amend, waive or repeal any provisions of, or add
any provision to, (i) this Certificate of Designation or (ii)
any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation filed
with the Secretary of State of Delaware by the Corporation
with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add
any provision to, the Corporation's By-Laws;
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<PAGE> 53
(iii) authorize, create, issue or sell any shares of
Equivalent Stock or Superior Stock, except as authorized in
this Certificate of Designation;
(iv) issue any shares of Series D Stock other than
pursuant to the Purchase Agreement or upon transfers of
outstanding shares of Series D Stock;
(v) enter into any agreement, indenture or other
instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on or make
redemptions of the Series D Stock in accordance herewith;
(vi) dissolve the Corporation;
(vii) enter into any agreement(s) that would restrict
the Corporation's ability to perform its obligations pursuant
to the Purchase Agreements (as defined in Section 11(iv)
below);
(viii) (A) at any time prior to the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless (i) the aggregate consideration
received by the Corporation or its stockholders, divided by
(ii) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding as of the date of such
transaction, equals or exceeds $25.00 (as adjusted for
Recapitalization Events); or (B) at any time after the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless such transaction provides
holders of Series D Stock with an IRR (as defined in the
Certificate of Designations of the Corporation's Series C
Stock, as in effect on the Original Issue Date) equal to at
least twenty-five one hundredths (25/100), calculated as if
the holder of Series D Stock purchased such shares of Series D
Stock on the date such holder purchased such shares at the
purchase price paid by such holder;
(ix) sell, lease or otherwise dispose of 20% or more
of the assets of the Corporation, other than in the ordinary
course of business, unless the proceeds of such sale, lease or
other disposition are reinvested in assets of the general type
used in the business of the Corporation;
52
<PAGE> 54
(x) issue more than 3,500,000 shares of Common Stock
(as adjusted for Recapitalization Events and excluding any
shares that the Corporation may issue pursuant to an
underwriters' overallotment option) in connection with any
public offering of the Corporation's Common Stock pursuant to
an effective registration under the Securities Act of 1933, as
amended, covering the offering and sale of Common Stock;
(xi) issue equity securities to employees, officers
or directors of the Corporation, except (a) securities
issuable upon the exercise of outstanding options and warrants
and pursuant to existing contractual commitments and (b)
options to purchase up to 2,184,166 shares of Common Stock,
together with the Common Stock issuable upon exercise thereof;
(xii) issue any securities for a price less than fair
market value, other than as may be required by existing
contractual commitments, as permitted by clause (xi) hereof or
pursuant to warrants to purchase shares of Common Stock
granted by the Corporation from time to time where the
exercise price of such warrants equals or exceeds the fair
market value of the Common Stock as of the date of grant of
such warrants;
(xiii) enter into any transactions (or series of
transactions), including loans, with any officer or director
of the Corporation or to or with their affiliates and family
members involving $100,000.00 or more per year individually or
$500,000.00 or more per year in the aggregate except (a) as
may be contemplated by existing contractual commitments, (b)
reasonable compensation payable to officers and directors, and
(c) for options and warrants issued in compliance with clause
(ix) hereof; or
(xiv) engage in any transaction (or series of
transactions) that would impair or reduce the rights and
preferences of the holders of the Series D Stock as a class
relative to the rights and preferences of the holders of any
other class of the Corporation's capital stock.
"Assets" shall mean an interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Equivalent Stock" shall mean any shares of any class or
series of Stock of the Corporation having any preference or priority as to
dividends or Assets on a parity with any such preference or priority of the
Series D Stock and no preference or priority as to dividends or Assets superior
to any such preference or priority of the Series D Stock and any instrument or
Security directly or indirectly convertible into or exercisable or exchangeable
for Equivalent Stock. Without limiting the generality of the foregoing, a
dividend rate, mandatory or optional sinking fund payment amounts or schedules
or optional redemption provisions, the existence of a conversion right or the
existence of a liquidation preference of
53
<PAGE> 55
up to 100% of the original issue price plus unpaid accrued dividends plus a
premium of up to the dividend rate or up to the percentage of the equity of the
Corporation represented by such Stock, with respect to any class or series of
Stock, differing from that of the Series D Stock, shall not prevent such class
of Stock from being Equivalent Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument directly or
indirectly convertible into or exercisable or exchangeable for Securities or
Security. The term "Security" shall mean one of the Securities.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate stock.
"Superior Stock" shall mean any shares of any class or series
of Stock of the Corporation having any preference or priority as to dividends or
Assets superior to any such preference or priority of the Series D Stock and any
instrument or security directly or indirectly convertible into or exercisable or
exchangeable for Superior Stock.
(d) Notwithstanding anything else contained herein, the
affirmative vote or written consent of the holders of not less than 90%
of the then outstanding shares of Series D Stock shall be necessary to
amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or the Certificate of Designation creating
this Series D Stock which would alter or change (i) the dividend rate,
(ii) redemption provisions, (iii) anti-dilution provisions, (iv) the
place or currency of payments hereunder, (v) the right to institute
suit for the enforcement of any payment hereunder, (vi) the conversion
provisions, or (vii) provisions of this Section 9, so as to affect any
of the foregoing adversely.
