As filed with the Securities and Exchange Commission on November 18, 1999.
File No. ___________
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
LEGAL CLUB OF AMERICA CORPORATION
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(Name of Small Business Issuer in its Charter)
COLORADO 84-1174969
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(State or other jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
1601 N. HARRISON PKWY., SUITE 200
SUNRISE, FLORIDA 33323
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(Address of Principal Executive Offices) (Zip Code)
(954) 267-0920
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
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(Title of Class)
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LEGAL CLUB OF AMERICA CORPORATION
FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES
TABLE OF CONTENTS
PAGE
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PART I.........................................................................1
Item 1. Description of Business.............................................1
Item 2. Management's Discussion and Analysis or Plan of Operation...........6
Item 3. Description of Property.............................................8
Item 4. Security Ownership of Certain Beneficial Owners and Management......9
Item 5. Directors, Executive Officers, Promoters and Control Persons.......10
Item 6. Executive Compensation.............................................12
Item 7. Certain Relationships and Related Transactions.....................13
Item 8. Description of Securities..........................................13
PART II.......................................................................16
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters......................................16
Item 2. Legal Proceedings..................................................17
Item 3. Changes In and Disagreements With Accountants......................17
Item 4. Recent Sales of Unregistered Securities............................17
Item 5. Indemnification of Directors and Officers..........................18
PART F/S......................................................................19
Financial Statements.......................................................19
PART III......................................................................20
Index to Exhibits..........................................................20
Signatures.................................................................21
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We own or have the rights to certain tradenames and trademarks that we use in
conjunction with our services. This document also contains tradenames and
trademarks of other companies.
(i)
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This Registration Statement contains certain forward-looking
statements. These forward looking statements include statements regarding
marketing plans, capital and operations expenditures, results of operations,
potential utility and acceptance of our existing and proposed services, and the
need for, and availability of, additional financing. The forward-looking
statements included herein are based on current expectations and involve a
number of risks and uncertainties. These forward-looking statements are based on
assumptions regarding our business which involve judgments with respect to,
among other things, future economic and competitive conditions and future
regulatory and business decisions, all of which are difficult or impossible to
predict accurately and many of which are beyond our control. Although we believe
that the assumptions underlying the forward-looking statements are reasonable,
any of the assumptions could prove inaccurate and, therefore, actual results may
differ materially from those set forth in the forward-looking statements. In
light of the significant uncertainties inherent in the forward-looking
information contained herein, the inclusion of such information should not be
regarded as any representation by us or any other person that our objectives or
plans will be achieved. Any forward-looking statement speaks only as of the date
on which such statement is made, and we do not undertake to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for us to predict all such factors. Further, we cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
CORPORATE HISTORY
And Justice For All, Inc., a Florida corporation, was incorporated in
the State of Florida on January 22, 1996. In that year, it acquired
substantially all of the assets of the Legal Club of America, Inc., a Florida
corporation. Bird-Honomichl, Inc., a Colorado corporation, was incorporated on
July 23, 1991. In October 1998, Bird-Honomichl acquired And Justice For All
through a merger in which And Justice For All became a wholly owned subsidiary
of Bird-Honomichl, which then changed its name to the Legal Club of America
Corporation ("Legal Club"). And Justice For All subsequently changed its name to
LegalClub.com, Inc. Currently, the registrant has three wholly owned
subsidiaries, LegalClub.com, Inc., National Association of Networked Attorneys,
Inc. and Legal Club Financial Corp.
BUSINESS OVERVIEW
We operate Legal Club of America, a national legal referral service
that provides our members referrals to a network of over 7,000 participating
attorneys in all 50 states. The attorneys provide a variety of free and deeply
discounted legal services. Since our inception in 1996, we have put in place a
variety of legal plans, a substantial internal infrastructure to administer
large volume enrollments and a diversified, national marketing capability,
including Web sites, to enroll individuals and small business owners on a
national scale. The Company has regional sales offices in Tampa, Chicago, New
York, Los Angeles, and Denver.
Legal Club's website, www.legalclub.com, features three distinct
environments, with over 3,000 links of interest, aimed at satisfying the legal
needs of the consumer, providing a vast resource of tools and services to the
legal professional as well as service and support for the authorized agents who
market the Company's Plans.
We pay commissions to our agents, screen, build and maintain the
attorney network and market legal plans to our members. Our members pay us a fee
on an annual or monthly basis, depending on the nature of their membership.
Monthly fees range from $1 to $24.95, depending on the type of membership. We
sometimes offer discounted rates to groups or organizations that offer
memberships in our club to their employees or members, as the case may be.
Membership in the club does not entitle members to any specific benefits other
than referral to a participating attorney. As of September 30, 1999, we had
approximately 550,000 members.
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Membership in one of our legal plans provides a member with referrals
to free and discounted legal services ($75/hour versus the national average of
$194 per hour), access to our national attorney network and/or assistance in
finding an attorney with a particular specialty. Upon enrollment, an attorney is
immediately assigned to our member based upon location, requested areas of law,
and language. We do not provide any legal services ourselves, nor do we make any
payments to, or receive any payments from, the participating attorneys. We also
do not underwrite, or provide, insurance. As such, we do not have the
limitations associated with legal insurance products. Any applicant who is able
to pay for a membership is accepted. We have no complicated forms to be
completed, no exclusions for pre-existing conditions, no waiting periods for
access to the services and no increases in premiums for over-use. Our members
have immediate access to our nationwide network of participating attorneys.
We screen attorneys prior to accepting them as participating attorneys
in our network. The attorneys must also agree to provide specified levels of
service, offer discounts to our members, and perform some routine legal services
without charge. Participating attorneys may establish their own screening
policies that may in some instances limit usage. While we monitor participating
attorneys to assure their compliance with our policies, we can not guarantee any
level of service. As of June 30, 1999, we had over 7,000 participating
attorneys. Our revenues from Legal Club of America for the fiscal years ended
June 30, 1999 and June 30, 1998 were $935,000 and $116,000, respectively.
Separate from our legal referral service, we are in the process of
designing and building an Internet based attorney directory known as NANA, the
National Association of Networked Attorneys. NANA is an Internet driven
corporation that houses a nationwide directory of attorneys for the 400,000
Americans that visit the Internet to obtain the services of an attorney each
month, and provides a variety of services for the legal professional. Attorneys
who wish to be listed on NANA will pay us a membership fee of approximately $35
a month, which will entitle them to a listing on our Internet directory, and
additional benefits, including Internet access and a personalized web page.
While NANA had, as of September 30, 1999, approximately 50 members, our
marketing efforts for this service are not scheduled to begin until January
2000. Each attorney that joins NANA, and is also a participating Legal Club
attorney, will be given an ELECTRONICALLY FAVORED listing, which will allow the
member attorney to float to the top of any criterion search they match.
OUR BUSINESS
LEGAL CLUB OF AMERICA
The following is a description of the legal plans currently marketed by
us (the "Legal Club Plans"):
INDIVIDUAL/FAMILY LEGAL PLAN. For $96 per year, the Individual Legal
Plan member receives referrals to attorneys who have agreed to provide seven
free services, including unlimited phone conversations, attorney review of
certain legal documents (six page maximum) and preparation of simple wills. The
individual receives a deeply discounted flat fee schedule for the most commonly
used legal services such as traffic defense ($89), Chapter 7 bankruptcy ($250),
simple divorce ($210) and real estate closings ($175). More importantly, the
member receives an extremely low hourly rate of just $75 for in or out of court
legal representation, as well as discounted contingency fees. This rate
represents a substantial savings when compared to the national average of $194
per hour for partner attorneys. The Individual Legal Plan covers the enrollee,
his or her spouse and any dependents 23 or younger.
SMALL BUSINESS LEGAL PLAN. For $299 per year, a small business owner
receives referrals to lawyers who have agreed to provide a number of free
services including ten initial collection letters per month, thirty-minute face
to face consultations for all new legal matters and review of up to five 10-page
documents each month. The cost of all other services are at a low hourly rate of
$89 for out of court representation and $109 for in court representation. There
is also a discount on all contingency-based legal matters.
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COMMERCIAL DRIVING LEGAL PLAN. For $360 per year, a commercial driver
receives referrals to lawyers who have agreed to provide the basic individual
plan as well as a number of additional non-legal benefits that are relevant to
the "on the road" lifestyle of a commercial driver. These benefits include
moving, non-moving and DOT violations, a UHP vision, dental and prescription
program, a Road America 24-hour roadside assistance program for commercial and
non-commercial vehicles, a $10,000 AD&D policy, emergency travel expense
reimbursement, ambulance service reimbursement, a bail bonds program, arrest
bond protection, an S.O.S. emergency evacuation program and discount on rental
cars and hotel stays.
ATTORNEY SELECTION PROCESS. To ensure that the attorney participating
in our Legal Club Plans meet and maintain our quality standards, we have
implemented an attorney selection and evaluation process. All attorneys must
have a Martindale-Hubbell law directory ethical standard of "V" (very high), and
either an "A" (very high to preeminent) or "B" (high to very high) legal ability
rating. Each attorney must maintain an active business license to practice law
in the state in which he or she practices, maintain good standing in his or her
respective bar association or licensing department, as applicable, maintain
professional liability insurance of at least the minimum amounts required by the
state in which he or she practices, and provide quarterly updates of his or her
personal practice information. We regularly request and receive reprimand
reports from the bar associations of every state. We also perform anonymous
professionalism testing of the attorneys in our network to ensure that they are
providing services that meet our standards. In an effort to ensure that we match
an appropriate and qualified attorney to each member, we categorize the
attorneys based on geographic location, substantive practice area, and foreign
language skills. If the needs of our members change or they are dissatisfied
with the attorney we have recommended to them, they are permitted to change
attorneys as often as they desire.
NATIONAL ASSOCIATION OF NETWORKED ATTORNEYS - NANA
We are in the process of designing and building NANA, an Internet based
attorney directory designed to provide full fee legal clients to attorneys who
are listed with us. In addition, NANA provides such attorneys with a password
protected intranet environment to interact with each other. In the intranet
environment, listed attorneys are able to perform criterion searches to find
other listed attorneys for business referrals. Free chat rooms and bulletin
boards are provided as a means to contact other attorneys, post questions, and
communicate special skills. NANA members receive a directory listing with a link
to a personalized web page that NANA creates and hosts for each attorney. This
web page features a photograph and all biographical and professional information
provided by the attorney. All NANA members also receive 100 hours per month of
free Internet access and unlimited E-mail, word processing and translation
capabilities.
NANA attorneys may choose to become participating attorneys in the
Legal Club. Those who do, receive a Gold Scale Membership listing. This means
that the name of that attorney will sort to the top of any criteria search
matching the attorney profile and that a Gold Scale insignia will appear next to
such attorney's listing in the NANA directory. There is no criteria for Gold
Scale membership other than participation in both NANA and the Legal Club.
Pursuant to our current business plan, and assuming that our capital
raising efforts are successful, we plan to initiate significant marketing
efforts for this service in January 2000.
MARKETING
We market our products through a combination of worksite enrollments,
Internet marketing through our Web site (www.legalclub.com), direct/affinity
marketing, infomercials and targeted advertising campaigns. In June 1999, we
entered into marketing agreements with Worksite Solutions, Inc., the worksite
marketing unit of AON Corporation and with Transamerica Assurance Company, the
worksite marketing unit of Transamerica Life Companies. Under these and similar
agreements with Willis Corroon, Century Business Systems and Trustmark/National
Worksite Benefits, the Legal Club Plans are offered by these companies as their
exclusive legal services benefits. These entities market benefit plans to
individuals and companies nationally, but may not have a legal services plan in
their portfolio of products. By forming alliances with them, we can benefit from
their existing
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relationships and marketing channels at a relatively low cost to us. In certain
cases, we are able to provide deep discounts to these organizations. We believe
that a legal services program is an attractive benefit option offered by
employers and is consistent with the growing national trend towards voluntary
benefit plans such as supplemental life, health, vision and dental coverage.
Typically, monthly payments are made by the members through automatic payroll
deductions.
Legal Club's Web site, www.legalclub.com, features three distinct
environments and houses a vast resource of tools and services, and over 3,000
links of interest, aimed at satisfying the legal needs of the consumer, the
legal professional and the authorized agents who market the Company's Plans. Our
Internet strategy is to provide a long-term solution for the delivery of
voluntary benefits to the workplace at a fraction of the cost of conventional
methods.
We recently initiated the PASSIVEPLUS Enrollment Process. Under this
method of enrollment, employees or members of an organization are enrolled in
the Legal Club for a free 90-day trial. Upon the expiration of the free trial
period, the member may cancel his or her membership at no cost. If the member
does not cancel his or her membership, it automatically renews and is paid
through automatic payroll deductions.
Affinity and direct marketers buy products and services in bulk from
providers and then offer them through direct marketing campaigns to members at
discounted rates. Many of Legal Club's 550,000 members were sold our Plans at a
reduced fee through direct marketing as part of the Company's first major
marketing program. Legal Club has developed strategic relationships with large
direct marketing companies, such as Protective Life Corporation and Coverdell &
Co., major banks, and affinity-based organizations, such as MemberWorks Inc. and
Purchase Power. Legal Club enables these direct marketing organizations to offer
the Company's plans to millions of credit card and bank customers in their
member databases.
In August 1998, we completed the production of a 30-minute television
infomercial, which has been broadcast nationally since that time. Interested
viewers are given a telephone number which connects them to a telemarketing
agency, from whom they can get additional information and sign up for our
services. We believe that approximately 35% of our gross revenues at this time
are from members who learned of our services by viewing the infomercial.
We are striving to establish relationships with a number of state bar
associations in an attempt to have them add NANA as one of the benefits offered
to their members. NANA also utilizes the Internet daily to communicate with over
500 legal news groups and is registered with various search engines.
THE INDUSTRY
According to the American Bar Association, more than 150 million
Americans are unable to afford the costs of basic legal assistance, primarily
because the average hourly rate for an attorney is about $194. According to the
American Bar Association , it receives a minimum of 115,000 phone calls per
month from individuals who are looking for qualified attorneys to represent
them. In order to accommodate this need for affordable, legal services, various
models have arisen. Legal service plans were first developed in the United
States in the late 1960's. Since then, there has been substantial growth in the
number of Americans entitled to receive various forms of legal services through
legal service plans. According to estimates developed by the National Resource
Center for Consumers of Legal Services, there were 4 million Americans entitled
to services through at least one legal service plan in 1981, 15 million in 1985,
58 million in 1990, 98 million in 1996 and 105 million in 1997.
Legal service plans are offered through various organizations and are
distinguishable based on various characteristics. These characteristics include
insurance vs. non insurance plans, whether there is a direct cost to the member,
whether there is a sponsor and, if so, whether there is a direct cost to the
sponsor, as well as the range and variety of services offered. According to the
National Resource Center for Consumers of Legal Services, the following are
examples of the most commonly used plans:
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o MEMBER PLANS. These generally provide limited benefits on an
automatic enrollment basis without any direct cost to the
individual user. Labor unions, elder hotlines and the National
Education Association are the largest sponsors of member
plans.
o EMPLOYMENT BASED PLANS. These are generally offered by medium
to large employers and can include legal referral and
consultation. Enrollment types can be automatic or voluntary
with varying costs to the member.
o MILITARY PLANS. These are automatic enrollment plans with no
cost to the member.
COMPETITION
Our primary competitors, which are insurance and member plans, are
Pre-Paid Legal Services, Inc., the Hyatt Legal Plans, the ARAG plans (formerly
known as Midwest Legal Plans), Law Phone, and the Signature Legal Plan. Pre-Paid
Legal Services, our largest competitor, is a publicly traded insurance company
that markets its products through a multi-level scheme, offering enumerated
services for designated annual payments.
The Hyatt and ARAG plans cover limited services for a limited number of
hours of service. The employee is responsible for paying for any additional time
expended at the attorney's regular hourly rates. Law Phone provides unlimited
telephone consultations for a fee of $10.00 per month. Limited in-person
visitation and additional discounted visits are also covered. The Signature
Legal Plan is also an insurance product with coverage that varies from state to
state.
While we compete with the various types of legal service providers
listed above, we feel that our service presents a number of important
competitive advantages to a potential member. There are no restrictions
regarding eligibility and no waiting period for access to the services. Once a
member, there are no limitations or exclusions based on pre-existing conditions,
and no increase in our membership fees as a result of a high volume of usage of
the services by the member. Since our services are not set up as an insurance
company, and because our revenues are based on initial and continuing membership
fees, increased usage by the members does not lower our revenues. Also, by
limiting our role to providing referral services, we believe that we materially
reduce our exposure to any liabilities that may arise from or as a result of
services provided by our participating attorneys.
REGULATION
INSURANCE REGULATION
We do not provide any portion of our membership fees to the attorneys
participating in the Legal Club network. We also do not receive any fees from
the attorneys for having referred the members to them. We do not insure our
customers against any risk. As a result, we believe that we are not subject to
regulation as an insurer. However, we have received a letter from the Florida
Department of Insurance stating its position that we should be regulated as a
legal expense insurer. Subsequently, we sought and received an opinion from the
Florida Legislative Joint Administrative Procedures Committee that we were
operating as a referral service only and not as an insurer. We have since
exchanged correspondence with the Florida Department of Insurance, but the
matter has not yet been resolved. This matter is currently subject to formal
administrative review. In the event this matter is not ultimately resolved in
our favor, and it is determined that we should be regulated as a legal expense
insurance provider, we will need to post a bond with the state and will be
required to maintain certain reserves. It is difficult for us to determine at
this time the ultimate costs that would be associated with a determination that
we must comply with insurance regulations. While we strongly believe that we do
not meet the regulatory definition of a legal expense insurer in the State of
Florida, we believe that being regulated in this manner, if it were to occur,
may have a material adverse impact on our financial condition.
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LEGAL REGULATION
Since we do not practice law or provide legal advice to our members, we
do not believe that we fall under the purview of regulations governing
attorneys. Nor do we believe that any of our services are in conflict with any
regulations affecting lawyers. We require our participating attorneys to comply
with applicable regulations and ethical codes and we perform monitoring
procedures to seek to ensure compliance.
EMPLOYEES
We currently have 47 full-time employees, of which 15 are in
operations, 13 are in management, 11 are in member services and 8 are in
administration. None of the employees belongs to a union. We believe that our
employee relationships are excellent.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
YEARS ENDED JUNE 30, 1998 AND 1999
We reported a net loss of $2,842,000, or $0.18 per basic and diluted
common share, for the fiscal year ended June 30, 1999, compared to a net loss of
$1,323,000, or $0.18 per basic and diluted common share for the comparable
period in 1998. The increase in net loss for the 1999 period is attributable to
the continued development of our infrastructure, as well as increased marketing
costs required to achieve membership growth.
Fee income from memberships for the fiscal year ended June 30, 1999 was
$935,000 compared to $116,000 for the comparable period in 1998, an increase of
706%. The increase in fee income is primarily the result of increased revenues
generated from infomercial placements as well as increased revenue associated
with sales of Legal Club employee benefits through employer groups.
The increase in fee income from memberships was offset by an even
larger increase in operating expenses, which totaled $3,782,000 and $1,234,000
for the fiscal years ended June 30, 1999 and 1998, respectively. The increase in
operating expenses were primarily the result of (1) payroll and employee
benefits which were $1,353,000 for the fiscal year ended June 30, 1999 compared
to $268,000 for the comparable period in 1998, and (2) communications expenses
which were $1,398,000 for the fiscal year ended June 30, 1999 compared to
$232,000 for the same period in 1998. Payroll and employee benefits increased
$1,085,000, an increase of 405%, due to the hiring of administrative, technical,
sales and management personnel to market and service customers, develop
operations, and manage our business. Communications expenses increased
$1,166,000 or 503% as a result of our increased infomercial television
placements as well as production costs associated with developing the
infomercials.
Other income, net, for the fiscal year ended June 30, 1999 was $5,000
as compared to a loss of $205,000 for the comparable period in 1998, an
improvement of $210,000. The improvement in other income, net is primarily the
result of (1) a decrease of $75,000 of interest expense in the current fiscal
year, and (2) a decrease of $94,000 associated with a loss on disposition of
investments in 1998 as compared to no loss on disposition of investments in
1999.
We expect revenues for the quarter ending September 30, 1999 to be
considerably higher than the comparable quarter ended September 30, 1998.
However, it is likely that our expenses will grow commensurately in order to
generate and service the revenue growth. We do not believe there is any
seasonality associated with our business.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $2,631,000 for the fiscal
year ended June 30, 1999, compared to net cash used in operating activities of
$879,000 for the comparable period in 1998. This increase of $1,752,000 in
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net cash used in operating activities resulted primarily from an increase in the
net loss of $1,519,000. The increases in uses of net cash from operating
activities were partially offset by increases in the sources of net cash
provided by increases in accounts payable and accrued liabilities totaling
$329,000 as well as an increase of $73,000 in deferred revenues.
Cash flows used for investing activities increased $179,000 for the
fiscal year ended June 30, 1999, compared to the same period in 1998. This was
due to our acquisition of additional computer equipment and furniture to equip
employees with the capacity to service the increased customer base. Since June
30, 1999 we have spent approximately $134,000 on plant, property and equipment
used in operations, including leasehold improvements associated with our move to
our new facilities (see Note 9 to the consolidated financial statements for
future lease commitments). Management believes we may require additional
computers and leasehold improvements over the next twelve months in order to
continue to enhance our products and operations, as well as to develop Internet
access to our services. Based upon our current capital resources, we believe
additional financing will be required to purchase or lease the additional
computers and leasehold improvements as such purchases may not be able to be
funded through cash flow from current operations. Unless we can obtain
additional financing, our ability to enhance our products, services operations
and Internet access may be materially impaired.