10. Preemptive Rights.
(a) The Corporation shall not issue or sell any shares of
Common Stock, Preferred Stock or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares
of Common Stock, other than any such issuance or sale (i) pursuant to a
Qualifying Offering, (ii) pursuant to a stock option plan approved by
the Board of Directors, (iii) as a form of consideration in connection
with mergers or acquisitions where the Corporation is the surviving
entity or (iv) where the aggregate gross proceeds are less than
$500,000 in any single transaction, provided that the sale price per
share is not less than the then applicable fair market value of such
shares, as determined in good faith by the Corporation's Board of
Directors, and, provided further, that the aggregate gross proceeds of
all such transactions shall not exceed $1,500,000 (the securities
issued in such transactions being referred to as the "Newly Issued
Securities"), unless prior to the issuance or sale of such Newly Issued
Securities each holder of Series D Stock shall have been given the
opportunity (such opportunity being herein referred to as the
"Preemptive Right") to purchase (on the
54
<PAGE> 56
same terms as such Newly Issued Securities are proposed to be sold) the
same proportion of such Newly Issued Securities being issued or offered
for sale by the Corporation as (x) the number of shares of Common Stock
(calculated solely on account of outstanding shares of Series D Stock
on an as converted basis) held by such holder on the day preceding the
date of the Preemptive Notice (as defined herein), as the case may be,
bears to (y) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding on that day.
(b) Prior to the issuance or sale by the Corporation of any
Newly Issued Securities, the Corporation shall give written notice
thereof (the "Preemptive Notice") to each holder of Series D Stock. The
Preemptive Notice shall specify (i) the name and address of the bona
fide investor to whom the Corporation proposes to issue or sell Newly
Issued Securities, (ii) the total amount of capital to be raised by the
Corporation pursuant to the issuance or sale of Newly Issued
Securities, (iii) the number of Securities of such Newly Issued
Securities proposed to be issued or sold, (iv) the price and other
terms of their proposed issuance or sale, (v) the number of such Newly
Issued Securities which such holder is entitled to purchase (determined
as provided in subsection (a) above), and (vi) the period during which
such holder may elect to purchase such Newly Issued Securities, which
period shall extend for at least thirty (30) days following the receipt
by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series D Stock who desires to purchase Newly
Issued Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Newly Issued Securities he wishes to
purchase, as well as the number, if any, of additional Newly Issued
Securities he would be willing to purchase in the event that all of the
Newly Issued Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series D Stock.
(c) In the event a holder of Series D Stock declines to
subscribe for all or any part of its pro rata portion of any Newly
Issued Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive Acceptance
Period, then the other holders of Series D Stock shall have the right
to subscribe for all (or any declined part) of the Declining Preemptive
Purchaser's pro rata portion of such Newly Issued Securities (to be
divided among the other holders of Series D Stock desiring to exercise
such right on a ratable basis).
(d) Any such Newly Issued Securities which none of the holders
elect to purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of three (3) months
after the expiration of the Preemptive Acceptance Period, to any other
person or persons at not less than the price and upon other terms and
conditions not less favorable to the Corporation than those set forth
in the Preemptive Notice.
(e) The preemptive rights afforded by this Section 10, and any
obligation for the Corporation to offer such shares of Common Stock,
Preferred Stock or other
55
<PAGE> 57
securities convertible into or exchangeable for shares of Common Stock
may be waived by a written instrument signed by the holders of sixty
percent (60 %) of the Series D Stock.
11. Events of Default. An Event of Default shall mean any of the
following:
(i) Any failure by the Corporation to pay in cash any
dividend, if and when declared by the Board of Directors, on
the payment due dates and in the amounts provided pursuant to
Section 3 hereof, if such failure shall continue for any two
quarterly periods;
(ii) Any failure by the Corporation to satisfy its
redemption obligations pursuant to Section 7 hereof if any
such failure shall continue for a period of five days from the
appropriate redemption date;
(iii) Any failure by the Corporation to comply with
the provisions of Sections 4, 5, 6, 8, 9 or 10 hereof;
(iv) If any representation or warranty made by the
Corporation in the Stock Purchase Agreement dated as of August
27, 1999 or the exhibits or schedules thereto (the "Purchase
Agreements") is or shall be untrue in any material respect at
the time it was made, if such representation or warranty
remains untrue after 10 days' written notice, with such notice
delivered by hand or by first-class, certified or overnight
mail, postage prepaid, or by telecopier, from any holder of
Series D Stock, unless waived in writing by holders of not
less than 60 % of the outstanding shares of Series D Stock;
(v) Any failure by the Corporation to comply with, or
any breach by the Corporation of, any of the covenants,
agreements or obligations of the Corporation contained in the
Purchase Agreements which continues for a period of 10 days
after written notice, with such notice delivered by hand or by
first-class, certified or overnight mail, postage prepaid, or
by telecopier, from any holder of Series D Stock, unless
waived in writing by holders of not less than 60 % of the
outstanding shares of Series D Stock;
(vi) Default by the Corporation in the performance or
observance of any obligation or condition with respect to any
Indebtedness of the Corporation that is not cured or waived
within 90 days or if the effect of such default is to
accelerate the maturity of such Indebtedness or cause such
Indebtedness to be prepaid, purchased or redeemed or to permit
the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed or to
realize upon any collateral or security for such Indebtedness,
unless such default shall
56
<PAGE> 58
have been waived by the appropriate person. Indebtedness of
any corporation shall mean the principal of (and premium, if
any) and unpaid interest on (i) indebtedness which is for
money borrowed from others; (ii) indebtedness guaranteed,
directly or indirectly, in any manner by such corporation, or
in effect guaranteed, directly or indirectly, by such
corporation through an agreement, contingent or otherwise, to
supply funds to or in any manner invest in the debtor or to
purchase indebtedness, or to purchase assets or services
primarily for the purpose of enabling the debtor to make
payment of the indebtedness or of assuring the owner of the
indebtedness against loss; (iii) all indebtedness secured by
any mortgage, lien, pledge, charge or other encumbrance upon
assets owned by such corporation, even if such corporation has
not in any manner become liable for the payment of such
indebtedness; (iv) all indebtedness of such corporation
created or arising under any conditional sale, lease or other
title retention agreement with respect to assets acquired by
such corporation even though the rights and remedies of the
seller, lessor or lender under such agreement or lease in the
event of default are limited to repossession or sale of such
assets and provided that obligations for the payment of rent
under a lease of premises from which the business of such
corporation will be conducted shall not constitute
indebtedness; and (v) renewals, extensions and refunding of
any such indebtedness; or
(vii) If the Corporation shall:
(a) become insolvent or generally fail to
pay, or admit in writing its inability to pay, its debts as they become
due;
(b) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other custodian
for the Corporation or any property thereof, or make a general
assignment for the benefit of creditors (any of which shall be referred
to herein as a "Receiver");
(c) in the absence of such application,
consent or acquiescence, permit or suffer to exist the appointment of a
Receiver, and such Receiver shall not be discharged within 60 calendar
days;
(d) commit any act of bankruptcy, permit or
suffer to exist the commencment of any bankruptcy reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding in respect of the Corporation, and, if any such case or
proceeding is not commenced by the Corporation, such case or proceeding
shall be consented to or acquiesced in by the Corporation, or shall
result in the entry of an order for relief and shall remain for 30
calendar days undismissed; or
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<PAGE> 59
(e) take any corporate or other action
authorizing, or in furtherance of, any of the foregoing.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
(The remainder of this page is intentionally left blank.)
58
<PAGE> 60
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
___ day of September, 1999.
PNV.NET, INC.
By:
--------------------------------------
Robert P. May, Chief Executive Officer
ATTEST:
- ---------------------------------
Anthony Allen, Secretary
59
<PAGE> 1
EXHIBIT 10.52
PNV.NET, INC.
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT (the "Amendment") is made as of the 16th day of
September, 1999, by and among PNV.net, Inc., a Delaware corporation (the
"Company"), the Patricof Investors set forth on Exhibit A attached hereto and
made a part hereof (the "Patricof Investors"), the holders of Series B 7%
Cumulative Convertible Preferred Stock set forth on Exhibit B attached hereto
and made a part hereof (the "Series B Holders"), the holders of Series C 7%
Cumulative Convertible Preferred Stock of the Company set forth on Exhibit C
attached hereto and made a part hereof (the "Series C Holders"), the holders of
shares of Series D 7% Cumulative Convertible Preferred Stock (the "Series D
Preferred Stock") of the Company set forth on Exhibit D attached hereto and made
a part hereof (the "Series D Holders"), Alex. Brown & Sons Incorporated as the
holder of warrants to purchase shares of the Company's Common Stock ("Alex.
Brown"), and Volpe Brown Whelan & Company, LLC ("Volpe" and together with the
Patricof Investors, the Series B Holders, the Series C Holders, the Series D
Holders and Alex. Brown, the "Investors").
WHEREAS, the Patricof Investors, the Series B Holders, the Series C
Holders, Alex. Brown, and the Company are parties to a Registration Rights
Agreement dated November 13, 1996, as amended on August 22, 1997 (the
"Registration Rights Agreement");
WHEREAS, in connection with the Company's (i) offering of the Series D
Preferred Stock, and (ii) issuance to Volpe of a warrant (the "Volpe Warrant")
to purchase shares of Common Stock, the Company has agreed to grant the Series D
Holders and Volpe registration rights with respect to shares of the Common Stock
of the Company issuable upon conversion of the Series D Preferred Stock and
issuable upon exercise of the Volpe Warrant;
WHEREAS, in connection with the sale of the Series D Preferred Stock,
all parties to the Registration Rights Agreement desire to amend the
Registration Rights Agreement to include the Series D Holders as a Holder (as
defined in the Registration Rights Agreement), to include the Common Stock
issuable upon the conversion of the Series D Preferred Stock and upon exercise
of the Volpe Warrant as Registrable Securities thereunder and to amend certain
portions of the Registration Rights Agreement to reflect the agreement
concerning registration rights between the Series D Holders, Volpe and the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree to amend the
Registration Rights Agreement as follows:
1. Definitions.
1.1. The following term set forth in Section I of the Registration
Rights Agreement shall be deleted in its entirety and shall hereafter have the
following meaning:
<PAGE> 2
"Registrable Securities" means (a) the shares of Common Stock into
which the Series B 7% Cumulative Convertible Preferred Stock ("Series B
Preferred Stock) is convertible, (b) the shares of Common Stock into which the
Series C 7% Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock") is convertible, (c) the shares of Common Stock into which the Series D
7% Cumulative Convertible Preferred (the "Series D Preferred Stock") is
convertible, (d) the Common Stock issuable upon the exercise of the the warrants
held by Alex. Brown, each dated August 22, 1997, and the warrant held by Volpe,
dated as of the date hereof, (e) any additional shares of Common Stock acquired
by the Holders by way of a stock dividend, stock split or other distribution in
respect of the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, any Common Stock described in clause (a), (b) or (c) above, and
the Common Stock issuable upon exercise of the warrants held by Alex. Brown,
each dated August 22, 1997, and the warrant held by Volpe, dated as of the date
hereof, and (f) any shares of Common Stock currently held or hereafter acquired
by any Patricof Investor. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities at such time as (i) a
registration statement with respect to the sale of such securities shall have
been declared effective by the Commission and such securities have been disposed
of pursuant to such effective registration statement, (ii) such securities have
been distributed to the public pursuant to the provisions of Rule 144, (iii)
such securities have ceased to be outstanding, or (iv) in the case of any
Registrable Securities issued upon the conversion of the Series D Preferred
Stock initially issued to or held by ABRY Broadcast Partners III, L.P. ("ABRY"),
or any Registrable Securities described in clause (e) above relating thereto,
such securities shall have been distributed to any limited partner of ABRY that
is not an Affiliate of the general partner of ABRY (or, to the extent specified
by ABRY by notice to the Company, to the general partner of ABRY or a limited
partner of ABRY that is an Affiliate of the general partner of ABRY).