Cash flows from financing activities increased $3,868,000 for the
fiscal year ended June 30, 1999 compared to the comparable period in 1998. This
increase was primarily due to our continued capital raising activities to fund
operations, develop infrastructure, and market products. We have incurred
cumulative losses since inception and continue to require additional capital to
fund operations and development. Management is planning to obtain additional
equity capital by the issuance of common or preferred stock for cash, pursuant
to equity offerings. Management recognizes that we must generate additional
capital to fund operations; however, no assurances can be given that we will be
successful in generating additional capital. Should we fail to generate
additional capital, our ability to continue operations may be materially
impaired.
We currently manage the payment of our current liabilities and
obligations on a monthly basis as cash becomes available. The balance of cash
available at June 30, 1999 of $1,801,000 has been used in operations through
October 1999, and our current capital resources are limited as of this date. We
intend to generate the necessary capital to operate for the next twelve months
during November 1999 and December 1999 by selling our common and preferred
shares to qualified investors in a private placement. Unless we are successful
in our efforts to sell our stock, we believe that we may not be able to continue
operations for the next twelve months. There are no assurances that we will be
able to raise the required capital through the sale of our debt or equity
securities or that we will have access to other sources of capital on terms that
are acceptable to us.
YEAR 2000 COMPLIANCE
With the new millennium approaching, many institutions around the world
are reviewing and modifying their computer systems to ensure that they are Year
2000 compliant. Many existing computer systems and microprocessors with data
functions (including those in non-information technology equipment and systems)
use only two digits to identify a year in the date field with the assumption
that the first two digits of the year are always "19." Consequently, on January
1, 2000, computers that are not Year 2000 compliant may read the year as 1900,
and systems that calculate, compare or sort using the incorrect date may
malfunction.
We have conducted an assessment of the Year 2000 issue and the
potential effect it will have on us and our business. We have determined that we
will not be required to materially modify or replace our information and
non-information technology systems to properly recognize and utilize dates
beyond December 31, 1999. We presently believe that with modifications
previously made to existing software, conversions to new software and
replacement of some hardware, the Year 2000 issue will be satisfactorily
resolved in our own systems. However, even if these changes are successful,
failure of third parties to which we are financially or operationally linked to
address their own system problems could have a material adverse effect on us.
Furthermore, the investing and trading patterns of clients may be affected by
Year 2000 issues as clients become concerned about the Year 2000 issue and the
effect it
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will have on the U.S. and international stock markets and the securities
industry generally. Changes in these patterns may harm our business.
We continue to monitor and review the Year 2000 issue and, as
appropriate, modify or replace the software (and replace some hardware) in our
computer systems. We continue to monitor our own internal systems to prepare for
Year 2000 compliance. We have also initiated communications with
counter-parties, intermediaries and vendors with whom we have important
financial and operational relationships to determine the extent to which they
are vulnerable to the Year 2000 issue. We have not yet received sufficient
information from these parties about their remediation plans to predict the
outcome of their efforts.
We have recently completed a comprehensive upgrade of our computer
systems, which included Year 2000 testing and preparation. The upgrade cost us
approximately $200,000. We do not expect to incur any additional significant
costs relating to Year 2000 readiness. While most of our Year 2000 program has
been completed, we may use additional funds for continuing preparation efforts.
We cannot assure you that these estimates will be correct; actual results could
differ materially from our plans.
In the event of a failure of our systems, our systems are fully backed
up and we have the capability to be operational within 48 hours.
ITEM 3. DESCRIPTION OF PROPERTY
We rent approximately 14,186 square feet of office space in a building
in Sunrise, Florida. The lease is for a term of eighty-four (84) calendar
months, which commenced on July 1, 1999. The total payment for the duration of
the lease term is approximately $1,235,000. We also have five regional sales
offices located in Tampa, Los Angeles, Denver, Chicago and New York. There is
only one employee in each regional sales office at this time.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information with respect to the beneficial
ownership of our capital Stock by (i) each of the directors of the Company, (ii)
each "named executive officer," (iii) each person known by the Company to be the
beneficial owner of five percent or more of each class of our voting securities,
and (iv) all executive officers and directors as a group, as of October 31,
1999. Unless otherwise indicated, the Company believes that the beneficial owner
has sole voting and investment power over such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF DESIGNATED CLASS(1) OWNERSHIP OF CLASS(1)(2)
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<S> <C> <C>
Brett Merl 2,353,555 shares common stock 10.5%
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
Jason Krouse 700,519 shares common stock 3.1%
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
A. Clinton Allen 350,000 shares common stock 1.6%
C. Allen & Co.
1280 Mass. Ave.
Cambridge, MA 02138
Ronald G. Agypt 125,000 shares common stock 0.6%
AON
400 N. Skokie Bldg., Suite 450
Northbrook, IL 60062
Matt Cohen 541,164 shares common stock 2.4%
Interactive Technologies.Com, Ltd.
11336 Wiles Road
Coral Springs, Florida 33076
Storie Partners L.P. 16,667 shares of Series A 7.5%
c/o Howard, Rice, Nemerovsky, Candy, Falk & Convertible Preferred Stock (3)
Rabkin
Three Embarcadero, 7th Floor
San Francisco, CA 94111-4065
All Executive Officers and Directors as a 4,070,238 shares common stock 16.1%
group (7 persons)
<FN>
- ---------------------
(1) Includes the amount of shares the beneficial owner has the right to
acquire within 60 days from options, warrants or similar rights.
(2) Calculation of total number of shares of outstanding common stock of the
corporation is made on a fully diluted basis, taking into account all
instruments convertible into common stock within 60 days, including the
Series A Convertible Preferred Stock.
(3) Holding consists of 16,667 shares of Series A Convertible Preferred Stock,
which are convertible into 1,666,770 shares of common stock. If converted,
these shares would represent 7.5% of the fully diluted common stock.
</FN>
</TABLE>
9
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, ages and positions held with
respect to each Director and Executive Officer:
<TABLE>
<CAPTION>
NAME OF OFFICER/DIRECTOR AGE POSITIONS WITH COMPANY
------------------------ --- ----------------------
<S> <C> <C>
Brett Merl........................... 38 Chief Executive Officer and Chairman of the Board
Richard Campanaro.................... 57 President and Chief Operating Officer
Michael Samach....................... 45 Chief Financial Officer
Jason Krouse......................... 31 Executive Vice President of Sales and Director
A. Clinton Allen..................... 55 Director
Ronald G. Agypt...................... 43 Director
Matt Cohen........................... 41 Director
</TABLE>
BRETT MERL has served as our Chief Executive Officer and Chairman of
the Board since October 1999. From January 1999 to October 1999, he served as
our President, Chief Executive Officer and Director. From January 1997 to
January 1999, he served as our Chief Executive Officer. From February 1996 to
December 1996, he served in various capacities for the Company. From December
1989 to January 1996, Mr. Merl was Vice President of Bernstein Zimmerman
Financial, Inc. ("BZFI"), an insurance agency specializing in group benefits and
pension planning. BZFI is also a benefits coordinator for three South Florida
credit unions, offering financial services to credit union members and the
member corporations. Mr. Merl received a B.S. degree in Marketing from Long
Island University in 1993.
RICHARD CAMPANARO began serving as our President and Chief Operating
Officer in October 1999. From March 1996 to October 1999, he served as Chief
Operating Officer of Scibal Associates, Inc., a third party administration
company, and from March 1995 to March 1996, he acted as consultant for the
company. From March 1993 to March 1996, Mr. Campanaro served as Director and
consultant for Century Industries, Inc. Mr. Campanaro previously served as
president and chief executive officer of Tandem Financial Group, an insurance
company jointly owned by Merrill Lynch and Co. and Equitable Life Assurance Co.,
now part of Merrill Lynch Insurance Group.
MICHAEL SAMACH began serving as our Chief Financial Officer in
September 1999. From February 1999 to September 1999, he acted as an independent
financial consultant. From September 1998 to February 1999, Mr. Samach served as
the Chief Financial Officer of Equipnet, Inc., a medical network management
company. From January 1998 to August 1998, he served as the Chief Financial
Officer of CHCS, Inc., also a medical network management company. From January
1996 to November 1997, he served as the Chief Financial Officer and the Chief
Operating Officer of American Medical Healthcare, Inc., a start-up HMO. From May
1993 to January 1996, Mr. Samach served as the Finance Director of the Florida
Region for Foundation Health of Florida. Mr. Samach is a Certified Public
Accountant and holds an M.B.A. and an M.S. degree from the University of Miami.
He also holds a B.S. degree from Florida State University.
JASON KROUSE has served as our Executive Vice President of Sales, since
August 1998 and as a Director since December 1998. In 1997, Mr. Krouse was
employed by the law firm of Kahl and Associates and in 1996 was associated with
the law firm of Bob, Spier, Ciotelli. Mr. Krouse received a J.D. degree from
Nova Southern Shepard Broad Law Center in 1997 and received his B.S. degree in
marketing from Florida Atlantic University in 1990. Mr. Krouse sits on the board
of directors of the Mass Marketing Insurance Institute and the National
Association of Voluntary Enrollment Specialists.
10
<PAGE>
A. CLINTON ALLEN has served as a Director since 1998. Since 1987, Mr.
Allen has served as vice chairman of Psychemedics Corp. He also serves as a
director for The DeWolfe Companies, Swiss Army Brands, Steinway Musical
Response, USA and DCRI Corp. Mr. Allen was also the first outside director of
Blockbuster Entertainment Corp.
RONALD G. AGYPT has served as a Director and the Chairman of the
Compensation Committee since March 1999. Since January 1998, Mr. Agypt has been
the National Sales Manager for Worksite Solutions, a subsidiary of AON, with
which we have entered an agreement for them to market our services through their
worksite markets. Prior to serving in his current position, Mr. Agypt served in
various management capacities with AON during the previous 24 years.
MATT COHEN has served as a Director since September 1999. From July
1997 to August 1999, Mr. Cohen served as our Chief Financial Officer. From 1988
until July 1997, Mr. Cohen served as vice president and chief financial officer
of Standard Brands of America, a retailer of consumer electronics and
appliances. Mr. Cohen also serves on the Board of Directors of Interactive
Technologies.com Ltd. and UBuy.com
All directors of the Company hold office until the next annual meeting
of stockholders or until their successors are elected and qualified. As
compensation for attending the meetings of our board of directors non-employee
directors receive $2,500 per meeting. Our employee directors do not receive any
additional compensation for attending the meetings.
11
<PAGE>
ITEM 6 EXECUTIVE COMPENSATION
The following tables and notes present for the three years ended June
30, 1999, the compensation paid by the Company to the Company's chief executive
officer and the executive officer who received compensation of at least $100,000
in 1999, 1998 or 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ---------------------------------------
AWARDS PAYOUTS
-------------------------- ------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ------------------- ------- ---------- ----------- ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brett Merl, 1999 $159,038 $50,000(1) $3,000 -- 82,090 -- $163
Chairman of the
Board and Chief
Executive Officer
- ----------------------------------------------------------------------------------------------------------------------
1998 58,413 -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
1997 -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Matt Cohen(2) 1999 128,077 50,000 3,000 -- 67,164 -- --
- ----------------------------------------------------------------------------------------------------------------------
1998 90,796 -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
1997 14,722 -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
<FN>
- ------------------
(1) Bonus voluntarily deferred by employee.
(2) Matt Cohen was our Chief Financial Officer until September 1999. He has
been on the Board of Directors since 1997.
</FN>
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS
We have entered into an Employment Agreement with Richard Campanaro,
effective as of October 18, 1999, engaging him to serve as our President and
Chief Operating Officer. This Employment Agreement has a term of one year, with
an initial annual base salary of $180,000.
We have entered into an Employment Agreement with Brett Merl, effective
as of July 1, 1997, engaging him to serve as our Chief Executive Officer.
This Employment Agreement has a term of three years, with an initial annual base
salary of $125,000.
We have entered into an Employment Agreement with Michael Samach,
effective as of September 17, 1999, engaging him to serve as our Chief Financial
Officer. This Employment Agreement has a term of three years, with an initial
annual base salary of $135,000.
We have entered into an Employment Agreement with Jason Krouse dated
December 12, 1997, engaging him to serve as our Vice President of Sales. This
Employment Agreement has a term of five years, with an initial annual base
salary of $55,000 per year.
12
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Brett Merl and Jason Krouse subscribed for and were issued our common
stock in exchange for promissory notes from each officer in the approximate
amount of $132,000. The notes, together with the interest accrued thereon, are
due December 26, 2003.
Jason Krouse extended the Company a loan on October 27, 1999, in the
amount of $50,000, bearing interest at a rate of 7% per annum and maturing on
April 26, 2000.
We have entered into a Consulting Agreement effective February 16, 1999
with A.C. Allen & Company, an affiliate of A. Clinton Allen, one of our
directors. Pursuant to this Consulting Agreement, A.C. Allen & Company receives
compensation in the amount of $4,000 per month in exchange for providing
business consulting services.
We have entered into an Agreement with Matthew Cohen, our former Chief
Financial Officer and Brett Merl, our Chief Executive Officer, dated September
1999. Pursuant to this Agreement, among other things, Brett Merl has agreed to
assume certain outstanding obligations of Mr. Cohen under a promissory note to
the Company in the original principal amount of $132,000, in exchange for
receiving 700,000 shares of the Company's common stock from Mr. Cohen.
ITEM 8. DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.0001 par value, and 1,000,000 shares of preferred stock, $.0001 par
value. As of June 30, 1999, 18,539,726 shares of our common stock and 27,778
shares of our Series A Convertible Preferred Stock were outstanding. The
following statements do not purport to be complete and are qualified in their
entirety by reference to the detailed provisions of the Company's Articles of
Incorporation and Bylaws, which are exhibits to this Registration Statement.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to any preferential rights
of preferred stockholders, the holders of common stock are entitled to receive
dividends on a pro rata basis, if any, declared from time to time by the board
of directors out of legally available funds. In the event of our liquidation,
dissolution or winding up, subject to any preferential rights of preferred
stockholders, the holders of common stock are entitled to share on a pro rata
basis in all assets remaining after payment of liabilities. The common stock has
no preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
The board of directors has the authority to issue the preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of any series, without further vote or action by the shareholders.
The issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of our company without further action by the
shareholders and may adversely affect the voting and other rights of the holders
of common stock. The issuance of preferred stock with voting and conversion
rights may adversely affect the voting power of the holders of common stock,
including the loss of voting control to others.
13
<PAGE>
SERIES A CONVERTIBLE PREFERRED STOCK. HOLDERS OF OUR SERIES A
CONVERTIBLE PREFERRED STOCK HAVE THE FOLLOWING RIGHTS AND PREFERENCES AND ARE
SUBJECT TO THE FOLLOWING TERMS:
o The holders have a right to convert each share of their Series
A preferred stock, at any time, into one hundred shares of our
common stock, subject to certain adjustments;
o The holders are entitled to receive dividends as and if
declared by the board of directors on our common stock, and in
such amount that such holders would have received had they
converted their Series A preferred stock to common stock on
the record date;
o The holders have priority over the holders of the common stock
in the event of our liquidation, dissolution or winding up;
and
o The holders are entitled to vote, as a class with the holders
of our common stock, such number of votes as they would have
been entitled to had they converted their Series A preferred
stock to common stock on the record date.
We have a right to redeem some or all of the Series A preferred stock
at any time after January 31, 2002 at a price of $90 per share, plus all accrued
dividends, if any.
DIVIDEND POLICY
The Company has not paid any dividend to its shareholders for any class
of stock and does not anticipate paying any dividends in the foreseeable future.
STOCK OPTION PLAN
1997 STOCK OPTION PLAN. Our 1997 Stock Option Plan authorizes the award
of up to 2,000,000 shares of common stock in the form of stock options. As of
September 30, 1999, stock options to purchase approximately 596,209 shares of
common stock were outstanding under the plan. Accordingly, up to 1,403,791
shares of common stock are currently available for future awards under the plan.
The Company anticipates issuing options for an additional 800,000 shares in
connection with the employment agreements of Richard Campanaro and Michael
Samach, our new executive officers. The purpose of the plan is to enable us to
attract and retain qualified and competent employees and to enable such persons
to participate in our long-term success and growth by giving them an equity
interest in our company.
All directors, key employees, consultants and independent contractors
of our company are eligible to receive options pursuant to the plan. The
participants under the plan shall be selected from time to time by the board of
directors or, if constituted by the board of directors, by the compensation
committee, in its sole discretion. The plan is administered by the compensation
committee or such other committee of directors as the board shall designate.
Notwithstanding the foregoing, from and after the effective date of our filing
this registration statement, the plan must be administered by a committee which
shall consist of two or more directors who are "non-employee" directors within
the meaning of Rule 16b-3 under the Exchange Act and an "outside" director
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended.
The committee makes all decisions or determinations by either a
majority vote of its members present at a meeting or by the unanimous written
approval of its members. The committee may adopt, alter or repeal any
administrative rules, guidelines and practices for carrying out the purposes of
the plan. The committee has the right to determine, among other things, the
persons to whom awards are granted, the terms and conditions of any awards
granted, the number of shares of common stock covered by the awards, the
exercise price and the term thereof. Notwithstanding the foregoing, the number
of shares of common stock which may be subject to options granted to any
individual during any calendar year may not exceed 500,000.
14
<PAGE>
The exercise price, term and exercise period of each stock option shall
be fixed by the committee at the time of grant. Notwithstanding the fixed option
price, no incentive stock option shall (i) have an option price which is less
than 100% of the fair market value of the common stock on the date of the award
of the stock option, (ii) be exercisable more than ten years after the date such
incentive stock option is awarded, or (iii) be awarded more than ten years after
the plan is adopted by the board.
REGISTRATION RIGHTS
We have granted registration rights to some of our equity and debt
holders in connection with our financing activities.
WARRANTS
As of September 30, 1999, immediately exercisable warrants to purchase
1,050,000 shares of our common stock were outstanding. Some of the terms of the
outstanding warrants are as follows:
o 300,000 warrants are exercisable for $.90 per share and expire
on December 31, 2003;
o 50,000 warrants are exercisable for $.90 per share and expire
on December 31, 2003;
o 300,000 warrants are exercisable for $.90 per share and expire
on February 12, 2009;
o 300,000 warrants are exercisable for $2.00 per share and
expire on August 1, 2009;
o 100,000 warrants are exercisable for $2.00 per share and
expire on December 31, 2003;
The holders of the warrants have certain registration and conversion
rights.
TRANSFER AGENT
The Transfer Agent and Registrar for the common stock is Interstate
Transfer Company, 56 W. 400 South, Suite 260, Salt Lake City, Utah 84101. Their
telephone number is (801) 531-7860.
15
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Company's Common Stock is traded on the NASD OTC Bulletin Board
under the symbol LEGL.
The following bid quotations have been reported for the period
beginning December 14, 1998, when the Company's common stock commenced trading
on the OTC Bulletin Board.
BID PRICES
--------------------------
PERIOD HIGH LOW
--------------------------------------- --------- --------
Quarter Ended September 30, 1999 $ 4 3/16 $ 2 5/8
Quarter Ended June 30, 1999 4 1/4 3 1/2
Quarter Ended March 31, 1999 6 1/2 2 3/4
Quarter Ended December 31, 1998 3 1/8 2 3/4
Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission. Such quotes are not necessarily representative of
actual transactions or of the value of the Company's securities, and are in all
likelihood not based upon any recognized criteria of securities valuation as
used in the investment banking community.
As of September 30, 1999, there were 398 holders of record of the
Company's common stock and 18,539,726 shares issued and outstanding. As of the
same date, there were 3 holders of the Company's Series A Preferred Stock and
27,778 shares outstanding. Certain of the shares of common stock are held in
"street" name and may, therefore, be held by several beneficial owners.
Of the 18,539,726 shares of outstanding common stock, 17,539,726 shares
are "restricted" securities of the Company within the meaning of Rule 144(a)(3)
promulgated under the Securities Act of 1933, as amended. In general, under Rule
144, as currently in effect, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company (in general, a
person who has a control relationship with the company) who has owned restricted
securities of common stock beneficially for at least one year is entitled to
sell, within any three-month period, that number of shares of a class of
securities that does not exceed the greater of (i) one percent (1%) of the
shares of that class then outstanding or, if the common stock is quoted on
NASDAQ, (ii) the average weekly trading volume of that class during the four
calendar weeks preceding such sale. A person who has not been an affiliate of
the company for at least the three months immediately preceding the sale and has
beneficially owned shares of common stock for at least two (2) years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above.
No prediction can be made as to the effect, if any, that future sales
of shares of common stock or the availability of common stock for future sale
will have on the market price of the common stock prevailing from time-to-time.
Sales of substantial amounts of common stock on the public market could
adversely affect the prevailing market price of the common stock.
The Company has not paid any dividends to its shareholders for any
class of stock since current management joined the Company in 1996 and does not
anticipate paying any such dividends in the foreseeable future. The payment of
dividends may be made at the discretion of the Board of Directors of the Company
and will depend upon, among other things, the Company's operations, its capital
requirements, and its overall financial condition.
16
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
We have received a letter from the Florida Department of Insurance
stating its position that we should be regulated as a legal expense insurer.
Subsequently, we sought and received an opinion from the Florida Legislative
Joint Administrative Procedures Committee that we were operating as a referral
service only and not as an insurer. We have since exchanged correspondences with
the Florida Department of Insurance, but the matter has not yet been resolved.