2. Amendment and Modification. Section 6.1 shall be deleted in its
entirety and replaced with the following:
This Agreement may be amended, modified and supplemented, and
compliance with any term, covenant, agreement, or condition contained herein may
be waived either generally or in particular instances, and either retroactively
or prospectively, only by a written instrument executed by the Company and
Investors who hold a majority of the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock (or the Common Stock into which
each such series of preferred stock may have been converted), as well as the
Patricof Investors; provided, however, that any provision of this Agreement that
would materially adversely affect any particular holder of Registrable
Securities without similarly affecting all holders of Registrable Securities
shall not be valid unless consented to in writing by such holder of Registrable
Securities. No course of dealing between or among any Persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any Person
under or by reason of this Agreement.
3. Notices.
(a) Subsection 2 of Section 6.5 shall be amended to add
subsection (iii) and (iv) as follows:
2
<PAGE> 3
(iii) if to the Series D Holders:
To the addresses set forth below such Series
D Holders' names on Exhibit A to the Series
D 7% Cumulative Convertible Preferred Stock
Purchase Agreement, dated as of August 27,
1999
(iv) if to Volpe:
One Maritime Plaza
San Francisco, California 9411
Attention: Kenneth B. Sawyer
Telephone: (415) 274-4400
Telecopy: (415) 986-6754
4. Binding Agreement. The Registration Rights Agreement as modified
herein, shall remain in full force and effect as so modified.
5. Counterparts. This Amendment may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The authentic signature
of any party received by facsimile transmission shall constitute a valid and
binding signature of such party.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
16th day of September, 1999.
PNV.NET, INC.
By: /s/ Robert P. May
------------------------------------------
Robert P. May, Chief Executive Officer
BT ALEX. BROWN & SONS INCORPORATED
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
VOLPE BROWN WHELAN & COMPANY, LLC
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
4
<PAGE> 5
EXHIBIT A
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.
(Its General Partner)
By: PATRICOF & CO. MANAGERS, INC.
(Its General Partner)
By: /s/
----------------------------------
Name:
Title:
COUTTS & CO. (CAYMAN) LTD., CUSTODIAN FOR
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC., INVESTMENT ADVISOR
By: /s/
----------------------------------
Name:
Title:
THE P/A FUND, L.P.
By: APA PENNSYLVANIA PARTNERS, L.P.
(Its General Partner)
By: /s/
----------------------------------
Name:
Title:
/s/
- --------------------------------------
Michael Willner
5
<PAGE> 6
EXHIBIT B
STATE OF MICHIGAN RETIREMENT SYSTEM
By: /s/
--------------------------------------
Name:
Title:
BENEFIT CAPITAL MANAGEMENT CORPORATION,
as Investment Manager for The Prudential Insurance Co.
of America, Separate Account No. VCA-GA-5298
By: /s/
--------------------------------------
Name:
Title:
CSK VENTURE CAPITAL CO., LTD., as
Investment Manager for CSK-1(A) Investment Fund
By: /s/
--------------------------------------
Name:
Title:
CREDIT SUISSE (GUERNSEY) LIMITED, as
Trustee of Dynamic Growth Fund II
By: /s/
--------------------------------------
Name:
Title:
By: /s/
--------------------------------------
Name:
Title:
6
<PAGE> 7
EXHIBIT B
(continued)
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.
(Its General Partner)
By: PATRICOF & CO. MANAGERS, INC.
(Its General Partner)
By: /s/
----------------------------------
Name:
Title:
COUTTS & CO. (CAYMAN) LTD., CUSTODIAN FOR
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
INVESTMENT ADVISOR
By: /s/
----------------------------------
Name:
Title:
THE P/A FUND, L.P.
By: APA PENNSYLVANIA PARTNERS, L.P.
(Its General Partner)
By: /s/
----------------------------------
Name:
Title:
/s/
- --------------------------------------
Michael Willner
7
<PAGE> 8
EXHIBIT C
VENHILL LIMITED PARTNERSHIP
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
JULIET CHALLENGER, INC.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
HENRY L. HILLMAN, ELSIE HILLIARD
HILLMAN AND C. G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN
TRUST U/A DATED 11/18/85
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
C.G. GREFENSTETTE AND THOMAS G.
BIGLEY, TRUSTEES U/A/T DATED 8/28/68
FOR JULIET LEA HILLMAN
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
C.G. GREFENSTETTE AND THOMAS G.
BIGLEY, TRUSTEES U/A/T DATED 8/28/68
FOR AUDREY HILLIARD HILLMAN
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
8
<PAGE> 9
EXHIBIT C
(continued)
C.G. GREFENSTETTE AND THOMAS G.
BIGLEY, TRUSTEES U/A/T DATED 8/28/68
FOR HENRY LEA HILLMAN, JR.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
C.G. GREFENSTETTE AND THOMAS G.
BIGLEY, TRUSTEES U/A/T DATED 8/28/68
FOR WILLIAM TALBOTT HILLMAN
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
WINFIELD CAPITAL CORP.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
ABS EMPLOYEES' VENTURE FUND LIMITED
PARTNERSHIP
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
/s/
----------------------------------------------
Franklin Antonio
ARUNDEL HOLDINGS, LLC
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
/s/
----------------------------------------------
E. Reid Curley
9
<PAGE> 10
EXHIBIT C
(continued)
GALEN COLE FAMILY FOUNDATION
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
/s/
----------------------------------------------
Michael J. DelCollo and Louise DelCollo JT WROS
/s/
----------------------------------------------
Gail G. Dougherty
/s/
----------------------------------------------
Michael K. Farr
THE HILLMAN COMPANY
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
/s/
----------------------------------------------
Kelly E. Green
RICHARD HEFTEL AS TRUSTEE OF THE
RICHARD HEFTEL LIVING TRUST DATED
01/09/96
By: /s/
------------------------------------------
Richard Heftel, Trustee
10
<PAGE> 11
EXHIBIT C
(continued)
/s/
----------------------------------------------
Leon Kaplan and Mary Buckley Kaplan JT WROS
/s/
----------------------------------------------
Robert Klein and/or Myriam Gluck,
as Tenants-by-Entirety
/s/
----------------------------------------------
Gerald Korman & Wendy S. Korman,
as Tenants-by-Entirety
/s/
----------------------------------------------
James C. McMillan
/s/
----------------------------------------------
Alan Meltzer
SPIEGEL ENTERPRISES
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
TAMPSCO PARTNERSHIP XII
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
FOUNDATION PARTNERS FUND, G.P.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
11
<PAGE> 12
EXHIBIT C
(continued)
TENNYSON PRIVATE PLACEMENT
OPPORTUNITY FUND, LLC
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
/s/
----------------------------------------------
J. Allen Dougherty TTEE UTD 12/22/97
FBO Peter Wetherill I
TRI VENTURES
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
BENEFIT CAPITAL MANAGEMENT
CORPORATION, AS INVESTMENT MANAGER
FOR THE PRUDENTIAL INSURANCE CO. OF
AMERICA SEPARATE ACCOUNT NO.
VCA-GA-5298
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
STATE TREASURER OF THE STATE OF MICHIGAN, CUSTODIAN OF THE MICHIGAN PUBLIC
SCHOOL EMPLOYEES' RETIREMENT SYSTEM, STATE EMPLOYEES' RETIREMENT SYSTEM,
MICHIGAN STATE POLICE RETIREMENT SYSTEM AND MICHIGAN JUDGES RETIREMENT SYSTEM
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
12
<PAGE> 13
EXHIBIT C
(continued)
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.
(Its General Partner)
By: PATRICOF & CO. MANAGERS,
INC. (Its General Partner)
By: /s/
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
COUTTS & CO. (CAYMAN) LTD., CUSTODIAN
FOR APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.
INVESTMENT ADVISOR
By: /s/
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE P/A FUND, L.P.
By: APA PENNSYLVANIA PARTNERS, L.P.
(Its General Partner)
By: /s/
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
/s/
---------------------------------------------
Robert May
13
<PAGE> 14
EXHIBIT D
HOLDERS OF SERIES D PREFERRED STOCK
ABRY BROADCAST PARTNERS III, L.P.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
HALPERN DENNY FUND IV, L.P.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
CUMMINS ENGINE COMPANY, INC.
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
14
<PAGE> 1
EXHIBIT 10.53
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION IS AVAILABLE AND AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IS DELIVERED TO SUCH
EFFECT.
Void after 5:00 p.m. New York, New York Time, on September 16, 2004.
WARRANT TO PURCHASE
SHARES OF
COMMON STOCK
OF
PNV.NET, INC.
This is to certify that, FOR VALUE RECEIVED, VOLPE BROWN WHELAN & COMPANY, LLC
or its registered assigns pursuant to Section (d) hereof ("Holder"), is entitled
to purchase, subject to the provisions of this Warrant, from PNV.NET, INC., a
Delaware corporation (the "Company"), 60,000 fully paid, validly issued and
nonassessable shares of Common Stock, par value $.00l per share ("Common
Stock"), at the exercise price of $10.50 per share until September 16, 2004. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock are subject to
adjustment from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares," and the exercise price
for a share of Common Stock, as adjusted from time to time, is hereinafter
sometimes referred to as the "Exercise Price."
(a) EXERCISE OF WARRANT. The Warrant may be exercised in whole or in
part at any time or from time to time until 5:00 P.M. New York time on September
16, 2004 (the "Expiration Date"), provided, however, that if such day is a day
on which banking institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a day. The
Warrant may be exercised by presentation and surrender to the Company at its
principal office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto, duly executed (with signature guaranteed if
required by the Company or, if any, its stock transfer agent) and accompanied by
payment of the Exercise Price for the number of Warrant Shares specified in such
form and any applicable taxes. The purchase price for any Warrant Shares
purchased pursuant to the exercise of this Warrant shall be paid in full upon
such exercise in cash, by certified or bank check or by wire transfer of
immediately available funds. Alternatively, this Warrant may be exchanged for
Warrant Shares as described
<PAGE> 2
in Section (k) hereof as soon as practicable after each such exercise of this
Warrant, but not later than seven (7) business days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or the Holder's designee (subject to the terms of this
Warrant). If the Warrant should be exercised in part only, the Company shall,
upon surrender of the Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable thereunder. Upon receipt by the Company of the
Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, together with the exercise price thereof
and taxes as aforesaid in cash, by certified or bank check or by wire transfer
of immediately available funds and the investment letter described below, the
Holder shall be deemed to be the holder of record of the Warrant Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be physically delivered to the Holder. Each stock certificate, so
delivered shall be in such denomination as may be reasonably requested by the
Holder hereof and shall be registered in the name of the Holder or such other
name as shall be designated by the Holder subject to the terms of this Warrant.