This matter is currently subject to formal administrative review. In the event
this matter is not ultimately resolved in our favor, and it is determined that
we will be regulated as a legal expense insurance provider, we will need to post
a bond with the state and will be required to maintain certain reserves. It is
difficult for management to determine at this time the ultimate costs that would
be associated with a determination that we must comply with insurance
regulations. While we strongly believe that we do not meet the regulatory
definition of a legal service insurer in the State of Florida, we believe that
being regulated in this manner, if it were to occur, may have a material adverse
impact on our financial condition.
We filed an action styled LegalClub.com, Inc. v. Bernstein in August
1999 in the Broward County Circuit Court. This case presents a claim against
Howard S. Bernstein for the rescission of certain stock issuances we made to him
at the time of our formation, as well as a claim for slander. The rescission
claim relates to Mr. Bernstein's alleged failure to perform under the agreement
pursuant to which we issued shares to him. We are seeking to recover such
shares. The slander claims seek recovery for various damaging statements that we
believe Mr. Bernstein made to members of the investment banking community. Mr.
Bernstein has filed a counterclaim against us for breach of contract, seeking
monetary relief of approximately $300,000 for salary and other compensation
allegedly due from us to Mr. Bernstein. At the present time, it is too early in
the litigation to assess with any degree of certainty the likelihood of success
of either our or Mr. Bernstein's claims.
An action styled Merin, Hunter, Codman, Inc. v. Legal Club of America
Corp. was filed in September 1999, in the Broward County Circuit Court, in which
Merin, Hunder, Codman, Inc. is seeking to recover brokerage commissions
allegedly due to it in connection with our search for premises to lease as our
headquarters. We maintain that the subject brokerage agreement with this entity
was terminated and that no commissions are owed. At this time, Merin, Hunter,
Codman has not alleged the amount of its claim, stating only that the amount
exceeds $15,000, which is the jurisdictional requirement for the Court in this
action. It is too early in this litigation to determine the likelihood of
success on Merin, Hunter, Codman's claims.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
COMMON STOCK
During 1999, we sold 7,484,354 shares of our common stock. Of this
total issuance, 7,272,814 shares were issued in exchange for an aggregate
offering price of $2,124,000 and 211,540 shares were used to convert existing
long term debt payable and related accrued interest to various private investors
for a total consideration of $634,000. These securities were sold to private and
institutional investors in reliance on Rule 506 of rules and regulations
promulgated under the Securities Act of 1933, as amended.
During 1998, we sold 5,527,525 shares of our common stock. Of this
total issuance, 3,376,211 shares were issued in exchange for an aggregate
offering price of $769,000, 902,139 shares were issued as compensation for
services performed by our employees and external consultants for a total
consideration of $298,000, 1,200,000 shares were issued to our officers under
subscription agreements for a total consideration of $396,000, and 49,175 shares
were used to convert existing long term debt payable and related accrued
interest to various private investors
17
<PAGE>
for a total consideration of $116,000. These securities were sold to private and
institutional investors in reliance on Rule 506.
During 1997, we sold 5,077,847 shares of our common stock. Of this
total issuance, 378,000 shares were issued in exchange for an aggregate offering
price of $147,000, 4,479,847 shares were issued as compensation for services
performed by our employees and external consultants for a total consideration of
$119,000, and 220,000 shares were used to convert existing long term debt
payable and related accrued interest to various private investors for a total
consideration of $748,000. These securities were sold to private and
institutional investors in reliance on Rule 506.
SERIES A CONVERTIBLE PREFERRED STOCK
In February 1999, we sold 27,778 shares of our Series A Convertible
Preferred Stock, which are convertible into 2,777,800 shares of our common
stock. The aggregate offering price was $2,500,000. These securities were sold
to accredited private and institutional investors in reliance on Rule 506.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant has authority under Sections 7-109-102 and 7-109-107 of
the Colorado Business Corporation Act to indemnify its directors and officers to
the extent provided for in such statute. The Registrant's Articles of
Incorporation and Bylaws provide that the Registrant shall indemnify and may
insure its officers and directors to the fullest extent not prohibited by law.
The effect of such provision is to require the Company to indemnify the officers
and directors of the Company for any claim arising against such persons in their
official capacities if such person acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The Registrant also maintains a policy of
directors' and officers' liability insurance.
18
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' Equity (Deficit) F-4
Consolidated Statements of Cash Flows F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6-F-14
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Legal Club of America Corporation
We have audited the accompanying consolidated balance sheets of Legal Club of
America Corporation, Inc. and its subsidiaries (collectively, the "Company") as
of June 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 1999 and 1998, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's accumulated deficit and
continuing losses from operations raise substantial doubt about its ability to
continue as a going concern. In addition, the Company is in default on certain
debt agreements. Management's plans in regard to these matters are also
described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Ahearn, Jasco + Company, P.A.
---------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
October 28, 1999
F-1
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,801,000 $ 20,000
Prepaid expenses 86,000 15,000
Advances and other 39,000 16,000
----------- -----------
TOTAL CURRENT ASSETS 1,926,000 51,000
PROPERTY AND EQUIPMENT, net 189,000 27,000
INTEREST DUE FROM SHAREHOLDERS 37,000 13,000
OTHER ASSETS 5,000 5,000
----------- -----------
TOTAL $ 2,157,000 $ 96,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $ 451,000 $ 894,000
Interest payable 163,000 488,000
Accounts payable and accrued liabilities 540,000 274,000
Deferred revenues 99,000 13,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,253,000 1,669,000
----------- -----------
LONG-TERM DEBT, less current portion 158,000 97,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.0001 par value; 1,000,000 shares authorized;
40,000 shares designated Series A; issued and outstanding:
27,778 shares of Series A in 1999; none in 1998 -- --
Common stock, $0.0001 par value; 50,000,000 shares
authorized; shares issued and outstanding: 18,539,726 in
1999 and 11,055,372 in 1998 2,000 1,000
Additional paid-in capital 8,199,000 2,942,000
Deficit (7,059,000) (4,217,000)
Stock subscription receivable (396,000) (396,000)
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT), NET 746,000 (1,670,000)
----------- -----------
TOTAL $ 2,157,000 $ 96,000
=========== ===========
</TABLE>
See notes to the consolidated financial statements.
F-2
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 1998
------------ ------------
REVENUES:
Membership fee income $ 935,000 $ 116,000
------------ ------------
OPERATING EXPENSES:
Payroll and employee benefits 1,353,000 268,000
Communications 1,398,000 232,000
Services performed for common stock -- 298,000
Professional fees 616,000 241,000
Office, administrative, and general 320,000 143,000
Occupancy 56,000 33,000
Equipment costs and depreciation 39,000 19,000
------------ ------------
TOTAL OPERATING EXPENSES 3,782,000 1,234,000
------------ ------------
LOSS FROM OPERATIONS (2,847,000) (1,118,000)
------------ ------------
OTHER INCOME (EXPENSE):
Other income, net 67,000 26,000
Loss on disposition of investments -- (94,000)
Interest expense (62,000) (137,000)
------------ ------------
OTHER INCOME (EXPENSE), NET 5,000 (205,000)
------------ ------------
NET LOSS $ (2,842,000) $ (1,323,000)
============ ============
LOSS PER COMMON SHARE:
Basic and diluted $ (0.18) $ (0.18)
============ ============
Weighted average common shares outstanding 15,784,768 7,354,386
============ ============
See notes to the consolidated financial statements.
F-3
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
=====================================================================================================================
COMMON SERIES A PREFERRED ADDITIONAL
COMMON STOCK, AT PREFERRED STOCK, AT PAID-IN
SHARES PAR VALUE SHARES PAR VALUE CAPITAL
----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' DEFICIT, July 1, 1997 5,527,847 $ 1,000 -- $ -- $ 1,363,000
Common stock issued for the conversion
of debt and accrued interest 49,175 -- -- -- 116,000
Stock issued pursuant to subscription
agreements 1,200,000 -- -- -- 396,000
Issuance of stock for cash 3,376,211 -- -- -- 769,000
Issuance of stock for services 902,139 -- -- -- 298,000
Net loss for the year ended June 30, 1998 -- -- -- -- --
----------- ----------- ----------- ------- -----------
STOCKHOLDERS' DEFICIT, June 30, 1998 11,055,372 1,000 -- -- 2,942,000
Common stock issued for the conversion
of debt and accrued interest 211,540 -- -- -- 634,000
Issuance of common stock for cash 7,272,814 1,000 -- -- 2,123,000
Issuance of preferred stock for cash -- -- 27,778 -- 2,500,000
Net loss for the year ended June 30, 1999 -- -- -- -- --
----------- ----------- ----------- ------- -----------
STOCKHOLDERS' EQUITY (DEFICIT),
June 30, 1999 18,539,726 $ 2,000 27,778 $ -- $ 8,199,000
=========== =========== =========== ======= ===========
<CAPTION>
===============================================================================================
STOCK STOCKHOLDERS'
SUBSCRIPTION EQUITY (DEFICIT),
DEFICIT RECEIVABLE NET
----------- ------------ -----------------
<S> <C> <C> <C>
STOCKHOLDERS' DEFICIT, July 1, 1997 $(2,894,000) $ -- $(1,530,000)
Common stock issued for the conversion
of debt and accrued interest -- -- 116,000
Stock issued pursuant to subscription
agreements -- (396,000) --
Issuance of stock for cash -- -- 769,000
Issuance of stock for services -- -- 298,000
Net loss for the year ended June 30, 1998 (1,323,000) -- (1,323,000)
----------- ----------- -----------
STOCKHOLDERS' DEFICIT, June 30, 1998 (4,217,000) (396,000) (1,670,000)
Common stock issued for the conversion
of debt and accrued interest -- -- 634,000
Issuance of common stock for cash -- -- 2,124,000
Issuance of preferred stock for cash -- -- 2,500,000
Net loss for the year ended June 30, 1999 (2,842,000) -- (2,842,000)
----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT),
June 30, 1999 $(7,059,000) $ (396,000) $ 746,000
=========== =========== ===========
</TABLE>
See notes to the consolidated financial statements.
F-4
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,842,000) $(1,323,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 26,000 20,000
Interest due from shareholders (24,000) (13,000)
Loss on disposition of investments -- 94,000
Services performed for common stock -- 298,000
Changes in certain assets and liabilities:
Prepaid expenses (71,000) (16,000)
Advances and other (23,000) (5,000)
Interest payable (49,000) 116,000
Accounts payable and accrued liabilities 266,000 (63,000)
Deferred revenues 86,000 13,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,631,000) (879,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITY - Purchases
of property and equipment (188,000) (9,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 75,000 86,000
Repayments of long-term debt (99,000) (4,000)
Issuances of common and preferred stock 4,624,000 769,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,600,000 851,000
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,781,000 (37,000)
CASH AND CASH EQUIVALENTS, beginning of year 20,000 57,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 1,801,000 $ 20,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 45,000 $ 16,000
=========== ===========
Income taxes $ -- $ --
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the years ended June 30, 1999 and 1998, $634,000 and $116,000,
respectively, of debt and accrued interest were converted to common stock.
During 1998: marketable securities were transferred to a creditor in
full satisfaction of a $240,000 obligation, 2) subscribed stock was issued for
promissory notes totaling $396,000, and 3) common stock with an assigned value
of $298,000 was issued in exchange for services rendered.
See notes to the consolidated financial statements.
F-5
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Legal Club of America Corporation resulted from the merger of And
Justice for All, Inc. (d/b/a Legal Club of America) and Bird-Honomichl, Inc. on
October 16, 1998 (see note 8). Bird-Honomichl, Inc. was incorporated in Colorado
on July 23, 1991. And Justice for All, Inc. was incorporated in Florida on
January 22, 1996. The operations of And Justice for All, Inc. commenced on
February 28, 1996; Bird-Honomichl, Inc. was a non-operating entity prior to the
merger. The financial information prior to the date of the merger is that of And
Justice for All, Inc.
The consolidated financial statements are presented following the
elimination of any intercompany balances and transactions. Legal Club of America
Corporation and its subsidiaries are collectively referred to as the "Company".
The Company is a membership organization that provides a broad range of
services to its subscribers. The Company has established a network of over 6,100
attorneys in all 50 states who have contracted to provide both individuals and
small business owners with a variety of free and deeply discounted legal
services. Membership provides a subscriber with access to the Company's attorney
network and/or assistance in finding an attorney with a particular specialty.
The assigned attorney is paid directly by the subscriber. The Company receives
fees for membership, pays commissions to its agents, builds and maintains its
attorney network, and markets its plan to prospective new members.
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.
GOING CONCERN CONSIDERATIONS
The Company's financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company has
incurred cumulative losses since inception, has funded operations through
investor capital, and has yet to generate meaningful revenues (as compared to
its expenses) from its primary operating activities. In addition, the Company is
in default on certain of its debt agreements. Management recognizes that the
Company must generate additional resources and attain profitable operations to
enable it to continue in business. Management is planning to obtain additional
equity capital through the conversion of debt and also by the issuance of common
stock for cash pursuant to equity offerings. The realization of assets and
satisfaction of liabilities in the normal course of business is dependent upon
the Company's raising additional equity capital and ultimately reaching
profitable operations. However, no assurances can be given that the Company will
be successful in these activities. Should any of these events not occur, the
accompanying financial statement will be materially affected.
REVENUE RECOGNITION AND CREDIT RISKS
Revenue is recognized in the period services are provided to its
members. Uncollected membership fees are fully allowanced as to their ultimate
realization, as the predictability of their collection is highly uncertain.
Collected membership fees which are subject to refund are recorded as deferred
revenues.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using
accelerated methods over the estimated useful lives of the assets. Expenditures
for routine maintenance and repairs are charged to expense as incurred.
F-6
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company accounts for income taxes in accordance with the Statement
of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes." Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating loss
carryforwards, and tax credit carryforwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
NET LOSS PER COMMON SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share." SFAS 128
requires companies with complex capital structures or common stock equivalents
to present both basic and diluted earnings per share ("EPS") on the face of the
income statement. Basic EPS is calculated as income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated using the "if converted" method for
common share equivalents such as convertible securities and options and
warrants.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments purchased
with an original maturity of three months or less. At times, cash balances may
be held at financial institutions in excess of federally insured limits.
ADVERTISING
The costs of advertising, promotion, and marketing programs are charged
to operations in the year incurred. Expenses for these programs totaled
$1,069,279 and $87,304 for the years ended June 30, 1999 and 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, and accounts payable and accrued liabilities are
reflected in the balance sheet at historical cost, which approximates fair value
because of the short-term maturity of those instruments.
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
SFAS No. 123 encourages, but does not require, companies to record compensation
plans at fair value. The Company has chosen, in accordance with the provision of
SFAS No. 123, to apply Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued Employees" (APB 25) for its stock plans. Under APB 25, if the
exercise price of the Company's stock options is less than the market price of
the underlying stock on the date of grant, the Company must recognize
compensation expense. SFAS No. 123 has been adopted for disclosure purposes only
and will not impact the Company's financial position, annual operating results,
or cash flows.
For transactions with other than employees in which services were
performed in exchange for stock, the transactions were recorded on the basis of
the fair value of the services received or the fair value of the equity
instrument issued, whichever was more readily measurable.
F-7
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
RECLASSIFICATION
Certain amounts have been reclassified in the 1998 financial statements
to conform with the 1999 presentation.
STATEMENT OF COMPREHENSIVE INCOME
A statement of comprehensive income has not been included, per SFAS No.
130, "Reporting Comprehensive Income," as the Company has no items of other
comprehensive income.
NOTE 2 - PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following at June 30, 1999 and
1998:
1999 1998
-------- --------
Office equipment $ 34,000 $ 29,000
Computer equipment 78,000 4,000
Computer software 111,000 4,000
Leasehold improvements 2,000 --
-------- --------
Total cost 225,000 37,000
Less: Accumulated depreciation 36,000 10,000
-------- --------
Property and equipment, net $189,000 $ 27,000
======== ========
Depreciation expense totaled $26,000 and $7,000 for the years ended
June 30, 1999 and 1998, respectively.
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at June 30, 1999 and 1998
consist of the following:
1999 1998
-------- --------
Accounts payable $349,000 $226,000
Accrued payroll and related taxes 93,000 34,000
Accrued liabilities to related parties:
Accrued officers' salaries 94,000 --
Accrued interest -- 10,000
Other 4,000 4,000
-------- --------
Total $540,000 $274,000
======== ========
F-8
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following at June 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Term loans with various maturity dates through 1998. Interest rates range from
12% to 15% plus an additional interest payment of 20% of the principal amount at
maturity. Interest only is payable monthly during the term of the loans. The
total principal amount has been classified as currently due since the Company is
in default with respect to certain principal and interest payments. Some of the
term loans have been refinanced during 1999 and are presented separately below $216,000 $879,000
Term loans from a stockholder, principal plus accrued interest of 9% and 12% are
payable at various maturity dates on or before August 2000 83,000 88,000
Refinanced term loans during 1999 (see above):
/bullet/ Payable in monthly installments of $5,000, including interest at a
rate of 6%, through September 2000 71,000 --
/bullet/ Payable in monthly installments of $12,250, including interest at
a rate of 8%, through March 2001 239,000 --
Other debt, repaid in 1999 -- 5,000
Unsecured term loans from stockholders, with interest at 8.5% to 9% -- 19,000
-------- --------
Total long-term debt 609,000 991,000
Less: Current portion 451,000 894,000
-------- --------
Long-term debt, less current portion $158,000 $ 97,000
======== ========
</TABLE>
Maturities of long-term debt subsequent to June 30, 1999 are as
follows: $451,000 in 2000 and $158,000 in 2001.
Interest expense for the years ended June 30, 1999 and 1998 totaled
$62,000 and $137,000, respectively.
NOTE 5 - INCOME TAXES
A summary of the provision for income taxes for the years ended June
30, 1999 and 1998 is as follows:
1999 1998
--------- ---------
Currently payable $ -- $ --
Deferred tax benefit (995,000) (456,000)
Less: Valuation allowance 995,000 456,000
--------- ---------
Provision for income taxes $ -- $ --
========= =========
F-9
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 5 - INCOME TAXES
The Company's deferred tax asset consists of the following at June 30,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax asset:
Available federal and state net operating loss carryover $ 1,835,000 $ 840,000
Less: Valuation allowance (1,835,000) (840,000)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
</TABLE>
There are no significant deferred tax liabilities. The Company has used
an estimated combined federal and state effective tax rate of 35% for all
deferred tax computations.
The Company has recorded a valuation allowance in accordance with the
provisions of SFAS No. 109 to reflect the estimated amount of deferred tax
assets that may not be realized. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible.
For income tax purposes, through its December 31, 1998 tax returns, the
Company has tax net operating loss carryovers ("NOL's") of approximately
$2,911,000, expiring at various dates through 2013. Tax NOL's after December 31,
1998 have not yet been computed. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in the
event of a significant change in ownership interest. There have already been
significant changes in stock ownership; however, management believes that an
ownership change has not yet occurred which would cause the net operating loss
carryover to be limited.
NOTE 6 - CAPITAL STOCK
The Company's authorized capital stock at June 30, 1999 consisted of
1,000,000 shares of preferred stock and 50,000,000 shares of common stock,
respectively, at a par value of $0.0001 per share. During the year ended June
30, 1999, the Company issued a total of 7,484,354 shares of its common stock
under equity investment agreements and debt-to-equity conversion agreements, and
for cash pursuant to a Reg. D private placement offering memorandum. During the
year ended June 30, 1998, the Company converted $76,000 of term loans assumed at
the time of acquisition that includes $21,000 of accrued interest and $40,000 of
other debt for 49,175 common shares. Also in 1998, the Company issued 4,278,350
common shares for various kinds of compensation and for private offerings
pursuant to Reg D.
During 1999, the Company amended its articles of incorporation to
authorize 1,000,000 preferred shares at a $0.0001 par value; 40,000 of these
preferred shares are designated as "Series A Convertible Preferred Stock".
Thereafter, the Company issued a total of 27,778 shares of its Series A
preferred stock for a cash payment of $2,500,000.
The board of directors has the authority to issue the preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of any series, without further vote or action by the shareholders.
The issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of common stock, including the loss of
voting control to others.
F-10
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 6 - CAPITAL STOCK (continued)
Holders of the Series A Convertible Preferred Stock have the following
rights and preferences and are subject to the following terms:
The holders have a right to convert each share of their Series A
preferred stock, at any time, into one hundred shares of common stock, subject
to certain adjustments;
The holders are entitled to receive dividends as and if declared by the
board of directors on the common stock, and in such amount that such holders
would have received had they converted their Series A preferred stock to common
stock on the record date;
The holders have priority over the holders of the common stock in the
event of a liquidation, dissolution or winding up; and
The holders are entitled to vote, as a class with the holders of the
common stock, such number of votes as they would have been entitled to had they
converted their Series A preferred stock to common stock on the record date.
The Company has the right to redeem some or all of the Series A
preferred stock at any time after January 31, 2002 at a price of $90 per share,
plus all accrued dividends, if any.
NOTE 7 - STOCK OPTION PLAN AND WARRANTS
In 1997, the Company established a stock option plan (the "Plan") and
issued stock options to key employees and directors. The Plan expires on October
31, 2007. The Company has authorized and reserved 2,000,000 shares of its common
stock for this Plan. At the date of each option grant, the Board of Directors of
the Company has the sole discretion to set option terms, including whether the
option is an incentive option, the option price per share, and its duration.
Outstanding options until fully vested are contingent upon continued service.
SFAS No. 123 requires entities that account for awards for stock-based
compensation to employees in accordance with APB 25 to present pro forma
disclosures of results of operations and earnings per share as if compensation
cost was measured at the date of grant based on the fair value of the award. The
fair value for these options was estimated at the date of grant using a
Black-Scholes options pricing model with the following weighted-average
assumptions: a risk-free interest rate of 6%, no dividend yield, a volatility
factor of the expected market price of the Company's common stock of 94% in 1999
and 26% in 1998 and a weighted-average expected life of the option of eight
years in 1999 and nine years in 1998. The fair value per option was
approximately $0.95 at June 30, 1999 and $0.19 at June 30, 1998.
The Black-Scholes 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 including the expected stock price
volatility. Because the Company's employee stock options have characteristics
different from those of traded options, and because changes in the subjective
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 disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
net loss and net loss per share would have increased to the pro forma amounts
for the years ended June 30, 1999 and 1998, as follows:
F-11
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 7 - STOCK OPTION PLAN AND WARRANTS (continued)
1999 1998
------------- -------------
Net loss:
As reported $ (2,842,000) $ (1,323,000)
Pro forma (3,029,000) (1,339,000)
Net loss per share (basic and diluted)
As reported $ (0.18) $ (0.18)
Pro forma (0.19) (0.18)
The pro forma amounts may not be representative of the future effects
on reported net income and earnings per share that will result from the future
granting of stock options since future pro forma compensation expense may be
allocated over the periods in which options become exercisable and new option
awards may be granted each year.
The following table presents the Company's stock option activity for
1999 and 1998:
OPTIONED WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- -----------------
Outstanding at October 1, 1997 -- $ 0.00
Issued in 1998 275,000 0.33
------- --------
Options outstanding at June 30, 1998 275,000 0.33
Issued in 1999 120,000 0.33
Issued in 1999 15,000 4.00
Issued in 1999 167,523 4.19
------- --------
Options outstanding at June 30, 1999 577,523 0.46
======= ========
All of the options outstanding at June 30, 1999 and 1998 expire on
November 1, 2007. Of the options outstanding at June 30, 1999, 259,189 are
available for exercise by the option holder, including all 167,523 of the
options issued with an exercise price of $4.19.
WARRANTS
During fiscal 1999, warrants for 1,050,000 shares at an exercise price
varying from $0.90 to $2 per share were issued to non-employee investors as part
of their investment consideration. The warrants have contractual lives of four
to ten years.
NOTE 8 - MERGER
On October 16, 1998, the Board of Directors of And Justice for All,
Inc. ("AJFA") voted to authorize the purchase of 100% of the outstanding shares
of AJFA by a publicly-held entity named Bird-Honomichl, Inc. ("BHI"). To
complete the merger, BHI issued new shares of its common stock to the
shareholders of AJFA in exchange for all of the outstanding stock of AJFA.
Immediately subsequent to the merger, the shareholders of AJFA controlled
approximately 87.57% of BHI. As a result of this merger, the business of AJFA is
to be conducted within the legal entity, BHI. Prior to the merger, BHI was a
non-operating entity. At the date of the merger, BHI had no significant assets
or liabilities.
F-12
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 8 - MERGER (continued)
Although BHI (renamed Legal Club of America Corporation) is the legal
surviving entity, for accounting purposes, the merger is treated as a purchase
business acquisition of BHI by AJFA (commonly called a reverse acquisition) and
a recapitalization of AJFA. AJFA is the acquirer for financial reporting
purposes because the former stockholders of AJFA received the larger portion of
the common stockholder interests and voting rights in the combined enterprise
when compared to the common stockholder interests and voting rights retained by
the former BHI stockholders. As a result of this accounting treatment, AJFA will
be recapitalized for financial reporting purposes to reflect the authorized
stock of the legal surviving entity.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company occupies its primary facility under a July 1999 operating
lease which expires in June 2006. The lease calls for monthly payments which
escalate to $17,000 at the end of the lease term. The Company is also
responsible for its pro-rata share of the operating costs of the building.
Future minimum lease payments for the above lease, as well as for other
operating leases, are as follows:
TWELVE MONTHS
ENDING JUNE 30,
- ---------------------
2000 $ 133,000
2001 172,000
2002 177,000
2003 182,000
2004 187,000
Thereafter 392,000
----------
$1,243,000
==========
Total rent expense was approximately $33,000 and $22,000 for the years
ended June 30, 1999 and 1998, respectively.
LITIGATION
From time to time, the Company is exposed to claims, legal actions, and
regulatory actions in the normal course of business, some of which are initiated
by the Company. At June 30, 1999, management believes that any such outstanding
issues, except for the item below, will be resolved without further impairing
the financial condition of the Company.
The Company filed an action in August 1999 against Howard S. Bernstein
for rescission of the Company's issuance of stock to him at the time of the
Company's formation and for slander by Bernstein against the Company. The
rescission claims relate to Bernstein's failure to perform under the agreement
pursuant to which the Company issued shares to Mr. Bernstein and seeks to
recover the shares issued to Bernstein by the Company. The slander claims seek
recovery for various damaging statements that the Company alleges Mr. Bernstein
made to members of the investment banking community. Bernstein has filed a
counterclaim against the Company for breach of contract, seeking monetary relief
of approximately $300,000 for salary and other compensation allegedly due from
the Company to Bernstein. Management is uncertain as to the likelihood of
success of the Company's claims or Bernstein's claims; consequently, no accrual
for any loss or gain has been included in the accompanying financial statements.
F-13
<PAGE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 10 - RELATED PARTY TRANSACTIONS
In December 1997, the Company issued 1,200,000 shares of its common
stock to three existing shareholders in exchange for subscription agreements
totaling $396,000. The subscription agreements bear interest at 6%. Accrued
interest due from the shareholders amounted to $37,000 and $13,000,
respectively, at June 30, 1999 and 1998. Subsequent to June 30, 1999, the
subscription agreement of one of the shareholders was assumed by another
shareholder, along with the ownership of the common shares, and the accrued
interest obligation.
See Note 3 for a description of accrued liabilities owed to related
parties.
On October 28, 1998, two shareholders released the Company from its
obligations to pay them back salary totaling $375,000 which had been accrued
through June 30, 1998. As a result, the accrued salary was removed as a
liability as of June 30, 1998.
NOTE 11 - NET LOSS PER COMMON SHARE
For the years ended June 30, 1999 and 1998, basic and diluted weighted
average common shares include only common shares outstanding since any common
share equivalents would be anti-dilutive. A reconciliation of the number of
common shares shown as outstanding in the consolidated financial statements with
the number of shares used in the computation of weighted average common shares
outstanding is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Common shares outstanding at June 30th 18,539,726 11,055,372
Effect of weighting (2,754,958) (3,700,986)
----------- -----------
Weighted average common shares outstanding 15,784,768 7,354,386
=========== ===========
</TABLE>
NOTE 12 - PENSION PLAN
Effective April 15, 1999, the Company commenced a 401(k) profit sharing
plan covering substantially all employees gainfully employed as of April 15,
1999. Under the plan, employees are eligible to participate in the plan after
completion of three months of service and reaching 21 years of age or older. The
Company matches employee contributions at a rate of 25% of the contribution, up
to a maximum of 6% of the employee's salary. Company contributions to the plan
are vested over five years at a rate of 20% per year. Contributions by the
Company for the year ended June 30, 1999 totaled $1,000.
F-14
<PAGE>
PART III
INDEX TO EXHIBITS
- -----------------
EXHIBIT NO. DESCRIPTION
----------- -----------
(3)(a) Articles of Incorporation, as amended
(3)(b) Bylaws
(4)(a) 1997 Stock Option Plan
(4)(b) Form of Warrants
(10)(a) Media Placement Service Agreement with Frederiksen
Television, Inc.
(10)(b) Campaign Management Services Agreement with
Frederiksen Television, Inc.
(10)(c) Marketing Agreement with Protective Life Insurance
Corporation
(10)(d) Lease dated June 8, 1999 with ACP Office I LLC
(10)(e) Employment Agreement for Brett Merl
(10)(f) Employment Agreement for Richard Campanaro
(10)(g) Employment Agreement for Michael Samach
(10)(h) Employment Agreement for Jason Krouse
(10)(i) Agreement with Matt Cohen
(21) Subsidiaries of the Registrant
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: November 18, 1999
LEGAL CLUB OF AMERICA CORPORATION
By: /s/ BRETT MERL
---------------------------------------
Brett Merl, President
By: /s/ MICHAEL SAMACH
---------------------------------------
Michael Samach, Chief Financial Officer
(Principal Accounting Officer)
21
<PAGE>
EXHIBIT DESCRIPTION
- ------- -----------
(3)(a) Articles of Incorporation, as amended
(3)(b) Bylaws
(4)(a) 1997 Stock Option Plan
(4)(b) Form of Warrants
(10)(a) Media Placement Service Agreement with Frederiksen Television,
Inc.
(10)(b) Campaign Management Services Agreement with Frederiksen
Television, Inc.
(10)(c) Marketing Agreement with Protective Life Insurance Corporation
(10)(d) Lease dated June 8, 1999 with ACP Office I LLC
(10)(e) Employment Agreement for Brett Merl
(10)(f) Employment Agreement for Richard Campanaro
(10)(g) Employment Agreement for Michael Samach
(10)(h) Employment Agreement for Jason Krouse
(10)(i) Agreement with Matt Cohen
(21) Subsidiaries of the Registrant
EXHIBIT 3.a
ARTICLES OF INCORPORATION
OF
BIRD-HONOMICHL, INC.
The undersigned natural person, being more than twenty-one years of
age, hereby establishes a corporation pursuant to the statutes of Colorado and
adopts the following Articles of Incorporation:
FIRST: The name of the corporation is:
BIRD-HONOMICHL, INC.
SECOND: The corporation shall have perpetual existence.
THIRD:
(a) PURPOSES. The nature, objects and purposes of the business
to be transacted shall be as follows:
(1) To engage in accounting, consulting, personnel
recruiting and general business consulting.
(2) To engage in any lawful business.
(3) To engage in any business which is considered
lawful in the State of Colorado.
(4) In general, to carry on any other business in
connection with the foregoing and to have and exercise all of the powers which
are now or may hereafter be conferred by the laws of Colorado upon like
corporations and to do any and all of the things hereinabove set forth to the
same extent as natural persons might or could do.
(b) POWERS. In furtherance of the foregoing purposes, the
corporation shall have and may exercise all of the rights, powers, and
privileges now or hereafter conferred upon corporations organized under the laws
of Colorado. In addition, it may do everything necessary, suitable or proper for
the accomplishment of any of its corporate purposes.
FOURTH:
(a) The aggregate number of shares which the corporation shall
have authority to issue is 50,000,000 shares of $.000l par value common stock.
(b) Each shareholder of record shall have one vote for each
share of stock standing in his name on the books of the corporation and entitled
to vote.
(c) There shall be no cumulative voting allowed.
<PAGE>
(d) At all meetings of shareholders, a majority of the shares
entitled to vote at such meeting, represented in person or by proxy, shall
constitute a quorum.
(e) No shareholder of the corporation shall have any
preemptive or other right to subscribe for any additional shares of stock, or
for other securities of any class, or for rights, warrants or options to
purchase stock or for script, or for securities of any kind convertible into
stock or carrying stock purchase warrants or privileges.
(f) The board of directors may from time to time distribute to
the shareholders in partial liquidation, out of stated capital or capital
surplus of the corporation, a portion of its assets, in cash or property,
subject to the limitations contained in the statutes of Colorado.
FIFTH: The number of directors shall be one. The director that shall
constitute the initial board, and his address is as follows:
B.L. Honomichl
1001 E. Bayaud Ave. #1402
Denver, Colorado 80209
SIXTH: The address of the initial registered office of the corporation
is 1001 E. Bayaud Ave. #1402, Denver, Colorado 80209. The name of its initial
registered agent at such address is B.L. Honomichl. The corporation may conduct
part or all of its business in any other part of Colorado, of the United States,
or of the world. It may hold, purchase, mortgage, lease and convey real and
personal property in any of such places.
SEVENTH: The following provisions are inserted for the management of
the new business and for the conduct of the affairs of the corporation, and the
same are in furtherance of and not in limitation or exclusion of the powers
conferred by law.
(a) CONTRACTS WITH DIRECTORS, ETC. No contract or other
transaction of the corporation with any other person, firm or corporation, or in
which this corporation is interested, shall be affected or invalidated by: (i)
the fact that any one or more of the directors or officers of this corporation
is interested in or is a director or officer of another corporation; or (ii) the
fact that any director or officer, individually or jointly with others, may be a
party to or may be interested in any such contract or transaction. Each person
who may become a director or officer of the corporation is hereby relieved from
any liability that might otherwise arise by reason of his contracting with the
corporation for the benefit of himself or any firm or corporation in which he
may be in any way interested.
(b) LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION.
No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
shall not eliminate or limit the liability of a director to the Corporation or
to its shareholders or other security holders for monetary damages
2
<PAGE>
for: (i) any or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such director; (iii) acts by such director as specified in Section
7-5-114 of the Colorado Corporation Code; or (iv) any transaction from which
such director derived an improper personal benefit, but only to the extent of
the reasonably fair value of any such improper benefit.
No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director committed
a criminal offense. The protection afforded in the preceding sentence shall not
restrict other common law protections and rights that an officer or director may
have.
The word "director" shall include at least the following, unless
limited by Colorado law: an individual who is or was a director of the
Corporation and an individual who, while a director of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise or employee benefit
plan. A director shall be considered to be serving as a director of an employee
benefit plan at the Corporation's request if his duties to the Corporation also
impose duties on or otherwise involve services by him to the plan or to
participants in or beneficiaries of the plan. To the extent allowed by Colorado
law, the word "director" shall also include officers, employees and agents of
the Corporation and the heirs and personal representatives of all directors.
This corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions contained in Section 7-3-101 of the Colorado Revised Statutes, or
any successor provisions.
(c) NEGATION OF EQUITABLE INTERESTS IN SHARES OR RIGHTS. The
corporation shall be entitled to treat the registered holder of any shares of
the corporation as the owner thereof for all purposes, including all rights
deriving from such shares, and shall not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving from such shares,
on the part of any other person, including but without limiting the generality
hereof, a purchaser, assignee or transferee of such shares or rights deriving
from such shares, unless and until such purchaser, assignee, transferee or other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the interest of
such purchaser, assignee, transferee or other person. The purchaser, assignee or
transferee of any of the shares of the corporation shall not be entitled: to
receive notice of the meetings of the shareholders; to vote at such meetings; to
examine a list of the shareholders; to be paid dividends or other sums payable
to shareholders; or to own, enjoy and exercise any other property or rights
deriving from such shares against the corporation, until such purchaser,
assignee, or transferee has become the registered holder of the shares.
3
<PAGE>
EIGHTH: The name and address of the incorporator is:
B.L. Honomichl
1001 E. Bayaud Ave. #1402
Denver, Colorado 80209
Dated: March 8, 1991
/S/ BRENDA L. HONOMICHL
----------------------------
Incorporator
4
<PAGE>
STATE OF COLORADO )
) SS.
COUNTY OF DENVER )
I, Sandi Y. Miela, a notary public, hereby certify that on March 8,
1991 personally appeared before me B. L. Honomichl who being by me first duly
sworn, declared that she is the person who signed the foregoing document as
incorporator.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on the date
first above mentioned.
My commission expires: May 9, 1999
/S/ SANDI Y. MIELA
---------------------------
Notary Public
1700 Lincoln
Suite 3800
Denver, Colorado 80203
5
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BIRD HONOMICHL, INC.
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Bird-Honomichl, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on October 16, 1998, as prescribed by the Colorado Business Corporation
Act, by a vote of the shareholders. Of 1,834,665 shares outstanding, 1,614,532
shares voted FOR the amendment and -0- shares voted AGAINST the amendment, which
vote was sufficient for approval.
Article Fourth of the Articles of Incorporation is amended to read as
follows:
(a) The total number of shares of stock which this corporation
is authorized to issue is fifty million (50,000,000) shares of common stock, par
value $.000l per share; and 1,000,000 shares of preferred stock, par value
$.0001 per share, which shares of preferred stock may be issued in various
series by the authority of the Board of Directors with such designations and
relative rights and preferences as shall from time to time be determined by the
Board of Directors within the limitations prescribed by the Colorado Business
Corporation Act.
THIRD: The following amendment to the Articles of Incorporation to
change the corporate name was adopted on October 16, 1998, as prescribed by the
Colorado Business Corporation Act, by a vote of the shareholders. Of 1,834,665
shares outstanding, 1,614,532 shares voted FOR the amendment and -0- shares
voted AGAINST the amendment, which vote was sufficient for approval.
Article First of the Articles of Incorporation is amended to read as
follows:
The name of the corporation is "Legal Club of America
Corporation".
IN WITNESS WHEREOF, these Articles of Amendment are hereby executed
this 20th day of November 1998.
/S/ JOSEPHINE JULIANO
------------------------------
Josephine Juliano
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
LEGAL CLUB OF AMERICA CORPORATION
LEGAL CLUB OF AMERICA CORPORATION, a corporation organized and existing under
the Business Corporation Act of the State of Colorado, desiring to amend its
Articles of Incorporation in accordance with Section 7-106-102 of said Business
Corporation Act, DOES HEREBY CERTIFY:
FIRST: That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of said Corporation, and pursuant to
Section 7-106-102 of the Colorado Business Corporation Act, said Board of
Directors, acting by unanimous written action in lieu of a meeting thereof on
March 31, 1999, duly determined that forty thousand (40,000) shares of the
Corporation's Preferred Stock, $.0001 par value, shall be designated "Series A
Convertible Preferred Stock", and to that end the Board of Directors adopted
resolutions providing for the designation, preferences and relative,
participating, optional or other rights, and the qualifications, limitations and
restrictions of the Series A Convertible Preferred Stock, which resolutions are
as follows:
RESOLVED, that forty thousand (40,000) shares of authorized and
heretofore unissued and undesignated shares of the $.0001 par value Preferred
Stock of Legal Club of America Corporation (the "Corporation"), a Colorado
corporation, are designated as the Corporation's Series A Convertible Preferred
Stock; and
RESOLVED FURTHER, that the Series A Convertible Preferred Stock shall
have the following preferences and relative, participating, optional or other
rights, qualifications, limitations and restrictions:
1. DIVIDENDS. Holders of shares of Series A Convertible
Preferred Stock (hereinafter referred to as the "Shares") shall be entitled to
receive dividends if, as and when dividends are declared on the Corporation's
Common Stock on an "as converted" basis, i.e., the dividend payable on each
Share shall equal the dividend payable on one share of Common Stock multiplied
by the number of shares of Common Stock into which a Share is convertible
pursuant to Section 5 below as of the date of record of such dividend (the
"Record Date"). The rights of holders of Shares to any such dividend shall be
PARI PASSU with holders of Common Stock.
2. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings, shall be distributed in
the following order of priority:
(a) First, to the holders of any class or series of
Preferred Stock or other capital stock of the Corporation which is entitled to a
preference over the Series A
<PAGE>
Convertible Preferred Stock in liquidation and dissolution of the Corporation,
but only to the extent of that preference.
(b) Next, to the holders of outstanding Shares and
any class or series of Preferred Stock or other capital stock of the Corporation
which is of equal rank with Series A Convertible Preferred Stock with respect to
sharing in the proceeds of liquidation and dissolution of the Corporation, but
only to the extent that such class or series of capital stock is of equal rank.
In any such distribution, holders of Shares shall be entitled to receive, prior
to and in preference to any distribution to the holders of Common Stock or any
other class or series of capital stock of the Corporation which is subordinate
and inferior to the rights of holders of Shares in liquidation and dissolution
and winding up, and in lieu of any other payment, an amount equal to Ninety
($90.00) Dollars per Share plus dividends accrued and unpaid through the
liquidation date (the "Shares Liquidation Preference"). For this purpose,
dividends shall be deemed to accrue on a straight-line basis from Record Date to
Record Date.
(c) After distribution of the Shares Liquidation
Preference to holders of Shares, the remaining assets, if any, of the
Corporation available for distribution to the shareholders of the Corporation
shall be distributed to the holders of shares of other classes of capital stock
of the Corporation, as their rights may appear.
(d) A liquidation for the purposes of this Section 2
includes a sale of all or substantially all of the assets of the corporation and
a merger or consolidation of the Corporation with or into any other corporation
or corporations, or any other corporate reorganization, where the shareholders
of the Corporation immediately prior to such event do not retain more than a
fifty percent (50%) interest in the successor entity (a "Merger or Sale of
Corporation"). No later than 10 days before the consummation of any Merger or
Sale of Corporation, the Corporation shall deliver a notice to each registered
owner of Shares setting forth the principal terms of such Merger or Sale of
Corporation. Such notice shall be delivered as provided in Section 8 below.
3. VOTING.
(a) In addition to the rights specified in this
Section 3 and any other rights required by applicable laws, each Share shall
entitle the holder thereof to a number of votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote in the same manner and
with the same effect as and as a class with the holders of Common Stock and any
other class or series of capital stock of the Corporation which votes as a class
with the Common Stock on an "as converted" basis, i.e., each Share shall be
entitled to a number of votes equal to the number of shares of Common Stock of
the Corporation into which such Share could be converted pursuant to Section 5
below as of the date for determining the shareholders of the Corporation
entitled to vote on the matter in respect of which the voting rights of Shares
are to be computed.
(b) Except as herein provided, the Corporation shall
not, without the affirmative consent or approval of the holders of Shares
representing at least 67% of the total
2
<PAGE>
number of Shares then outstanding, voting as a separate class, given either by
written consent in lieu of a meeting or by vote at a meeting called for such
purposes:
(i) create or issue any class or series of
capital stock (A) ranking prior or equal to the Shares, as to payment of
dividends, distribution of assets in liquidation and dissolution or redemptions,
or (B) which in any manner adversely affects the rights of holders of the
Shares; or
(ii) alter or change the designations,
powers, preferences or rights, or the qualifications, limitations or
restrictions of the Shares.