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of stock certificates
pursuant to this Section (a), except that, in case such stock certificates shall
be registered in a name or names other than the name of the Holder of this
Warrant, funds sufficient to pay all stock transfer taxes which shall be payable
upon the execution and delivery of such stock certificate or certificates shall
be paid by the Holder hereof to the Company.
In order to assure the availability of an exemption from registration
under the federal or applicable state securities laws, the Company may condition
the exercise of the Warrant upon the Holder delivering to the Company an
investment letter in the form as customarily used by the Company from time to
time in connection with the exercise of unregistered options and warrants issued
by the Company. It is further understood that certificates for the Warrant
Shares, if any, to be issued upon exercise of the Warrant may contain a
restrictive legend in accordance with Section (j) hereof.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant. If any shares of the Common Stock are or become listed or quoted
on any national securities exchange or The NASDAQ Stock Market (National Market)
other than pursuant to a Qualifying Offering (as defined in the Certificate of
Designation relating to the Company's Series D 7% Cumulative Convertible
Preferred Stock), the Company shall also list the Warrant Shares, as the case
may be, on such exchange or system, as the case may be, subject to notice of
issuance.
(c) FRACTIONAL SHARES. Fractional shares or scrip representing,
fractional shares may be issued upon the exercise of this Warrant.
Alternatively, the Company may, at its option, with respect to any fraction of a
share issuable upon any exercise hereof, pay to the Holder an amount in cash
equal to such fraction multiplied by the greater of (i) the initial
-2-
<PAGE> 3
Exercise Price per share or (ii) the current market value of the shares of the
Company's Common Stock. The current market value of a share of Common Stock
shall be determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ Stock Market
(National Market), the current market value shall be the last
reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the
average closing bid and asked prices for such day on such
exchange or system;
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be
the mean of the last reported bid and asked prices for the
Common Stock reported by the National Quotation Bureau, Inc.,
on the last business day prior to the date of the exercise of
this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not
so reported, the current market value shall be an amount
reasonably determined by the Board of Directors of the
Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling (which
may be reasonably requested by the Holder) the Holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder.
Subject to Section (j) hereof, the Holder may transfer or assign this Warrant,
in whole or in part and from time to time. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed (with signature
guaranteed, if required by the Company or its stock transfer agent) and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee or assignees named in such
instrument of assignment and this Warrant shall promptly be canceled. This
Warrant may be divided into or combined with other Warrants which carry the same
rights upon presentation at the principal office of the Company or at the office
of its stock transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged, and the term "Holder" includes
any subsequent holder or holders of this Warrant or any warrant for which this
Warrant is exchanged or into which it is divided. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant
-3-
<PAGE> 4
of like tenor, date and amount. Any such new Warrant executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not the original Warrant shall be at any time enforceable by
anyone.
(e) RIGHTS OF THE HOLDER. Subject to the provisions of Section (1), the
Holder shall not, by virtue hereof, be entitled to any rights of a shareholder
in the Company, either at law or equity (including, without limitation, any
rights to dividends) and the rights of the Holder with respect to the shares of
Common Stock purchasable pursuant to this Warrant are limited to those expressed
in the Warrant and are not enforceable against the Company except to the extent
set forth herein.
(f) ANTI-DILUTION PROVISIONS. So long as this Warrant shall be
outstanding, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall: (i) declare a dividend or make
a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) issue shares of Common Stock or
securities convertible into Common Stock (other than shares of
Common Stock issued upon: (A) conversion of outstanding shares
of Series B Preferred Stock, Series C Preferred Stock, or
Series D Preferred Stock, (B) exercise of warrants to purchase
Common Stock outstanding as of September 16, 1999 or (C)
exercise of any option granted or hereafter granted to any
officer, director, employee, agent or consultant of the
Company pursuant to a stock option plan approved by the
Company's Board of Directors), for consideration less than the
Exercise Price of this Warrant on the date of grant of such
option; (iii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or (iv)
combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, then the Exercise Price in
effect at the time of the record date for such dividend or
distribution, the sale of such shares of Common Stock or the
effective date of such subdivision, combination or
reclassification (such dividend or distribution, sale of
securities, subdivision, combination or reclassification,
collectively a "Dilution Event") shall be proportionately
adjusted as of the effective date of such Dilution Event by
multiplying such Exercise Price by a fraction, the denominator
of which shall be the outstanding number of shares of Common
Stock determined on a fully-diluted basis immediately
following such event and the numerator of which shall be the
outstanding number of shares of Common Stock determined on a
fully-diluted basis immediately prior thereto plus, in the
case of an adjustment pursuant to clause (ii), the number of
shares of Common Stock that would be purchasable at the
Exercise Price for the consideration per share being paid for
the shares being issued. For example, if the Company declares
a 2-for-1 stock split and the Exercise Price immediately prior
to such event was $10.50 per share, the adjusted Exercise
Price immediately after such
-4-
<PAGE> 5
event would be $5.25 per share. Such adjustment shall be made
successively whenever any Dilution Event shall occur.