(c) Upon not less than twenty (20) days prior notice
to all holders of Shares, the Corporation may take, with the affirmative consent
or approval of holders of 67% or more of Shares outstanding, any of the actions
described in Section 3.b above.
(d) The holders of the Shares will be entitled,
voting as a separate class, to nominate and elect one (1) director.
4. REDEMPTION.
(a) The Corporation shall have the right, at any time
and from time to time after January 31, 2002, upon written notice to all holders
of Shares at their respective registered addresses stating that the Corporation
is exercising its right of redemption set forth herein (a "Redemption Notice")
and fixing a date for such redemption (the "Redemption Date") which shall be no
more than sixty (60) and no less than thirty (30) days following the date of the
Redemption Notice, redeem the Shares at a price per Share (the "Redemption
Price") equal to Ninety ($90.00) Dollars per Share, plus all dividends which
have accrued on the Shares to the Redemption Date.
(b) From and after the Redemption Date, holders of
Shares shall cease to have any rights as holders of Shares other than the right
(1) to receive the Redemption Price as provided herein, or (2) to receive shares
of Common Stock issuable upon conversion of any Shares as to which the
conversion rights set forth in Section 5 below have been timely exercised.
(c) The Corporation shall pay the Redemption Price to
each holder of record of Shares as of the Redemption Date, provided, however,
that as a condition precedent to the Corporation's payment of the Redemption
Price to any holder, such holder shall deliver to the Corporation the
certificate representing the Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
(d) If the Corporation at any time redeems fewer than
all Shares, it shall redeem all such Shares pro-rata from all holders thereof,
subject, however, to such holders' rights to convert some or all of their Shares
into Common Stock hereunder.
3
<PAGE>
5. CONVERSION.
(a) Subject to adjustment as provided in subsections
(i) through (iii) of this Section 5.a, holders of Shares shall have the right,
at a holder's option, at any time or from time to time prior to the Redemption
Date thereof, to convert each Share into one hundred (100) fully paid and
non-assessable shares of Common Stock.
(i) If, at any time after the date that
Shares are first issued (the "Original Issue Date"), the number of shares of
Common Stock outstanding is increased by a subdivision, conversion or split-up
of shares of Common Stock, then, following the record date fixed therefor, the
ratio upon which Shares may be converted into Common Stock pursuant to Section
5.a above (the "Conversion Ratio") shall be appropriately adjusted by increasing
the number of shares of Common Stock issuable upon conversion of each Share in
proportion to such increase in outstanding shares of Common Stock.
(ii) If, at any time after the Original
Issue Date, the number of shares of Common Stock outstanding is decreased by a
stock combination, reverse split or conversion, then, following the record date
for such combination, reverse stock split or conversion, the Conversion Ratio
shall be appropriately adjusted by decreasing the number of shares of Common
Stock issuable on conversion of each Share in proportion of such decrease in
outstanding shares of Common Stock.
(iii) If, at any time after the Original
Issue Date, the Corporation shall issue shares of Common Stock, or rights,
options or warrants or other securities convertible into or exchangeable for
shares of Common Stock, at a price per share (or having an exercise or
conversion price per share, together with any consideration paid to the
Corporation to purchase such option, warrant or other convertible or
exchangeable security) less than the quotient obtained by dividing the number of
shares of Common Stock into which a Share is convertible immediately prior to
the issuance of such shares of Common Stock, rights, options, warrants or other
convertible securities (hereafter "dilutive securities") by Ninety ($90.00)
Dollars (such quotient being hereinafter referred to as the "Conversion Price"),
then, in each such case, the number of shares of Common Stock into which each
Share is convertible shall be adjusted so that the holder of each Share shall be
entitled to receive upon the conversion thereof a number of shares of Common
Stock determined by multiplying the number of shares of Common Stock into which
such Share was convertible immediately prior the issuance of the dilutive
securities by a fraction (A) the numerator of which is the sum of (I) the number
of shares of Common Stock outstanding prior to such issuance and (II) the number
of additional shares of Common Stock issued and/or issuable upon the exercise of
conversion, option or similar rights of the dilutive securities, and (B) the
denominator of which is the sum of (I) the number of shares of Common Stock
outstanding immediately prior to such issuance and (II) the number of shares of
Common Stock which the aggregate consideration receivable by the Corporation for
the dilutive securities at the time of issuance plus any additional
consideration receivable upon conversion or exercise would purchase at the
Conversion Price in effect immediately prior to such issuance.
4
<PAGE>
(iv) For the purpose of making any
adjustment in the number of shares of Common Stock issued upon conversion of a
Share (the "Conversion Ratio") as provided above, the consideration received by
the Corporation for any issue or sale of Common Stock will be computed:
(A) to the extent it consists of
cash, as the amount of cash received by the Corporation before deduction of any
offering expenses payable by the Corporation and any underwriting or similar
commissions, compensation, or concessions paid or allowed by the Corporation in
connection with such issue or sale;
(B) to the extent it consists of
property other than cash, at the fair market value of that property as
determined in good faith by the Corporation's Board of Directors; and
(C) if Common Stock is issued or
sold together with other stock or securities or other assets of the corporation
for a consideration which covers both, as the portion of the consideration so
received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Common Stock.
(v) If the Corporation (1) grants any
rights or options to subscribe for, purchase, or otherwise acquire shares of
Common Stock, or (2) issues or sells any security ultimately convertible into
shares of Common Stock, then, in each such case, the price per share of Common
Stock issuable on the exercise of the rights or options or the conversion of the
securities will be determined by dividing the total amount, if any, received or
receivable by the corporation as consideration for the granting of the rights or
options or the issue or sale of the convertible securities, plus the minimum
aggregate amount of additional consideration payable to the corporation on
exercise or conversion of the securities, by the maximum number of shares of
Common Stock issuable on the exercise of conversion. Such granting or issue or
sale will be considered to be an issuance or sale for cash of the maximum number
of shares of Common Stock issuable on exercise or conversion at the price per
share determined under this subsection, and the Conversion Ratio will be
adjusted as above provided to reflect (on the basis of that determination) the
issuance or sale. No further adjustment of the Conversion Ratio will be made as
a result of the actual issuance of shares of Common Stock on the exercise of any
such rights or options or the conversion of any such convertible securities.
(vi) Upon the redemption or repurchase of
any such securities convertible or exercisable into Common Stock, or the
expiration or termination of the right to convert into, exchange for, or
exercise with respect to, Common Stock, the Conversion Ratio will be readjusted
to the Conversion Ratio that as would have been obtained had the adjustment made
upon their issuance been made upon the basis of the issuance of only the number
of such securities as were actually converted into, exchanged for, or exercised
with respect to, Common Stock. If the purchase price or conversion or exchange
rate provided for in any such security changes at any time, then, upon such
change becoming effective, the Conversion Ratio then in effect will be
readjusted forthwith to that which as would have been obtained had the
adjustment made upon the issuance of such securities been made upon the basis of
(1) the issuance of only
5
<PAGE>
the number of shares of Common Stock theretofore actually delivered upon the
conversion, exchange or exercise of such securities, and the total consideration
received therefor, and (2) the granting or issuance, at the time of such change,
of any such securities then still outstanding for the consideration, if any,
received by the Corporation therefor and to be received on the basis of such
changed price or rate.
(b) In case, at any time after the Original Issue
Date, of any capital reorganization, or any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock) or of the sale or other disposition of
all or substantially all the properties and assets of the Corporation as an
entirety to any other person, each Share shall after such reorganization,
reclassification, consolidation, merger, sale or other disposition be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or other
disposition) upon conversion of such Share would have been entitled upon such
reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 5 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(c) To exercise the right to convert set forth in
this Section 5, a holder of Shares shall deliver to the Corporation at its
principal executive offices, marked to the attention of the Secretary of the
Corporation, the certificate or certificates representing the Shares to be
converted, endorsed to, or accompanied by a separate assignment to, the
Corporation, and a written notice (a "Notice of Conversion") stating (i) such
holder's wish to exercise the right to convert such Shares, and (ii) the name or
names and addresses in which and to which securities or other property then
deliverable upon conversion of such Shares should be registered and delivered
(if to a person other than the holder and/or to an address other than the
holder's address of record). Subject to Section 5d below, the conversion of a
Share shall be deemed effective, and such Share shall cease to be outstanding
for any purpose, upon receipt by the Corporation of the aforementioned Notice of
Conversion and certificate representing such Share, provided the same are
received prior to the Redemption Date, and the sole right of the holder of such
Share after conversion shall be to receive the securities or other property then
issuable upon the conversion thereof.
(d) If the Conversion Notice submitted by a holder of
Shares requests that shares of Common Stock be issued in the name of any person
other than the registered owner of the Shares to be converted, the Corporation
may require, as a condition to the effectiveness of such conversion, that the
persons or entities in whose names such shares of Common Stock are to be issued
(i) supply such information, (ii) agree to such restrictions on transfer of
securities of the Corporation issuable upon such conversion, and (iii) comply
with
6
<PAGE>
such other requirements, as the Corporation may reasonably request or impose to
assure compliance with applicable securities laws.
(e) SUCCESSIVE CHANGES. The above provisions of this
Section 5 shall similarly apply to successive issuances, sales, dividends or
other distributions, subdivisions and combinations on or of the Common Stock
after the applicable Original Issue Date.
(f) NO IMPAIRMENT. The Corporation will not, by
amendment of the corporation's Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Series A Convertible Preferred Shareholders against
impairment.
(g) EXCLUDED EVENTS. Notwithstanding anything in this
to the contrary, the Conversion Ratio shall not be adjusted (i) by virtue of the
conversion of Shares into shares of Common Stock, or (ii) by reason of the
issuance of Common Stock upon the exercise of options, warrants or similar
rights outstanding on the Original Issuance Date or pursuant to the
anti-dilution provisions thereof.
(h) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Conversion Ratio pursuant
to this Section 5, the Corporation, at its expense upon request by any
registered owner of Shares shall compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each such holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. Such certificate
shall set forth (i) such adjustment and readjustment, (ii) the current
Conversion Ratio for the Shares at the time in effect, (iii) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a Share, and (iv) if such
adjustment is the result of an issuance of Common Stock, the number of shares of
Common Stock issued and the consideration received therefor.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
The corporation at all times will reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the Shares such number of its shares of Common Stock
as from time to time will be sufficient to effect the conversion of all then
outstanding Shares; and if at any time the number of authorized but unissued
shares of Common Stock is not sufficient to effect such conversion, in addition
to such other remedies as may be available to the holders of Shares for such
failure, the Corporation will take such corporate action as, in the opinion of
its counsel, may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as will be sufficient for such purpose.
(j) NO FRACTIONAL SHARES. No fractional shares shall
be issued upon conversion of Shares. Whether or not fractional shares would be
issuable upon such conversion
7
<PAGE>
shall be determined on the basis of the total number of Shares which the holder
of such Shares is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion. If the
conversion would result in any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay the holder an amount in cash equal to the
fair market value of such fractional share on the date of conversion (as
determined in good faith by the Board of Directors of the Corporation).
(k) The Corporation shall pay all documentary, stamp
or other transactional taxes attributable to the issuance or delivery of shares
of capital stock of the Corporation upon conversion of any Shares; PROVIDED,
HOWEVER, that the Corporation shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance or delivery of
any certificate for such shares in a name other than that of the holder of the
Shares in respect of which such shares are being issued.
(l) The Corporation shall reserve, and at all times
from and after the Original Issue Date keep reserved, free from preemptive
rights, out of its authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of Shares sufficient shares to provide for
the conversion of all outstanding Shares.
(m) All shares of Common Stock which may be issued in
connection of Shares as provided herein, upon issuance by the Corporation, shall
be validly issued, fully paid and nonassessable and free from all taxes, liens
or charges with respect thereto.
6. OTHER. Except as expressly provided herein, Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
7. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
will mail to each registered owner of Shares at least 10 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or rights, and the
amount and character of such dividend, distribution or right.
8. OTHER NOTICES. Any notices required to be given to any
holder of Shares must be in writing and will be deemed given upon personal
delivery, one day after deposit with a reputable overnight courier service for
overnight delivery or after transmission by facsimile telecopier with
confirmation of successful transmission, or five days after deposit in the
United States mail, by certified mail postage prepaid, or upon actual receipt if
given by any other method, addressed to each holder of such record at his or her
address appearing on the books of the corporation.
9. COVENANTS. Except as otherwise required by law, and in
addition to any other rights provided by law, the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of not
less than a majority of Shares outstanding, voting as
8
<PAGE>
a class, take any action, or permit any action to be taken, to (i) amend or
repeal any provision of, or add any provision to, the Corporation's Articles of
Incorporation or by-laws if such action would alter or change the rights,
preferences, privileges or powers of, or the restrictions provided for the
benefit of, the Preferred Stock; (ii) increase the number of shares of Preferred
Stock authorized hereby; (iii) authorize or issue shares of any class or series
of stock having any preference or priority as to voting, liquidation preference
or dividends superior or equal to any such preference or priority of the
Preferred Stock set forth herein; or (iv) effectuate a Merger or Sale of
Corporation, or a Liquidation, in each case unless such Merger or Sale of
Corporation or such Liquidation will result in aggregate payments and
distributions (including non-cash distributions to be valued in good faith by
the Corporation's Board of Directors) of an amount equal to the Liquidation
Preference on each outstanding Share or on the aggregate number of shares of
Common Stock issuable upon conversion of each such Share (as appropriately
adjusted for stock splits, recapitalizations, combinations and the like after
the Original Issue Date.)
IN WITNESS WHEREOF, this Certificate of Designation has been signed by
the President of the Corporation and the Corporation has caused its corporate
seal to be hereunto affixed as of this 17th day of May, 1999.
LEGAL CLUB OF AMERICA CORPORATION
BY:/S/ BRETT MERL
------------------------------------
BRETT MERL, CHIEF EXECUTIVE OFFICER
[CORPORATE SEAL]
ATTEST:/S/ MATT COHEN
--------------------------------
MATT COHEN, SECRETARY
9
EXHIBIT 3.b
AMENDED AND RESTATED BY-LAWS
OF
LEGAL CLUB OF AMERICA CORPORATION
ADOPTED MARCH 1, 1999
<PAGE>
ARTICLE I - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be
held at such place within or without the State of Colorado as may be designated
from time to time by the Board of Directors (the "Board"), the Chairman of the
Board or the President or, if not so designated, at the registered office of the
Corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held at a time fixed by the
Board or, if not so fixed by the Board, by the President.
1.3 SPECIAL MEETING. Special meetings of stockholders may be
called at any time by the Board, the Chairman of the Board or the President, and
shall be called by the Board upon the request of the holders of ten percent
(10%) of the outstanding shares of stock of the Corporation entitled to vote at
the meeting. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notices of
all meetings shall state the place, date and hour of the meeting. The notice of
a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called.
1.5 VOTING LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, or any agent or
attorney of a stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, at the place where the meeting is to be held or, if such place is
specified in the notice of the meeting at a place within the city which the
meeting is to be held other than the place of the meeting. The list shall also
be produced and kept at the time and place of the meeting during the whole time
of the meeting, and may be inspected by any stockholder, or any agent or
attorney of a stockholder, who is present.
1.6 QUORUM AND REQUIRED VOTE. Except as otherwise provided by
law or in the Articles of Incorporation, the presence in person or by proxy of
holders of shares of capital stock of the Corporation which represent the right
to cast a majority of all votes entitled to be cast on a particular matter shall
constitute a quorum for the purpose of considering such matter at a meeting of
stockholders.
<PAGE>
1.7 VOTING AND PROXIES. Each holder of Common Stock shall have
one vote for each share of such stock entitled to vote and held of record by
such stockholder, and holders of shares of capital stock other than Common Stock
shall have such voting rights as are provided in the Articles of Incorporation.
Each stockholder of record entitled to vote at a meeting of the stockholders, or
to express consent or dissent to corporate action in writing without a meeting,
may vote or express such consent or dissent in person or may authorize another
person or persons to vote or act for such stockholder by proxy in accordance
with applicable law.
1.8 BUSINESS TO BE CONDUCTED. At any meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting of
stockholders, such business must be (a) specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before a
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by the stockholder, and (d) any material interest of the stockholder in
such business. Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in this Section 1.8. The Chair of the
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
Bylaws and, in such event, such business shall not be transacted.
1.9 NOMINATIONS FOR ELECTION AS DIRECTORS. Only persons who
are nominated in accordance with the procedures set forth in this Section 1.9
shall be eligible for election as Directors of the Corporation.
(a) Nominations of persons for election to the Board
of Directors of the Corporation may be made at a meeting of stockholders (a) by
or at the direction of the Board of Directors, or (b) by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
gives timely notice of his/her/its intention to make such nomination at the
meeting. Such notice shall be made in writing to the Secretary of the
Corporation, and must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 60 days nor more than 90 days
prior to the meeting; provided, however, that in the event that
<PAGE>
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the 10th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth (x) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
directors or otherwise is required pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
persons' written consent to being named in any proxy statement as a nominee and
to serving as a Director if elected); and (y) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.
(b) So long as any shares of the Corporation's Series
A Convertible Preferred Stock are outstanding, the holders of a majority of such
shares shall have the right to nominate and elect one (1) director of the
Corporation who shall serve at the pleasure of the holders of such shares, i.e.,
until the expiration of the term fixed by such holders unless earlier removed by
vote of the holders of a majority of such shares. Except for the rights set
forth herein, holders of the Series A Convertible Preferred Stock, acting as
such, shall not have any right to participate in the nomination or election of
directors of the Corporation.
(c) No person shall be eligible for election as a
Director of the Corporation unless nominated in accordance with the procedures
set forth in this Section 1.9. The Chair of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the Bylaws and, in such event, the defective nomination shall be
disregarded.
1.10 APPLICABILITY OF FEDERAL SECURITIES LAWS AND REGULATIONS.
At any time that the Corporation has a class of equity securities registered
under the Securities Exchange Act of 1934, to the extent that any provision of
this Article I shall be in conflict with rules and regulations of the Securities
and Exchange Commission promulgated under such Act with respect to the
nomination and/or election of Directors of the Corporation, or otherwise with
respect to the conduct of business at a meeting of stockholders, such rules and
regulations shall govern and this Article shall be interpreted and limited in
its application, as necessary, to conform with such rules and regulations.
ARTICLE II - DIRECTORS
<PAGE>
2.1 GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all of the powers of the Corporation except as may be otherwise
provided by law or the Articles of Incorporation.
2.2 NUMBER AND TERM. The Board of Directors shall have not
less than three (3) nor more than nine (9) members. Within that range, the Board
shall have the authority to determine the number of directors which shall
constitute the Board and the terms of office of directors, provided that the
term of the director elected by holders of the Corporation's Series A
Convertible Preferred Stock shall be as set forth in Section 1.9(b) above, and
the Board shall not have the authority to reduce the term of any director in
office. Unless otherwise specified by the Board or in these Bylaws, each
director shall serve until the Annual Meeting of Shareholders next following his
election, and until his successor is duly elected and qualified.
2.3 NOMINATION BY STOCKHOLDERS. Nominations for election to
the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors in accordance with the procedures
set forth in Article I hereof.
2.4 REGULAR MEETINGS. Regular meetings of the Board may be
held without notice at such time and place, either within or without the State
of Colorado, as shall be determined from time to time by the Board.
2.5 SPECIAL MEETING. Unless the Board shall otherwise direct,
special meetings of the Board may be held at any time and place, within or
without the State of Colorado, and shall be called at any time by or at the
request of the President and shall be called by or at the written request of
one-third of the directors, or by one director in the event that there is only a
single director in office. Notice, which need not be written, of the time and
place of special meetings shall be given to each director at least twenty-four
(24) hours before the time for which the meeting is scheduled. A notice or
waiver of notice of a meeting of the Board need not specify the purposes of the
meeting. Any business may be transacted at a special meeting.
2.6 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any
members of any committee designated by the Directors may participate in a
meeting of the Board or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
2.7 QUORUM. A majority of all the directors in office shall
constitute a quorum at all meetings of the Board.
2.8 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members
<PAGE>
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board and subject to
the provisions of the Business Corporation Act of the State of Colorado, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation.
ARTICLE III - OFFICERS
3.1 ENUMERATION. The officers of the Corporation shall consist
of a President, a Secretary, a Treasurer and such other officers with such other
titles as the Board may determine.
3.2 ELECTION. Officers shall be elected annually by the Board
at its first meeting following the annual meeting of stockholders.
3.3 DUTIES AND POWERS. Except as otherwise provided by the
Board, the officers shall have, exercise and perform the duties and powers
usually incident to their offices and as set forth herein:
(i) CHIEF EXECUTIVE OFFICER AND PRESIDENT. The
President shall be the chief executive officer of the Corporation unless the
Board shall elect a Chairman and vest in such Chairman the authority of chief
executive officer of the Corporation. The Chief Executive Officer of the
Corporation shall, subject to the direction of the Board, have general charge
and supervision of the business of the Corporation. Unless otherwise provided by
the Board, the President shall preside at all meetings of the stockholders, and
if he is a director, at all meetings of the Board. If the Chairman of the Board
of Directors shall be the chief executive officer of the Corporation, the
President shall perform such duties and possess such powers as the Board of
Directors may from time to time prescribe.
(ii) VICE PRESIDENT. Any Vice President shall perform
such duties and possess such powers as the Board or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
President in the order determined by the Board) shall perform the duties of the
President and when so performing shall have all the powers of and be subject to
all the restrictions upon the President.
<PAGE>
(iii) SECRETARY. The Secretary shall perform such
duties and shall have such powers as the Board or the President may from time to
time prescribe, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board, to attend all
meetings of stockholders and the Board and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
(iv) TREASURER. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board or the President, including without limitation the duty and power to
keep and be responsible for all funds and securities of the Corporation, to
deposit funds of the Corporation in depositories selected by the Board, to
disburse such funds as ordered by the Board, to make proper accounts of such
funds, and to render as required by the Board statements of all such
transactions and of the financial condition of the Corporation.
3.4 SALARIES. Officers of the Corporation shall be entitled to
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board.
ARTICLE IV - TRANSFER OF SHARE CERTIFICATES
4.1 GENERAL. Except as otherwise established by rules and
regulations adopted by the Board and subject to applicable law, shares of stock
may be transferred on the books of the Corporation only by the registered holder
or by duly authorized attorney. Transfers shall be made only on surrender to the
Corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Articles of Incorporation or
by these By-Laws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-Laws.
4.2 RESTRICTION ON CERTAIN TRANSFERS. Whenever shares of the
Corporation's capital stock are issued pursuant to exemptions from registration
under the Securities Act of 1933 or regulations adopted under that Act which
require or impose limitations on the resale or other transfers of such shares by
the holders thereof, no resale or other transfer of such shares shall be
permitted except in compliance with the terms and conditions of the exemption or
regulation pursuant to which the shares were issued.
<PAGE>
ARTICLE V - INDEMNIFICATION
5.1 RIGHT TO INDEMNIFICATION. The Corporation shall indemnify
any person who was or is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (collectively, a "proceeding"), by
reason of the fact such person is or was (a) a director or executive officer of
the Corporation or a constituent corporation absorbed in a consolidation or
merger (hereinafter, a "constituent corporation"), or, (b) is or was serving at
the request of the Corporation or a constituent corporation as a director,
officer, partner, employee or agent of another corporation, partnership, joint
venture or other enterprise or entity, or (c) is or was a director or officer of
the Corporation serving at its request as an administrator, trustee or other
fiduciary of one or more of the employee benefit plans, if any, of the
Corporation or another entity which may be in effect from time to time, against
all expenses, liability and loss actually and reasonably incurred or suffered by
such person in connection with such proceeding, whether or not the indemnified
liability arises or arose from any proceeding by or in the right of the
Corporation, to the extent that such person is not otherwise indemnified and to
the extent that such indemnification is not prohibited by law as it presently
exists or may hereafter be amended.
5.2 ADVANCE OF EXPENSES. The Corporation shall advance all
expenses reasonably incurred by a person entitled to indemnification pursuant to
Section 5.1 above, in defending a proceeding in advance of the final disposition
of such proceeding, and may, but shall not be obligated to, advance expenses of
other persons entitled to indemnification pursuant to any other agreement or
provision of law.
5.3 PROCEDURE FOR DETERMINING PERMISSIBILITY. To determine
whether any indemnification under this Article V is permissible, the Board by a
majority vote of a quorum consisting of directors not parties to such proceeding
may, and on request of a person seeking indemnification shall be required to,
determine in each case whether the applicable standards in any applicable
statute have been met, or such determination shall be made by independent legal
counsel if such quorum is not obtainable, or, even if obtainable, a majority
vote of a quorum of disinterested directors so directs. If a claim for
indemnification under this Article is not paid in full within ninety (90) days
after a written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim, and the
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification under applicable law. The reasonable expenses
of any person in prosecuting a successful claim for indemnification hereunder,
and the fees and expenses of any independent legal counsel engaged to determine
permissibility of indemnification, shall be borne by the Corporation. For
purposes of this paragraph, "independent legal counsel" means legal counsel
other than that regularly or customarily engaged by or on behalf of the
Corporation.
<PAGE>
5.4 PROCEEDINGS INITIATED BY INDEMNITEE. Notwithstanding any
other provision of this Article V, the Corporation shall be required to
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board.
5.5 INDEMNIFICATION NOT EXCLUSIVE; INURING OF BENEFIT. The
indemnification provided by this Article V shall not be deemed exclusive of any
other right to which one seeking indemnification may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, these By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise, and
shall inure to the benefit of the heirs, executors and administrators of any
such person.
5.6 INSURANCE AND OTHER INDEMNIFICATION. The Board shall have
the power to (i) authorize the Corporation to purchase and maintain, at the
Corporation's expenses, insurance on behalf of the Corporation and on behalf of
others to the extent that power to do so has not been prohibited by applicable
law, and (ii) give other indemnification to the extent not prohibited by
applicable law.
5.7 MODIFICATION OR REPEAL. Any modification or repeal of any
provision of this Article V shall operate prospectively, and shall not adversely
affect any right or protection of any person under this Article as in effect
prior to such modification or repeal with respect to any act or omission
occurring prior to such modification or repeal.
ARTICLE VI - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. These By-Laws may be altered,
amended or repealed or new By-Laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
at which a quorum is present.
6.2 BY THE STOCKHOLDERS. These By-Laws may be altered, amended
or repealed or new By-Laws may be adopted by the affirmative vote of the holders
of a majority of the shares of the capital stock of the Corporation entitled to
vote at any regular meeting of stockholders, or at any special meeting of
stockholders, provided such change shall have been set forth, or a summary
thereof shall have been provided, in the notice of such special meeting.
EXHIBIT 4.a
1997 STOCK OPTION PLAN
OF
AND JUSTICE FOR ALL, INC.
1. PURPOSE. The purpose of this Stock Option Plan is to advance the
interests of And Justice for All, Inc., a Florida corporation d/b/a Legal Club
of America (the "Corporation") by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by directors, key
employees, consultants and independent contractors who are employed by, or
perform services for, the Corporation and its Subsidiaries and upon whose
judgment and keen interest the Corporation is largely dependent for the
successful conduct of its operations. It is anticipated that the acquisition of
such proprietary interest in the Corporation will stimulate the efforts of such
directors, key employees, consultants and independent contractors on behalf of
the Corporation and its Subsidiaries and strengthen their desire to remain with
the Corporation and its Subsidiaries. It is also expected that the opportunity
to acquire such a proprietary interest will enable the Corporation and its
Subsidiaries to attract desirable personnel, directors and other service
providers.
2. DEFINITIONS. When used in this Plan, unless the context otherwise
requires:
a) "Board of Directors" shall mean the Board of Directors of
the Corporation, as constituted at any time.
b) "Chairman of the Board" shall mean the person who at the
time shall be Chairman of the Board of Directors.
c) "Committee" shall mean the Committee hereinafter described
in Section 3.
d) "Corporation" shall mean And Justice for All, Inc. d/b/a
Legal Club of America, a Florida corporation.
e) "Fair Market Value" on a specified date shall mean the
closing price at which one Share is traded on the stock exchange, if
any, on which Shares are primarily traded, or the last sale price or
average of the bid and asked closing prices at which one Share is
traded on the over-the-counter market, as reported on the National
Association of Security Dealers Automated Quotation System, but if no
Shares were traded on such date, then on the last previous date on
which a Share was so traded, or, if none of the above are applicable
the value of a Share as established by the Committee for such date
using any reasonable method of valuation.
f) "Options" shall mean the stock options granted pursuant to
this Plan.
g) "Plan" shall mean this 1997 Stock Option Plan of And
Justice For All, Inc., as adopted by the Board of Directors on 10-1,
1997 and as approved by the
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shareholders of the Corporation on 10-1, 1997, as such Plan from time
to time may be amended.
h) "Share" shall mean a share of common stock of the
Corporation, no par value per share.
i) "Subsidiary" shall mean any corporation 50% or more of
whose stock having general power is owned by the Corporation, or by
another Subsidiary as herein defined, of the Corporation.
3. COMMITTEE. The Plan shall be administered by the Board of Directors
or a Committee appointed by the Board of Directors; provided, however, that from
and after the effective date of the registration of the Corporation's Shares
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the Securities Act of 1933, as amended (the "Securities Act"), the Plan shall be
administered by a Committee which shall consist of two or more directors of the
Corporation, each of whom shall be a "Non-Employee Director" within the meaning
of Rule 16b-3 under the Exchange Act and an "outside director" within the
meaning of Section 162 (m) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). The members of the Committee shall be selected by the
Board of Directors. Any member of the Committee may resign by giving written
notice thereof to the Board of Any Directors, and any member of the Committee
may be removed at any time, with or without cause, by the Board of Directors.
If, for any reason, a member of the Committee shall cease to serve, the vacancy
shall be filled by the Board of Directors. The Committee shall establish such
rules and procedures as are necessary or advisable to administer the Plan.
During such time as the Plan is administered by the Board of Directors, all
references herein to the Committee shall be deemed to refer to the Board of
Directors.
4. PARTICIPANTS. The class of persons who are potential recipients of
Options granted under this Plan consist of the (i) directors of the Corporation
or a Subsidiary, (ii) key employees of the Corporation or a Subsidiary, as
determined by the Committee and (iii) consultants and independent contractors
used by the Corporation or a Subsidiary, as determined by the Committee in its
sole discretion. The directors, key employees, consultants and independent
contractors to whom Options are granted under this Plan, and the number of
Shares subject to each such Option, shall be determined by the Committee in its
sole discretion, subject, however, to the terms and conditions of this Plan.
Persons to whom Options may be granted include key employees who are also
directors of the Corporation or a Subsidiary, directors who are not also key
employees and consultants and independent contractors who are not also key
employees.
5. SHARES. The Committee may, but shall not be required to, grant, in
accordance with this Plan, Options to purchase an aggregate of up to 2,000,000
Shares, which may be either Shares held in treasury or authorized but unissued
Shares. The maximum number of Shares which may be the subject of Options granted
to any individual during any calendar year shall not exceed 500,000 Shares. If
the Shares that would be issued or transferred pursuant to any Option are not
issued or transferred and cease to be issuable or transferable for any reason,
the number of Shares subject to such Option will no longer be charged against
the limitation provided for herein
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and may again be made subject to Options; provided, however, that with respect
to any Option granted to any Eligible Person who is a "covered employee" as
defined in Section 162(m) of the Code and the regulations promulgated thereunder
that is canceled or repriced, the number of Shares subject to such Option shall
continue to count against the maximum number of Shares which may be the subject
of Options granted to such Eligible Person and such maximum number of Shares
shall be determined in accordance with Section 162(m) of the Code and the
regulations promulgated thereunder.
At the time an Option is granted, the Committee may, in its sole
discretion, designate whether such Option (a) is to be considered as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code, or (b) is not to be treated as an incentive stock option for purposes of
this Plan and the Internal Revenue Code. No Option which is intended to qualify
as an incentive stock option shall be granted under this Plan to any individual
who, at the time of such grant, is not an employee of the Corporation or a
Subsidiary.
Notwithstanding any other provision of this Plan to the contrary, to
the extent that the aggregate Fair Market Value (determined as of the date of an
Option is granted) of the Shares with respect to which Options which are
designated as incentive stock options, and any other incentive stock options,
granted to an employee (under this Plan, or any other incentive stock option
plan maintained by the Corporation or any Subsidiary that meets the requirements
of Section 422 of the Internal Revenue Code) first become exercisable in any
calendar year exceeds $100,000, such Options shall be treated as Options which
are not incentive stock options. Options with respect to which no designation is
made by the Committee shall be deemed to be incentive stock options to the
extent that the $100,000 limitation described in the preceding sentence is met.
This paragraph shall be applied by taking options into account in the order in
which they are granted.
If any Option shall expire, be canceled or terminate for any reason
without having been exercised in full, the unpurchased Shares subject thereto
may again be made subject to Options under the Plan.
Nothing herein contained shall be construed to prohibit the issuance of
Options at different times to the same employee, director, consultant or
independent contractor.
The form of Option shall be determined from time to time by the
Committee. A certificate of Option signed by the Chairman of the Board of
Directors or the President or a Vice President of the Corporation, shall be
issued to each person to whom an Option is granted. The certificate of Option
for an Option shall be legended to indicate whether or not the Option is an
incentive stock option.
6. PRICE. The price per Share of the Shares to be purchased pursuant to
the exercise of any Option shall be fixed by the Committee at the time of grant;
provided, however, that the purchase price per share of the Shares to be
purchased pursuant to the exercise of an Option shall not be less than the Fair
Market Value of a Share on the day on which the Option is granted.
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<PAGE>
7. DURATION OF OPTIONS. The duration of any Option granted under this
Plan shall be fixed by the Committee in its sole discretion; provided, however,
that no Option shall remain in effect for a period of more than ten years from
the date upon which the Option is granted.
8. TEN PERCENT SHAREHOLDERS. Notwithstanding any other provision of
this Plan to the contrary, no Option which is intended to qualify as an
incentive stock option may be granted under this Plan to any employee who, at
the time the Option is granted, owns shares possessing more than ten percent of
the total combined voting power or value of all classes of stock of the
Corporation, unless the exercise price under such Option is at least 110% of the
Fair Market Value of a Share on the date such Option is granted and the duration
of such Option is no more than five years.
9. CONSIDERATION FOR OPTIONS. The Corporation shall obtain such
consideration for the grant for an Option, if any, as the Committee in its
discretion may request.
10. RESTRICTIONS ON TRANSFERABILITY OF OPTIONS. Options shall not be
transferable otherwise than by will or by the laws of descent and distribution
or as provided in this Section 12. Notwithstanding the preceding the Committee
may, in its discretion, authorize a transfer of all or a portion of any Option,
other than an Option which is intended to qualify as incentive stock option, by
the initial holder to (i) the spouse, children, stepchildren, grandchildren or
other family members of the initial holder ("Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Family Members, (iii) a corporation or
partnership in which such Family Members and the initial holder are the only
shareholders or partners, or (iv) such other persons or entities which the
Committee may permit; provided, however, that subsequent transfers of such
Options shall be prohibited except by will or the laws of descent and
distribution. Any transfer of such an Option shall be subject to such terms and
conditions as the Committee shall approve, including that such Option shall
continue to be subject to the terms and conditions of the Option and of the Plan
as amended from time to time. The events of termination of employment or service
under Section 12 shall continue to be applied with respect to the initial
holder, following which a transferred Option shall be exercisable by the
transferee only to the extent and for the periods specified under Section 12. An
Option which is intended to qualify as an incentive stock option shall not be
transferable otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the holder's lifetime only by the holder
thereof.
11. EXERCISE OF OPTIONS. An Option, after the grant thereof, shall be
exercisable by the holder at such rate and times as may be fixed by the
Committee.
Notwithstanding the foregoing, all or any part of any remaining
unexercised Options granted to any person may be exercised in the following
circumstances (but in no event prior to approval of the Plan by stockholders as
provided in Section 17); (a) immediately upon (but prior to the expiration of
the term of the Option) the holder's retirement from the Corporation and all
Subsidiaries on or after his 65th birthday, (b) subject to the provisions of
Section 12 hereof, upon the disability (to the extent and in a manner as shall
be determined by the Committee in its sole discretion) or death of the holder,
(c) upon the occurrence of a change in control of the Corporation, defined as
the transfer, in one or more related transactions (other than pursuant to a
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<PAGE>
bona fide underwritten public offering) of ownership of the Corporation's
securities representing an aggregate of ___% or more of the voting power of the
Corporation, or (d) such special circumstances or event as in the opinion of the
Committee merits special consideration.
An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect, together with the Option
certificate and the full purchase price of the Shares purchased pursuant to the
exercise of the Option, to the Chairman of the Board or an officer of the
Corporation appointed by the Chairman of the Board for the purpose of receiving
the same. Payment of the full purchase price shall be made as follows: in cash;
by check payable to the order of the Corporation; by delivery to the Corporation
of Shares which shall be valued at their Fair Market Value on the date of
exercise of the Option; or by such other methods as the Committee may permit
from time to time; provided, however, that a holder may not use any Shares to
pay the exercise price unless the holder has beneficially owned such Shares for
at least six months. No Option may be granted pursuant to the Plan or exercised
at any time when such Option, or the granting, exercise or payment thereof, may
result in the violation of any law or governmental order or regulation.
Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto, a
certificate for the Shares purchased pursuant to the exercise of the Option. If
the Option shall have been exercised with respect to less than all of the Shares
subject to the Option, the Corporation shall also cause to be delivered to the
person entitled thereto a new Option certificate in replacement of the
certificate surrendered at the time of the exercise of the Option, indicating
the number of Shares with respect to which the Option remains available for
exercise, or the original Option certificate shall be endorsed to give effect to
the partial exercise thereof.
12. TERMINATION OF EMPLOYMENT OR SERVICE. All or any part of any
Option, to the extent unexercised, shall terminate immediately (i) in the case
of an employee, upon the cessation or termination for any reason of the Option
holder's employment by the Corporation and all Subsidiaries, or (ii) in the case
of a director, consultant or independent contractor of the Corporation or a
Subsidiary who is not also an employee of the Corporation or a Subsidiary, upon
the holder's ceasing to serve as a director, consultant or independent
contractor of the Corporation or a Subsidiary, except that in either case the
Option holder shall have until the end of the tenth business day following the
cessation of his employment with the Corporation and Subsidiaries or his service
as a director, consultant or independent contractor of the Corporation or a
Subsidiary, as the case may be, and no longer, to exercise any unexercised
Option that he could have exercised on the day on which such employment, or
service as a director, consultant or independent contractor, terminated;
provided that such exercise must be accomplished prior to the expiration of the
term of such Option. Notwithstanding the foregoing, if the cessation of
employment or service as a director, consultant or independent contractor is due
to retirement on or after attaining the age of sixty-five (65) years, or to
disability (to an extent and in a manner as shall be determined in each case by
the Committee in its sole discretion) or to death, the Option holder or the
representative of the Estate or the heirs of a deceased Option holder shall have
the privilege of exercising the Options which are unexercised at the time of
such retirement, or of such disability or death; provided, however, that such
exercise must be accomplished prior to the
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<PAGE>
expiration of the term of such Option and (a) within three months of the Option
holder's retirement or disability, or (b) within six months of the Option
holder's death, as the case may be. If the employment or service of any Option
holder with the Corporation or a Subsidiary shall be terminated because of the
Option holder's violation of the duties of such employment or service with the
Corporation or a Subsidiary as he may from time to time have, the existence of
which violation shall be determined by the Committee in its sole discretion
(which determination by the Committee shall be conclusive) all unexercised
Options of such Option holder shall terminate immediately upon such termination
of the holder's employment or service with the Corporation and all Subsidiaries,
and an Option holder whose employment or service with the Corporation and
Subsidiaries is so terminated, shall have no right after such termination to
exercise any unexercised Option he might have exercised prior to the termination
of his employment or service with the Corporation and Subsidiaries.
Nothing contained herein or in the Option certificate shall be
construed to confer on any employee or director of any right to be continued in
the employ of the Corporation or any Subsidiary or as a director of the
Corporation or a Subsidiary or derogate from any right of the Corporation and
any Subsidiary to request the resignation of or discharge any employee,
director, consultant or independent contractor (without or with pay), at any
time, with or without cause.
13. ADJUSTMENT OF OPTIONED SHARES. If prior to the complete exercise of
any Option there shall be declared and paid a stock dividend upon the common
stock of the Corporation or if the common stock of the Corporation shall be
split up, converted, exchanged, reclassified, or in any way substituted for, or
if the Corporation shall merge, sell its assets, or be subject to a share
exchange or similar transaction, the Option, to the extent that it has not been
exercised, shall entitle the holder thereof upon the future exercise of the
Option to such number and kind of securities or other property subject to the
terms of the Option to which he would have been entitled had he actually owned
the Shares subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification, substitution, merger, sale of assets, or share exchange; and
the aggregate purchase price upon the future exercise of the Option shall be the
same as if the originally optioned Shares were being purchased thereunder. Any
fractional shares or securities payable upon the exercise of the Option as a
result of such adjustment shall be payable in cash based upon the Fair Market
Value of such shares or securities at the time of such exercise. If any such
event should occur, the number of Shares with respect to which Options remain to
be issued, or with respect to which Options may be reissued, shall be adjusted
in a similar manner.
Notwithstanding any other provision of the Plan, in the event of a
recapitalization, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the corporate structure or
outstanding Shares, the Committee may make such equitable adjustments to the
number of Shares and the class of shares available hereunder or to any
outstanding Options as it shall deem appropriate to prevent dilution or
enlargement of rights.
14. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES ACT. The
Corporation may postpone the issuance and delivery of Shares upon any exercise
of an Option until (a) the admission of such Shares to listing on any stock
exchange on which Shares of the Corporation of
6
<PAGE>
the same class are then listed, and (b) the completion of such registration or
other qualification of such Shares under any State or Federal law, rule or
regulation as the Corporation shall determine to be necessary or advisable to
comply with applicable laws and regulations. Any person exercising an Option
shall make such representations and furnish such information as may, in the
opinion of counsel for the Corporation, be appropriate to permit the
Corporation, in the light of the then existence or non-existence with respect to
such Shares of an effective registration statement under the Securities Act to
issue the Shares in compliance with the provisions of the Securities Act or any
comparable act. The Corporation shall have the right, in its sole discretion, to
legend any Shares which may be issued pursuant to the exercise of an Option, or
may issue stop transfer orders in respect thereof.
15. INCOME TAX WITHHOLDING. If the Corporation or a Subsidiary shall be
required to withhold any amounts by reason of any Federal, State or local tax
rules or regulations in respect of the issuance of Shares pursuant to the
exercise of such Option, the Corporation or the Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the holder
of such Option. In any event, the holder shall make available to the Corporation
or Subsidiary, promptly when requested by the Corporation or such Subsidiary,
sufficient funds to meet the requirements of such withholding; and the
Corporation or Subsidiary shall be entitled to take and authorize such steps as
it may deem advisable in order to have such funds made available to the
Corporation or Subsidiary out of any funds or property due or to become due to
the holder of such Option.
16. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Options not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any outstanding Option. Notwithstanding the foregoing, any
amendment by the Board of Directors or the Committee which would increase the
number of Shares issuable under Options granted pursuant to the Plan or to any
individual during any calendar year or change the class of persons to whom
Options may be granted shall be subject to the approval of the stockholders of
the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall be
final. The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
deem advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose.
17. EFFECTIVE DATE. This Plan shall become effective upon its approval
by the shareholders of the Corporation.
18. FINAL ISSUANCE DATE. No Option shall be granted under the Plan
after 10-31, 2007.
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OPTION CERTIFICATE
NON-QUALIFIED STOCK OPTION
_______________ Shares
To Purchase Common Stock of
AND JUSTICE FOR ALL, INC.
D/B/A LEGAL CLUB OF AMERICA
Issued Pursuant to the 1997 Stock
Option Plan of And Justice for All, Inc. d/b/a Legal Club of America
THIS CERTIFIES that on _________________, 19____, _____________________
(the "Holder") was granted an option ("Option") to purchase at the Option price
of $___ per share all or any part of _________________ fully paid non-assessable
shares ("Shares") of the Common Stock of AND JUSTICE FOR ALL, INC. D/B/A LEGAL
CLUB OF AMERICA ("Corporation"), a Florida corporation, upon and subject to the
following terms and conditions.
This Option shall expire on ________________, 2007.
This Option may be exercised or surrendered during the Holder's
lifetime only by the Holder. This Option shall not be transferable by the Holder
otherwise than by will or by the laws of descent and distribution, and except as
otherwise provided in the Plan.
Except as otherwise provided pursuant to the 1997 Stock Option Plan of
And Justice for All, Inc. d/b/a Legal Club of America (the "Plan"), this Option
may be exercised as follows: [add vesting schedule]. In no event, however, may
this Option be exercised after the Option's expiration date. This Option is an
incentive stock option, within the meaning of that term as defined in Section
422 of the Internal Revenue Code.
8
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The Option and this Option certificate are issued pursuant to and are
subject to all of the terms and conditions of the Plan, the terms and conditions
of which are hereby incorporated as though set forth at length, and a copy of
which is attached hereto.
WITNESS the signature of the Corporation's duly authorized officer.
Dated: ____________________, 19____.
AND JUSTICE FOR ALL, INC. d/b/a Legal
Club of America
By: ________________________________
Authorized Signatory
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ADDENDUM TO OPTION AGREEMENT
The following vesting schedule applies to all employee options granted.
As an employee your options will vest as follows:
Year 1 - 33%
Year 2 - 33%
Year 3 - 34%
If for any reason you are terminated for cause, as described in your
employment agreement Section 5 during the vesting period, you will forfeit the
rights to any portion of the remaining or non-vested options.
- --------------------------------- ---------------------------------
Employee Corporation
- --------------------------------- ---------------------------------
Dated: Dated:
EXHIBIT 4.b
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED, UNLESS SO REGISTERED OR UNLESS IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
LEGAL CLUB OF AMERICA CORPORATION
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
______________ (_______) SHARES
THIS CERTIFIES THAT, for value received, ______________ ("Holder") is
entitled to subscribe for and purchase from LEGAL CLUB OF AMERICA CORPORATION, a
Colorado corporation (the "Company"), at any time from the date hereof through
and including the Expiration Date set forth below (the "Exercise Period"),
_____________________ (_________) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.0001 par value per share (the "Common
Stock"), at a price of ______________($___) CENTS per Share (the "Exercise
Price"), subject to the limitations, terms and conditions set forth herein.
Transfer, assignment or hypothecation of this Warrant by the Holder may be made
only in accordance with and subject to the terms, conditions and other
provisions of this Warrant. The term "Holder," as used herein, shall include the
original Holder and only such persons to whom this Warrant is transferred in
strict conformity with the terms and conditions set forth or incorporated by
reference herein. As used herein, the term "Warrant" shall mean and include this
Warrant and any Warrant or Warrants hereafter issued in consequence of the
exercise or transfer of this Warrant, in whole or in part.
1. This Warrant shall expire on ______________ (the "Expiration Date").
2. This Warrant may be exercised during the Exercise Period as to the
whole or any lesser number of whole Shares by the surrender of this Warrant
(with the form of Election at the end hereof duly completed and executed) to the
Company, marked to the attention of its President, 1601 N. Harrison Parkway,
Suite 200, Bldg. A, Sunrise, Florida 33323, or such other place as is designated
in writing and delivered to Holder by the Company, accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price").
3. Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of this
Warrant, a duly executed form of election. the Shares Purchase Price and such
further documentation as may be required pursuant to Section 9(c) below. Upon
each exercise of this Warrant, the holder shall be deemed to be the holder of
record of the Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed as soon as practicable after
each such
<PAGE>
exercise of this Warrant, the Company shall issue and deliver to the Holder a
certificate or certificates for the Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Shares subject to purchase hereunder.
4. The Company shall maintain a register (the "Warrant Register") on
which the names and addresses of the persons to whom this Warrant is issued and
shall be entitled to treat the registered Holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. Subject to compliance with
applicable securities laws and any other restrictions set forth herein, this
Warrant shall be transferable on the books of the Company only upon delivery
thereof with the form of Assignment at the end hereof duly completed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock upon surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on its books to any person, unless the Holder of such
Warrants shall furnish to the Company evidence of compliance with the Act and
applicable state securities law, in accordance with the provisions of Section 9
hereof.
5. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor.
6. The Exercise Price shall be subject to adjustment from time to time
as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify the outstanding
shares of Common Stock into a lesser number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution on the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price then in effect by a fraction, the denominator of which shall be the number
of shares of Common Stock outstanding immediately after giving effect to such
action, and of which the numerator shall be the number of shares of Common
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<PAGE>
Stock outstanding immediately prior to such action. Such adjustment shall be
made successively whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (a) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the initial Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 6 shall be made to the
nearest one--hundredth of a cent and to the nearest whole Share.
7. (a) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger of consolidation in which
the Company is the continuing or surviving corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, appropriate provisions shall be made
so that the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such consolidation,
merger, sale, lease or conveyance by a holder of the number of Shares of Common
Stock for which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance and, in any such case,
effective provision shall be made in its Articles of Incorporation or otherwise,
if necessary, in order to effect such agreement. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 6.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or
combination, but including any change in the Shares into two or more classes or
series of shares) or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which (here is a reclassification or change (including a change to the
right to receive cash or other property) in the Shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a result of
a subdivision or combination, but including any change in the Shares into two or
more classes or series of Shares), the Holder shall have the right thereafter to
receive upon exercise of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
by the holder of the number of Shares for which this Warrant might have been
exercised immediately prior to such reclassification, change, consolidation or
merger. Thereafter, appropriate provision (as reasonably determined by the Board
of Directors) shall be made for adjustment which shall be as nearly equivalent
as practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly
apply to successive reclassification and changes in Shares of Common Stock and
to successive consolidations, mergers, sales or conveyances.
3
<PAGE>
8. The issue of any stock or other certificate upon the exercise of
this Warrant shall be made without charge to the Holder for any tax in respect
of the issue of such certificate. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of any certificate in a manner other than that of the Holder
and the Company shall not he required to issue or deliver any such certificates
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
9. (a) Unless registered under the Securities Act of 1933, as
amended (the "Act"). the Warrants and Shares or other securities issued upon
exercise of the Warrants shall not be transferable unless, in the opinion of
counsel reasonably satisfactory to the Company, an exemption from registration
tinder applicable securities laws is available. The Warrants, Shares and other
securities issued upon the exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Shares or securities shall bear the following legend and any other legend which
counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(b) Additional restrictions and limitations may apply to the
resale of Warrants and Shares outside the United States. Such further
limitations and restrictions shall be evidenced by legends placed on the
certificates evidencing such securities.
(c) Notwithstanding any other term of this Warrant, the
Company may require, as a condition of issuing Shares or other securities upon
the exercise of this Warrant or permitting the transfer of this Warrant or
Shares or other securities issued upon exercise of this Warrant, that the Holder
and/or transferee execute such agreements or give such assurances and
information as may be required, in the opinion of counsel for the Company, to
satisfy applicable securities laws' requirements.
10. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
11. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
4
<PAGE>
12. This Warrant shall be governed by and construed in accordance with
the laws of the State of Delaware.
13. (a) If the Company proposes to file a registration statement
under the Act (other than in connection with an exchange offer, a "rights"
offering to shareholders, a Registration Statement on Form S-8 or Form S-4 or
any successor forms relating to employee benefit plans or acquisition of another
entity) with respect to shares of Common Stock (a "Piggy Back Registration
Statement"), the Company shall give written notice of such proposed filing to
Holder at least thirty (30) calendar days before the anticipated filing date of
such PiggyBack Registration Statement or, in the event that the Company has not
formulated its intent to file such Piggyback Registration Statement at least
thirty (30) calendar days before the anticipated filing date of such Piggyback
Registration Statement, as soon as practicable upon the formation by the Company
of such intent. The notice shall specify the information required to be provided
to the Company by Holder pursuant to paragraph 13(d) below and shall offer to
holder the opportunity to include in the Piggy Back Registration Statement such
number of Shares as Holder may request. The Company shall not be required to
honor any such request (i) if, in the opinion of counsel to the Company
reasonably acceptable to Holder, registration under the Act is not required for
the transfer of the Shares in the manner proposed by Holder; or (ii) to register
in the aggregate fewer than 10,000 Shares. The Company shall permit, or, in the
case of an offering made through an underwriter or group of underwriters on a
"firm commitment" basis (an "Underwritten Offering"), shall use its best efforts
to cause the managing underwriter of the proposed offering to permit, such
Shares to be included in the proposed offering on the same terms and conditions
as applicable to the shares of Common Stock Offered by the Company and for the
account of any person other than the Company, as the case may be.
(b) Notwithstanding the foregoing, if the managing underwriter
of an underwritten offering shall advise the Company in writing that, in its
opinion, the distribution of all or a portion of the Shares requested by Holder
to be included in the Piggy Back Registration Statement concurrently with the
shares of Common Stock being registered by the Company would materially
adversely affect the distribution of such securities by the Company for its own
account, or for the account of any person or persons that have asserted demand
registration rights under any other agreement with respect to such registration,
then such requested Shares shall not be included in the Registration. If the
managing underwriter elects to include less than all Shares, then the number of
Shares shall be pro rata with (i) other securities properly requested to be
included in the Piggy Back Registration Statement by other Holders pursuant to
piggy back or incidental registration rights under any other agreement or (ii)
shares included in the Piggy Back Registration Statement for the account of any
corporate officer or director of the Company and any of their respective family
members, whichever results in the registration of the greater number of Shares
for Holder's account. The Company shall not be required to maintain in effect
the Piggy Back Registration Statement as it relates to Shares beyond the period
necessary to comply with the Securities Act (otherwise than pursuant to Rule 415
or any similar regulation permitting "shelf registration") with respect to the
distribution of the Shares included therein.
(c) In connection with any registration of Shares pursuant to
paragraph 13(a), and as a condition to the Company's obligation to register the
Shares, Holder shall promptly
5
<PAGE>
furnish to the Company such information regarding Holder, the proposed
distribution of the Shares by Holder and such other matters as the Company may
reasonably request in writing.
(d) All expenses incident to the Company's performance of or
compliance with the provisions set forth herein (other than underwriting
discounts and commissions relating to the sale of the Shares, and the fees and
disbursements of Holder's counsel, if any) will be borne by the Company. In
addition. the Company shall, without charge to Holder, provide Holder with
reasonable quantities of preliminary prospectuses, final prospectuses and other
material required to effect sales of the Shares to the public, and will take
appropriate action to enable the Shares to be sold in the State of New York and
such other states as the Company may elect.
14. Without limiting any indemnification rights of the Company or
Holder arising under any other agreement or law, in any registration of Shares
pursuant hereto:
(a) the Company will indemnify and hold harmless Holder
against any losses, claims, damages or liabilities (which shall include, but not
he limited to, all costs of defense and investigation and all attorneys' fees)
to which Holder may become subject under the Act, the Exchange Act or otherwise
insofar as such losses, claims, damages or liability (or actions in respect
thereof) arise out of or are based upon any untrue statement of any material
fact contained, during the effective period thereof, in any Registration
Statement, any preliminary or final prospectus furnished by the Company, or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company shall have no obligation to
Holder in respect of any such loss, claim, damage or liability arising out of or
based upon any untrue statement or liability arising out of based upon an untrue
statement or omission made in a Registration Statement, preliminary prospectus,
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished by Holder specifically for use in
the preparation thereof.
(b) Holder will indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 20
of the Exchange Act against any losses, claims, damages or liabilities (which
shall include, but not be limited to, all costs of defense and investigation and
all attorneys' fees) to which the indemnified party may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or
liability (or actions in respect thereof) arise out of or are based upon (i) an
untrue statement or omission made in a Registration Statement, preliminary
prospectus, prospectus, preliminary offering circular or offering circular, or
any amendment or supplement, in reliance upon and in conformity with written
information furnished by Holder for use by the Company in the preparation
thereof, or (ii) actions or omissions by Holder or persons acting on his behalf
in the sale of the Shares which are unrelated to the content of the Registration
Statement but which violate the Act, the Exchange Act or regulations thereunder.
15. (a) Not withstanding any other term of this Warrant, unless
the Company shall have prepared, filed and processed to effectiveness a Piggy
Back Registration Statement
6
<PAGE>
covering the Shares on or before ______________, and such Registration Statement
has remained effective for a period of at least ninety (90) days prior to the
Expiration Date (one hundred eighty [180] days if the Registration Statement is
on Form S-3), the Holder shall have the right at any time after ______________,
to convert this Warrant into that number of Shares (hereinafter referred to as
the "Conversion Shares") which shall equal the product obtained by multiplying
all Shares then issuable upon exercise of the Warrant pursuant to paragraph 2
above by a fraction, the denominator of which is the Market Price of the
Company's Common Stock, as defined below, and the numerator of which is the
difference between the Market Price and the Exercise Price. Where the number of
Conversion Shares equals "CS", the number of Shares equals "S", the Exercise
Price equals "EP" and the Market Price equals "MP", the following formula shall
determine the number of Conversion Shares at any time issuable upon conversion
of this Warrant to Common Stock pursuant to this paragraph 15(a):
CS= S(MP-EP)
----------
MP
(b) For purposes of paragraph 15(a) above, the term "Market
Price" of the Company's Common Stock shah mean: (i) if the Common Stock is
listed on a national securities exchange, the average closing prices for the
Common Stock required on such exchange for the five (5) trading clays
immediately preceding the date of exercise of the rights of conversion set forth
in paragraph 15(a) (the "Conversion Rights") or (ii) if the Common Stock is not
listed on a national securities exchange but is quoted on the Nasdaq Stock
Market (Small Cap or National Market System), the average closing prices for the
Common Stock on the Nasdaq Stock Market for the live (5) trading days
immediately preceding the date of exercise of Conversion Rights; or (iii) if
either (i) or (ii) above applies, and "bid" and "asked" prices for the Common
Stock are quoted on the National Association of Securities Dealers, Inc.
("NASD") OTC Bulletin Board and the average weekly trading volume for the Common
Stock as reported on the NASD Bulletin Board has averaged at least one (1%)
percent of the total number of shares of Common Stock outstanding during the
four calendar weeks immediately preceding the exercise of Conversion Rights, the
average of the mean between the closing "bid" and "asked" prices reported on the
OTC Bulletin Board for the five (5) trading days immediately preceding the date
of exercise of Conversion Rights; or (iv) if none of subsections (i), (ii) or
(iii) apply, as determined by the Board of Directors of the Company.
(c) The Conversion Rights may be exercised in the same manner
as provided in paragraph 2 above, except that payment of the Shares Purchase
Price shall not be tendered.
7
<PAGE>
16. The Company warrants the due authorization, execution and delivery
of this Warrant this __ day of _______.
LEGAL CLUB OF AMERICA CORPORATION
[SEAL]
Name:
----------------------------
8
<PAGE>
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects (check one): [ ] to exercise
the within Warrant to purchase _____________________ Shares* of Common Stock
issuable upon the exercise thereof; [ ] to convert the within Warrant to shares
of Common Stock pursuant to paragraph 15 thereof. The undersigned requests that
certificates for such Shares, or, in the case of conversion, the number of
Conversion Shares issuable pursuant to paragraph 15 thereof, be issued in
his/her/its name and delivered to him/her/it at the following address:
- -------------------------------------------------------------------------------
Date: _______
- -------------------------------------------------------------------------------
Signature(s)(* *)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
within Warrant to the extent of _______ Shares(*) purchasable upon exercise
thereof to ____________ whose address is ____________________________ and hereby
irrevocably constitute and appoint ____________ ________ his/her/its Attorney o
transfer said Warrant on the book of the Company, with full power of
substitution.
Date: ______________
- -------------------------------------------------------------------------------
SIGNATURE(S)(* *)
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares", otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the names(s) of the Holder as set forth
on the first page of this Warrant.
9
EXHIBIT 10.a
MEDIA PLACEMENT SERVICES AGREEMENT
This Agreement dated this 19th day of March, 1999, is made between
Frederiksen Television, Inc., a Virginia corporation (hereinafter referred to as
"FTV") and And Justice For All, Inc., a Florida corporation (hereinafter
referred to as "Client").
1. FTV will act as a media placement agency for Client's television
direct response campaign for legal referral services known as "Legal Club of
America(R)." Media placement shall mean the direct and indirect purchase of
cable, broadcast, and satellite airtime (including, without limitation, all
third-party costs associated with the placement of media, where applicable).
2. FTV shall prepare a media plan for an initial media test to be
conducted by FTV for Client, which plan shall set forth the amounts, markets,
and times mutually agreed upon in writing by the parties to this Agreement (the
"Approved Media Plan"). The first phase of an Approved Media Plan may test one
or more offers. Subsequent media will be placed by FTV for further testing and
roll-out as required and in amounts agreed upon in writing by the parties to
this Agreement.
3. FTV and Client will make reasonable efforts to arrange for Client to
receive weekly reports, which present the media aired and the orders received
for each airing. FTV will provide additional reports as reasonably requested by
Client.
4. All production work such as dub masters, broadcast dubs, special
edits and shipping of dubs express charges are additional costs not included in
the cost of the media buys. Client agrees to pay such costs directly or to
reimburse FTV for all reasonable out-of-pocket expenses incurred by FTV, such as
UPS, Federal Express, couriers, etc. related to media placed on behalf of
Client.
5. Client will bear financial responsibility for media placed on its
behalf under the terms of this Agreement.
6. Media payment terms are cash in advance. An invoice will be
forwarded to Client for the initial media test upon receipt of the Approved
Media Plan which amount is due at least four (4) weeks in advance of the initial
media airing. As rollout commences, a schedule of media will be provided along
with an invoice reflecting media scheduled to air. Typically, this process
involves advancing money on a weekly basis at least two to four weeks in advance
of scheduled airings.
7. If FTV is trafficking tapes (edits and sending of tapes to stations)
for Client under FTV's account, then Client shall make a reasonable deposit to
FTV for such trafficking charges. The amount of this deposit will be determined
following approval by Client of the Approved Media Plan. Once the deposit is
exhausted, all charges will be due and payable as incurred.
<PAGE>
8. Client recognizes that individual stations or other media outlets
have individual policies regarding payment terms and cancellations (typically
two to four weeks) for direct response and agrees to abide by them.
9. For the placement of media for Client, FTV will receive a media
commission as its sole compensation for the media placement services as follows:
twelve percent (12%) commission for each media test; thereafter, the parties
shall negotiate in good faith a sliding-scale commission structure based on (i)
the aggregate media placed by FTV on monthly basis; or (ii) the performance of
the media placed on a cost per order or sale-to-media cost ratio.
10. Client and FTV shall hereby mutually indemnify and hold each other,
their affiliated companies and their respective officers, directors,
shareholders, employees, licensees, agents, successors and assigns harmless from
all claims, actions, suits, demands, judgments, awards, costs of suit (including
attorney's fees and expenses) and liability arising out of the placement of
media, the airing of Client's commercials, or the performance of the terms and
conditions of this Agreement. Neither party shall have any obligations to
indemnify and hold the other harmless with respect to any claims which arise out
of or result from fraud or knowing misrepresentation by or on behalf of the
other or arising from any of its representations, warranties, covenants,
obligations, agreements or duties under this Agreement.
11. This Agreement is effective upon execution by both parties and will
continue in full force and effect until terminated by either party upon thirty
(30) day written notice to the other. Upon giving or receiving such notice of
termination, FTV shall cease to make any additional media placements, unless
otherwise instructed by Client. Client shall remain financially obligated for
any media that is booked by FTV through the effective date of the termination.
12. All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission; (ii) on the next day
if delivered by overnight mail or courier, or (iii) on the day indicated on the
return receipt, or if there is no such receipt, on the third calendar day
(excluding Sundays) if delivered by certified or registered mail, postage
prepaid, to the party for whom intended to the following addresses:
If to Client: And Justice For All, Inc.
1500 N.W. 62nd Street, Suite 404
Ft. Lauderdale, FL 33309
Attention: Brett Merl, Chief Executive Officer
Fax: (954) 267-0401
If to FTV: Frederiksen Television
2735 Hartland Road, Suite 300
Falls Church, VA 22043
Attention: Lee Frederiksen, President
Fax: (703) 560-8292
2
<PAGE>
Each party may, by written notice given to the other in accordance with this
Agreement, change the address to which notices to such party are to be
delivered.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Virginia without regard to the conflict of law provision
thereof.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, and all of which
together shall constitute one and the same Agreement. A signature delivered by
facsimile shall be deemed to be an original signature and shall be effective
upon receipt thereof by the other party.