(2) Notwithstanding the provisions of paragraph (1) of this
Section (f), in the event the Company issues shares of Common
Stock or securities convertible into Common Stock, other than
securities referenced in clauses (A), (B) and (C) of paragraph
(1) of this Section (f), for consideration less than the
Exercise Price of this Warrant on the date of issuance of such
securities during the nine (9) month period beginning on the
date of the closing of the sale of shares of Series D
Preferred Stock of the Company to certain purchasers pursuant
to a Stock Purchase Agreement, dated as of August 27, 1999, by
and between the Company (the "Series D Stock Purchase
Agreement"), the Exercise Price in effect on the date of
issuance of such securities shall be adjusted so as to equal
the per share consideration received by the Company in
connection with such issuance.
(3) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to paragraphs (1) or (2) above,
the number of Warrant Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the
number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to the Dilution Event by the
Exercise Price in effect immediately prior to the Dilution
Event and dividing the product so obtained by the Exercise
Price, as adjusted pursuant to paragraphs (1) or (2).
(4) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease
of at least $.05 in such price; provided, however, that any
adjustments which by reason of this paragraph (f)(4) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder.
(5) Each computation required by this Section (f) for purposes
of determining whether the Exercise Price shall be adjusted
shall be performed by the Company's Chief Financial Officer.
(6) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice (certified
as correct by the Company's Chief Financial Officer) setting
forth the adjusted Exercise Price and adjusted number of
Warrant Shares issuable upon exercise of this Warrant to be
mailed to the Holder, at its address appearing in the Warrant
Register, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any.
(7) All calculations under this Section (f) shall be made to
the nearest cent or to the nearest Warrant Share, as the case
may be.
(8) In the event that, as a result of application of Section
(i) of this Warrant, this Warrant shall become exercisable for
securities other than the Common
-5-
<PAGE> 6
Stock, thereafter the number of shares of Common Stock
receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section (f).
(9) Irrespective of any adjustments in the Exercise Price or
the number or kind of Warrant Shares purchasable upon exercise
of this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of
shares as are stated in this Warrant initially issued.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, a certificate of the
Company's Chief Financial Officer showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder or
any holder of this Warrant, and the Company shall, forthwith after each such
adjustment, mail, by certified mail, a copy of such certificate to the Holder or
any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall declare any dividend or make any
distribution upon the Common Stock, or (ii) if the Company shall generally offer
to the holders of the Common Stock, whether or not pursuant to any holders'
right of first refusal with respect to the purchase of new securities issued by
the Company, for subscription-or purchase by them any shares of any class of the
Company's capital stock or any other rights to purchase shares of the Company's
capital stock, or (iii) if the Company proposes to register under the Securities
Act of 1933, as amended, any shares of its Common Stock pursuant to one or more
demand, piggyback or incidental registration rights granted to its stockholders,
or (iv) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder of this Warrant, at least 10 days prior to the date
specified in (x), (y) or (z) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or offer
for subscription or purchase, (y) such reorganization, reclassification,
consolidation, merger, sale, lease, transfer, dissolution, liquidation or
winding up is to take place and the date, if any is to be fixed, as of which the
holders of the Common Stock or other capital stock of the Company shall receive
cash or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up, or
(z) the date by which holders of the Common Stock or other capital stock of the
Company must elect to participate in the registration
-6-
<PAGE> 7
of securities pursuant to clause (iii) above, or purchase securities by the
Company pursuant to the offering referred to in clause (ii) above.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, conversion or capital reorganization of outstanding shares of
the Common Stock of the Company, or in case of any consolidation or merger of
the Company with or into another corporation (other than a merger with another
corporation in which merger the Company is the continuing corporation and which
does not result in any reclassification or capital reorganization of outstanding
shares of Common Stock of the Company issuable upon exercise of this Warrant) or
in case of any sale, lease or conveyance to another corporation of the property
of the Company substantially as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of this Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification or capital reorganization and consolidation, merger, sale or
conveyance which would have been deliverable to the Holder of this Warrant on
the effective date of the reclassification, reorganization or merger had the
Holder exercised the Warrant immediately prior to the event described in this
Section (i). Any such provision shall include provision for subsequent
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications or capital
reorganizations of shares of the Common Stock and to successive consolidations,
mergers, sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of paragraph (1) of Section (f) hereof.
(j) SECURITIES LAW COMPLIANCE.
(1) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be
issued upon exercise hereof are being acquired solely for the
Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell,
transfer, assign or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon exercise hereof except under
circumstances that will not result in a violation of the
Securities Act of 1933, as amended (the "Act"), or any state
securities laws. Upon exercise of this Warrant, the Holder
shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of Common
Stock so purchased are being acquired solely for the Holder's
own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
(2) If deemed necessary by counsel to the Company, this
Warrant, and all Warrant Shares issued upon exercise hereof
shall be stamped or imprinted with
-7-
<PAGE> 8
legends setting forth the restrictions on transfer arising
under applicable federal and state securities laws.
(k) RIGHT TO CONVERT WARRANT INTO COMMON STOCK.
(1) Right to Convert. As an alternative to payment of the
Exercise Price in cash, the Holder shall have the right at any
time and from time to time to convert this Warrant into shares
of Common Stock (the "Conversion Right"). Upon exercise of the
Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price or of any
other cash or other consideration) that number of shares of
Common Stock equal to the quotient obtained by dividing (x)
the value of this Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Exercise
Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate fair market value of the
shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the exercise of the Conversion Right) by
(y) the fair market value of one share of Common Stock
immediately prior to the exercise of the Conversion Right. For
purposes hereof, the fair market value of a share of Common
Stock shall be the greater of (i) a price per share of Common
Stock equal to the initial Exercise Price or (ii) the current
market value of the shares of the Company's Common Stock as
determined in accordance with Section (c) hereof.
(2) Method of Exercise. The Conversion Right may be exercised
by the Holder by the surrender of this Warrant at the
principal office of the Company together with a written
statement specifying that the Holder thereby intends to
exercise the Conversion Right. Certificates for the shares of
Common Stock issuable upon exercise of the Conversion Right
shall be delivered to the Holder within five (5) days
following the Company's receipt of this Warrant together with
the aforesaid written statement.
(l) ADDITIONAL RIGHTS OF THE HOLDER. So long as this Warrant shall be
outstanding, the Holder shall (i) be entitled to registration, co-sale,
pre-emptive and similar rights with respect to the shares of Common Stock
purchasable hereunder, (ii) be obligated under certain circumstances to sell a
portion of the shares of Common Stock purchasable hereunder, and (iii) be
entitled to receive various financial and related information from the Company,
each to the same extent as those purchasers purchasing shares of the Company's
Series D Preferred Stock pursuant to the Series D Stock Purchase Agreement.
(m) REPRESENTATIONS OF THE HOLDER.
(i) The Holder hereby represents and warrants to the Company
that it has substantial knowledge, skill and experience in
making investment decisions of the type represented by this
Warrant and the Warrant Shares, it is capable of evaluating
the risk of its investment in this Warrant and the Warrant
Shares and is
-8-
<PAGE> 9
able to bear the economic' risk of such investment, including
the risk of losing the entire investment, that it is acquiring
this Warrant and the Warrant Shares for its own account, and
that this Warrant and the Warrant Shares are being acquired by
it for investment and not with a present view to any
distribution thereof in violation of applicable securities
law. If the Holder should in the future decide to dispose of
any of this Warrant and the Warrant Shares, it is understood
that it may do so only in compliance with the Act and
appliance state securities laws. The Holder represents and
warrants that it is an "accredited investor" as defined in
Rule 501 (a) under the Act.
(ii) The Holder understands that (i) this Warrant and the
Warrant Shares have not been registered under the Act by
reason of their issuance in a transaction exempt from the
registration requirements of the Act, (ii) this Warrant and
the Warrant Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Act and
applicable state securities laws or is exempt from such
registrations (and evidence satisfactory to the Company is
provided by such Holder of the availability of such
exemptions, including the delivery to the Company of opinions
of counsel to such Holder, which opinions and counsel is
satisfactory to the Company), and (iii) this Warrant and the
Warrant Shares may bear a legend to such effect.
(n) AMENDMENTS. Neither the Warrant nor any term hereof may be changed,
waived, discharged or terminated without the prior written consent of the
Holder.
(o) NO IMPAIRMENT. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of any
Holder.
(p) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
(q) NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, addressed (a) if to the Holder, to Volpe Brown Whelan & Company, LLC,
One Maritime Plaza, 11th Floor, San Francisco, California 94111, Attention:
Kenneth B. Sawyer, or at such other address as the Holder shall have furnished
to the Company in writing, or (b) if to the Company, to PNV.net, Inc., 11711 NW
39th Street, Coral Springs, Florida 33065, Attention: Robert P. May, Chief
Executive Officer, or at such other address as the Company shall have furnished
to the Holder in writing.
(The remainder of this page is intentionally left blank.)
-9-
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereinto duly authorized.
PNV.NET, INC.
By: /s/
----------------------------------------
Robert P. May, Chief Executive Officer
-10-
<PAGE> 11
PURCHASE FORM
Dated: __________________
The undersigned hereby irrevocably elects to exercise its rights
pursuant to this Warrant to the exist of purchasing ______________ shares of
Common Stock of PNV.net, Inc., and hereby makes payment of $____________, in
cash, in payment of the exercise price thereof.
The undersigned hereby irrevocably elects to exercise its rights
pursuant to this Warrant to the extent of purchasing _______ shares of Common
Stock and hereby authorizes you to deliver such shares of Common Stock for sale
to ____________, and to retain from the proceeds of such sale $______________ in
cash, in payment of the exercise price thereof and to remit to the undersigned
the balance of such proceeds.
--------------------------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
-11-
<PAGE> 12
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________________________ hereby
sells, assigns and transfers unto
Name
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
the right to purchase Common Stock of PNV.net, Inc. (the "Company"), represented
by this Warrant to the extent of ________ shares as to which such right is
exercisable and does hereby irrevocably constitute and appoint as Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date
--------------------
Signature
--------------------------------------
-12-
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of PNV.net, Inc. on Form
S-1 of our report dated August 27, 1999, appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
September 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1999 AND THE STATEMENTS OF OPERATIONS OF PNV.NET FOR THE YEAR
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,100,848
<SECURITIES> 19,071,534
<RECEIVABLES> 301,503
<ALLOWANCES> 25,083
<INVENTORY> 341,208
<CURRENT-ASSETS> 23,996,881
<PP&E> 39,386,478
<DEPRECIATION> 7,332,654
<TOTAL-ASSETS> 61,385,669
<CURRENT-LIABILITIES> 5,169,198
<BONDS> 70,846,069
42,093,299
0
<COMMON> 4,328
<OTHER-SE> (8,345,375)
<TOTAL-LIABILITY-AND-EQUITY> 61,385,669
<SALES> 8,452,720
<TOTAL-REVENUES> 8,452,720
<CGS> 15,716,779
<TOTAL-COSTS> 15,716,779
<OTHER-EXPENSES> 24,581,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,514,610
<INCOME-PRETAX> (39,771,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,771,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,771,977)
<EPS-BASIC> (9,890)
<EPS-DILUTED> 0
</TABLE>