15. The parties hereby agree that in the event a suit is initiated with
reference to this Agreement by any party, the prevailing party shall be entitled
to an award of reasonable attorneys fees and disbursements incurred by such
party in connection with and including but not limited to fees and disbursements
in administrative, regulatory, bankruptcy and appellate proceedings.
In witness whereof, the parties have caused this Agreement to be duly
executed on the first date written above.
For Frederiksen Television, Inc.
By: /S/ (ILLEGIBLE)
---------------------------------
Title: VICE PRESIDENT
------------------------------
For And Justice For All, Inc.
By: /S/ (ILLEGIBLE)
---------------------------------
Title: CEO
------------------------------
3
EXHIBIT 10.b
CAMPAIGN MANAGEMENT SERVICES AGREEMENT
This Agreement, dated the 19th day of March, 1999, is made between
Frederiksen Television, Inc., a Virginia corporation, (hereinafter referred to
as "FTV") and And Justice For All, Inc., a Florida corporation (hereinafter
referred to as "Client").
The parties wish to set forth herein the terms pursuant to which FTV
will perform certain management services for Client. Accordingly, in
consideration of the mutual promises and undertakings set forth herein, and
intending to be legally bound hereby, the parties agree as follows:
1. ENGAGEMENT AND DUTIES OF FTV. Subject to the terms and conditions of
this Agreement, Client engages FTV to provide the following services in support
of Client's direct response marketing campaigns. Client may elect to have FTV
provide one or more or the services set forth below. The selection of any one
service phase below does not obligate Client to any other of the following
services set forth herein.
(a) PHASE 1 SERVICES.
(i) Evaluate the infrastructure support required and
recommend an appropriate inbound telemarketing and fulfillment structure;
(ii) Following approval by Client of the proposed
inbound telemarketing and fulfillment structure, FTV will solicit and evaluate
bids from appropriate inbound telemarketing and fulfillment companies; and
(iii) Recommend to Client a service provider for
inbound telemarketing and fulfillment services.
(b) PHASE 2 SERVICES.
(i) Following approval by Client of the inbound
telemarketing and fulfillment service providers, FTV will work with those
parties to implement the approved supporting infrastructure and communication
links;
(ii) Arrange for the inbound telemarketing scripts.
Client shall have final approval for all telemarketing scripts and all marketing
materials prior to use;
(iii) Arrange for order fulfillment; and
(iv) Arrange for the electronic download of orders
and other information to Client on a regular basis.
(c) PHASE 3 SERVICES. Following the set-up of the
telemarketing and fulfillment support and the commencement of the media airings,
FTV will provide on-going management services of these support functions. These
services will include routine contact with
<PAGE>
the inbound telemarketing and fulfillment centers as well as Client to evaluate
the results of time marketing efforts and address operational issues as they may
arise. Without limiting the scope of FTV's services hereunder, such
administrative and management actions include, but are not limited to:
(i) Day-to-day management of inbound telemarketing
services, including the writing of appropriate inbound telemarketing script(s).
Client shall have final approval for all telemarketing scripts and all marketing
materials prior to use;
(ii) Coordinate the fulfillment of consumer orders
with the appropriate service providers;
(iii) Coordinate the processing of credit cards and
checks orders from and refunds to consumers.
(iv) Coordinate the reporting of orders, customer
names and addresses, and other information to Client on a regular basis;
(v) Analyze operational information for trends,
profitability, etc. and make recommend appropriate actions or modifications to
the project based on the results of such analyses; and
(vi) Coordinate customer service for products sold to
consumers; and
(vii) Address operational issues as they may arise.
2. LIMITS ON FTV AUTHORITY. FTV shall have no authority to:
(a) Perform any act in violation of any applicable law or
regulation thereunder;
(b) Make, execute, or deliver any assignment for the benefit
of creditors, or any bond, confession of judgment, guarantee, indemnity bond or
surety bond, except for bonds delivered in the ordinary course of business or
bonds delivered in connection with disputed claims by or against Client or its
assets, with the written advice of counsel to Client, without the prior written
consent of a majority of Client's shareholders;
(c) Borrow from Client; or
(d) On behalf of Client, become a surety, guarantor or
accommodation party to any obligation, except for the deposit of items for
collection in the ordinary course of business.
3. INTELLECTUAL PROPERTY RIGHTS / PRODUCT OWNERSHIP. Any and all audio
or video productions of marketing materials (regardless of the technique or
format used) created, edited, marketed or produced in accordance with this
Agreement and all rights in connection therewith shall be the exclusive property
of the Client. Client owns all said property and rights thereto and has the sole
and exclusive right to copyright protection of the materials. Any published work
2
<PAGE>
performed in accordance with this Agreement shall be considered "work for hire"
and shall be exclusive property of Client. Nothing in this Agreement shall be
construed to confer or transfer any intellectual property rights to FTV.
4. TERM OF AGREEMENT. This Agreement is effective upon execution by
both parties and will continue in full force and effect until terminated by
either party upon thirty (30) day written notice to the other. Client shall
remain financially obligated for services and costs through the effective date
of the termination.
5. COMPENSATION. FTV shall receive reimbursement for costs and expenses
reasonably incurred in performing its duties upon submission of documentation
supporting such expenses. In consideration of FTV's rendition of services to
Client and the performance and observance by FTV of its representations,
warranties, covenants and other obligations under this Agreement, Client shall
pay to FTV the compensation as set forth on the attached Schedule 1.
6. INDEPENDENT CONTRACTOR. FTV is not and shall not be an employee or
agent of Client for any purpose whatsoever. Rather, FTV is and shall at all
times remain an independent contractor. As such, FTV is solely responsible for
the time, manner and place of performance of its duties hereunder.
7. CONFIDENTIAL INFORMATION. Client and FTV acknowledge that in the
course of performing management services hereunder, FTV may review and become
privy to proprietary, confidential and competitively sensitive information
concerning Client's business, including, without limitation: (i) marketing and
promotional plans and strategies, (ii) information relating to contractual
arrangements with licensors, suppliers, producers performers and program
providers, (iv) information relating to the purchase and placement of media,
results of media deployment and media monitoring and tracking systems, (v)
information relating to rates, costs and facilities for telemarketing, order
processing fulfillment and credit card processing services, (vi) financial
information beyond that which is publicly reported by Client, and (vii) other
proprietary and competitively sensitive information (collectively, "Confidential
Information"). FTV agrees to receive and hold all Confidential Information in
confidence and will not, without the prior written consent of Client, make any
use of Confidential Information for purposes unrelated to rendering the Services
or disclose any of the Confidential Information to any person or entity except
as may be necessary in ordinary course of rendering the Services. The duty of
confidentiality shall indefinitely survive the term of this Agreement.
8. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by the
laws of the Commonwealth of Virginia without regard to the conflict of law
provision thereof.
9. MISCELLANEOUS.
(a) NOTICES. All notices, requests, instructions, consents and
other communications to be given pursuant to this Agreement shall be in writing
and shall be deemed received (i) on the same day if delivered in person, by
same-day courier or by telegraph, telex or facsimile transmission; (ii) on the
next day if delivered by overnight mail or courier, or (iii) on the day
indicated on the return receipt, or if there is no such receipt, on the third
calendar day
3
<PAGE>
(excluding Sundays) if delivered by certified or registered mail, postage
prepaid, to the party for whom intended to the following addresses:
If to Client: And Justice For All, Inc.
1500 N.W. 62nd Street, Suite 404
Ft. Lauderdale, FL 33309
Attention: Brett Merl, Chief Executive Officer
Fax: (954) 267-0401
If to FTV: Frederiksen Television
2735 Hartland Road, Suite 300
Falls Church, VA 22043
Attention: Lee Frederiksen, President
Fax: (703) 560-8292
Any party may, by written notice to the other in accordance with this Agreement,
change the address to which notices to such party are to be delivered.
(b) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between them.
(c) WAIVER OF BREACH. Any waiver by any party of any breach or
default of any provision of this Agreement shall not constitute a waiver of such
provision or any subsequent breach or default hereof.
(d) ASSIGNABILITY. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns, provided, however, that FTV may not
assign this Agreement or any rights hereunder to any person or entity without
the prior written consent of Client, and any attempted assignment without such
consent shall be void.
(e) SEVERABILITY; REFORMATION. All of the provisions of this
Agreement are distinct and severable, and any provision of this Agreement that
is deemed inoperative, unenforceable, void or invalid shall not affect the
operation, enforceability, legality or validity of any other part of this
Agreement. In the event that any of the provisions of this Agreement should be
determined to be invalid or unenforceable, in whole or in part, such provision
shall be deemed to be modified or restricted to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement, as time case may require, and this Agreement shall be
construed and enforced to the maximum extent permitted by law as if such
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be.
(f) HEADINGS. The headings of sections and subsections have
been included for convenience only and shall not be considered in interpreting
this Agreement.
4
<PAGE>
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be original, and all of
which together shall constitute one and the same Agreement. A signature
delivered by facsimile shall be deemed to be an original signature and shall be
effective upon receipt thereof by the other party.
(h) The parties hereby agree that in the event a suit is
initiated with reference to this Agreement by any party, the prevailing party
shall be entitled to an award of reasonable attorneys fees and disbursements
incurred by such party in connection with and including but not limited to fees
and disbursements in administrative, regulatory, bankruptcy and appellate
proceedings.
In witness whereof, the parties have caused this Agreement to be duly
executed on the first date written above.
For Frederiksen Television, Inc. For And Justice For All, Inc.
By: /S/ THOMAS K. REDDING By: /S/ BRETT MERL
----------------------------- -----------------------------
Name: THOMAS K. REDDING Name: BRETT MERL
--------------------------- ---------------------------
Title: VICE PRESIDENT Title: CEO
-------------------------- --------------------------
5
<PAGE>
MANAGEMENT SERVICES AGREEMENT
SCHEDULE 1
COMPENSATION TO FTV
Phase I Services $1,000.00. Payable at commencement of
services by FTV.
Phase 2 Services $1,500.00. Payable at commencement of
services by FTV.
Phase 3 Services These services are billed at the rate
of five percent (5%) of Net Sales. For
the purposes of this Agreement, Net
Sales shall mean the gross receipts
from sales of the product or service
less refunds and chargebacks. These are
billed monthly with payment due to FTV
within fifteen (15) days from date of
invoice.
Monthly minimum for Phase 3 Services $1,000.00
Out-of pocket expenses These will be billed separately as
incurred. Examples include overnight
courier charges; travel costs; costs
associated with creating product
literature; and costs for shipping
product samples and other materials to
potential distributors.
6
EXHIBIT 10.c
MARKETING AGREEMENT
THIS AGREEMENT, entered into this 8 day of October, 1997 between AND
JUSTICE FOR ALL, INC., d/b/a LEGAL CLUB OF AMERICA (hereinafter referred to as
"CLUB"), a Florida corporation having its principal office at 1500 N.W. 62nd
Street, Suite 404, Ft. Lauderdale, Florida 33309; and PROTECTIVE LIFE INSURANCE
CORPORATION (hereinafter referred to as "PLICO"), having its corporate
headquarters located at 2801 HIGHWAY 280 SOUTH, BIRMINGHAM, ALABAMA 35223
WHEREAS, CLUB offers memberships to the public, whereby persons may pay
a monthly fee and receive legal services from participating attorneys at a CLUB
predetermined price;
WHEREAS, CLUB enters into agreements with participating attorneys to
provide legal services to CLUB members at CLUB predetermined prices;
WHEREAS, CLUB wishes to market and sell its proprietary services to the
public, and to enroll additional CLUB members, and the parties have agreed upon
the terms under which PLICO shall market these services on CLUB'S behalf; and
WHEREAS, PLICO and CLUB agree to the following terms for this specific
case marketing Agreement, all as set forth below;
NOW, THEREFORE, for good and valuable considerations, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, agree as follows:
1. PLICO agrees to use its best efforts to market and sell CLUB
memberships during the Term (as set forth below). CLUB does and shall continue
to market such memberships itself and through other parties, and PLICO shall not
have any exclusive marketing rights or any exclusive territory.
2. PLICO is an independent contractor of CLUB, and is solely
responsible for the time, manner and place of performance of its duties under
this Agreement.
3. PLICO shall continuously appoint a representative to act as liaison
to CLUB; initially, this shall be Steve Klister.
TERM
4. The Term of this Agreement shall coincide with the terms in the
original Direct Marketing Agreement signed between the parties.
MARKETING , SALES AND COMPENSATION
5. PLICO shall conduct telemarketing targeting the lists of leads to be
provided weekly by CLUB to sell CLUB'S legal services plan. Said lists shall
include names, addresses, and telephone numbers of individuals that contact a
televised infomercial unrelated to CLUB'S programs. PLICO is responsible for any
and all costs associated with said telemarketing program. Said costs may include
telemarketing service representative costs, toll charges, literature and
advertising brochures, and other related items associated with the effort.
<PAGE>
6. PLICO shall submit all printed and scripted marketing materials to
CLUB for its approval of their compliance with CLUB'S policies as reasonably
promulgated from time to time, including but not limited to regulations
applicable to marketing efforts, advertising, collections and other matters.
7. CLUB shall review all marketing prior to dissemination and shall
have final approval for any and all marketing pieces regardless of the marketing
technique used.
8. Upon enrolling new CLUB members, PLICO shall remit all new enrollee
information in a computer compatible format on a weekly basis.
9. PLICO shall bill and collect the price of membership, and subsequent
membership in CLUB from each new enrollee. PLICO shall remit to CLUB the ongoing
monthly member service charges within thirty (30) days of the end of each month
for the number of net members calculated monthly. The final price of membership
shall be agreed upon by the parties in advance of any marketing in order to
maintain regulatory compliance.
10. PLICO shall remit to CLUB the one time fulfillment fee of $1.85 per
new member enrollment within thirty (30) days of the end of the first new month
of membership. Said fulfillment fee becomes due and payable upon actual
fulfillment by CLUB regardless of any subsequent cancellation of membership.
11. PLICO shall remit to CLUB monthly member service charges. Said
charges shall be one dollar per month plus twenty percent of the total monthly
amount to be collected by PLICO for each membership. (i.e. $1.00 plus
$1.80=$2.80 per month based upon 20% of an $8.99 monthly membership fee per
member)
FULFILLMENT
12. CLUB shall provide fulfillment services to all CLUB members
enrolled by PLICO as remitted to CLUB. Fulfillment services consist of
processing and databasing all new enrollees, providing attorney information,
packaging, and mailing a new member kit consisting of a welcome letter,
membership card, Planmember Guidebook, Last Will and Testament Questionnaire,
and Legal Check Up and Fact Sheet.
CUSTOMER SERVICE
13. CLUB shall provide ongoing customer service through a toll-free
telephone number to all CLUB members enrolled by PLICO on weekdays from nine
o-clock a.m. (9:00 a.m.) until eight o-clock p.m. (8:00 p.m.)EST.
14. Customer service provided by CLUB shall include servicing all
member inquiries, attorney re-assignments, and other non-billing member related
services. All billing related inquiries to CLUB from PLICO enrolled members
shall be referred to PLICO offices.
15. Except as otherwise provided in this Agreement, any dispute between
or among the parties, including but not limited to any claim based or arising
from any alleged tort or contract, shall be resolved
<PAGE>
by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
16. The parties hereby agree if any provision of this Agreement is held
to be invalid or unenforceable, all other provisions shall nevertheless continue
in full force and effect.
17. The parties hereby agree that modification and waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed with the same formality as this Agreement. The failure of any party to
insist upon strict performance of any of the provisions of this Agreement shall
not be construed as a waiver of any subsequent default or breaches of the same
or similar nature.
18. The parties hereby agree that this Agreement contains the entire
understanding of the parties. There are no representations, covenants,
warranties or undertakings other than those expressly set forth in this
agreement.
19. This Agreement shall be binding on and inure to the benefit of the
respective parties hereto and their successors and assigns.
20. All references to gender or number in this Agreement shall be
deemed interchangeably to have a masculine, feminine, neuter, singular or plural
meaning, as the sense of the text requires.
IN WITNESS WHEREOF, this Agreement has been executed and delivered in
the manner prescribed by law on the date first written above.
BY: BY: /s/ Charles R. Misasi
--------------------------------- --------------------------------------
WITNESS PLICO OFFICER SIGNATURE
BY: /s/ Charles R. Misasi, Vice President
--------------------------------------
PRINT NAME / TITLE
[CORPORATE SEAL]
WITNESS AND JUSTICE FOR ALL, INC.
BY: /s/ MARCI RUBIN BY: /s/ BRETT MERL
--------------------------------- --------------------------------------
[CORPORATE SEAL]
EXHIBIT 10.d
LEASE
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of the
8th day of June, 1999 by and between ACP Office I LLC ("Landlord"), whose
address for purposes hereof is 444 Brickell Avenue, Suite 1001, Miami, Florida
33131 and LEGAL CLUB OF AMERICA CORPORATION a Florida corporation ("Tenant"),
whose addresses for purposes hereof is 1500 NW 62nd Street, Suite 404, Fort
Lauderdale, Florida 33309.
PREMISES
1. Subject to and upon the terms, provisions, covenants and
conditions set forth in this Lease, and each in consideration of the
duties, covenants and obligations of the other hereunder, Landlord
leases, demises and lets to Tenant and Tenant leases, demises and lets
from Landlord those certain premises (the "Premises" or "Leased
Premises") in the Office Park located at 1601 N. Harrison Parkway,
Sunrise, Florida 33323, Building A ("The Building") such Premises being
more particularly described as follows:
Building A, Suite 200, which is agreed by Landlord and Tenant to
consist of 14,186 square feet of Net Rentable Area as approximately
reflected on the floor plan attached as Exhibit "A".
TERM
2. This Lease shall be for the term of eighty-four (84) calendar
months (the "Lease Term" or "Term"), commencing on July 1, 1999
(Commencement Date") unless sooner terminated or extended as provided
herein. Upon substantial completion of tenant improvements, defined as
completion of items required of Landlord on Exhibit "B" (exclusive of
punch list items), occupancy by Tenant of any part of premises or
Landlord's receipt of a temporary or final certificate of occupancy,
Tenant agrees to execute a Tenant Acceptance Letter (attached as "Exhibit
D") acknowledging acceptance of premises and the commencement of the
lease.
If Tenant, with Landlord's consent, shall occupy the Premises
prior to the beginning of the term as specified above, all provisions of
this Lease shall be in full force and effect commencing upon such
occupancy, and rent for such period shall be paid by Tenant at the same
rate herein specified.
Tenant acknowledges that the Premises are currently occupied by
another tenant. In the event Landlord is unable to deliver possession of
the Premises to Tenant on July 1, 1999, the Commencement Date shall be
amended to reflect the date Premises are delivered to Tenant. Landlord
shall not be liable for any damages due to delay in delivery of the
Premises.
BASE RENT
3. Tenant shall pay Landlord a total "Base rent" of One Million
Two Hundred Thirty-four Thousand Seven Hundred Eighty-four and 92/100
Dollars ($1,234,784.92) in monthly installments of, and computed at, Base
Rent Rates as follows:
RATE PER AGREED
NET RENTABLE MONTHLY
LEASE MONTHS SQUARE FOOT INSTALLMENT TOTAL BASE RENT
------------ ---------- ----------- ---------------
1 - 3 $0.00 $0.00 $0.00
4 - 12 $11.75 $13,890.46 $125,014.14
13 - 24 $12.10 $14,304.22 $171,650.60
25 - 36 $12.46 $14,729.80 $176,757.56
37 - 48 $12.83 $15,167.20 $182,006.38
49 - 60 $13.21 $15,616.42 $187,397.06
61 - 72 $13.61 $16,089.29 $193,071.46
73 - 84 $14.02 $16,573.98 $198,887.72
<PAGE>
Each payment shall be without any offset or deduction whatever, on
or before the first day of the month, in lawful (legal tender for public
or private debts) money of the United States of America, at the
Management Office of the Building or elsewhere as designated from time to
time by Landlord's written notice to Tenant.
In addition to Base Rent, Tenant shall pay to Landlord each month
a sum equal to any sales tax, tax on rentals, and any other charges,
taxes and/or impositions now in existence or hereafter imposed based upon
the privilege of renting the space leased hereunder or upon the amount of
rentals collected therefor. Nothing herein shall, however, be taken to
require Tenant to pay any part of any Federal and State Taxes on income
imposed upon Landlord.
If a Rent payment is not received within five (5) business days
after its due date, Landlord shall be entitled, in addition to any other
remedy that may be available, to an administrative fee and late charge of
five percent (5%) of the rent payment or Two Hundred Dollars ($200.00),
whichever amount is greater.
<PAGE>
ADDITIONAL RENT
3.A. In addition to the Base Rent, Tenant shall pay to Landlord as
"Additional Rent" "Tenant's proportionate share of Operating Expenses"
and "Tenant's proportionate share of Taxes". As used herein the term:
(1) "Tenant's proportionate share of Operating Expenses" shall
mean the percentage which the Net Rentable Area then leased by Tenant
bears to the total Net Rentable Area contained in the Project; Tenant's
proportionate share of Operating Expenses is specified to be 2.3%.
"Tenant's proportionate share of Taxes" shall mean the percentage of the
Net Rentable Area then leased by Tenant bears to the percentage of the
tax bill allocated to the Building in which Tenant leases space. The tax
bill allocation of Building A is 6.2% of the Project, therefore, Tenant's
proportionate share of Taxes of the Project is specified to be 3.1%.
(2) "Operating Expenses" shall mean all expenses, costs and
disbursements, of every kind and nature which Landlord shall pay or
become obligated to pay because of or in connection with the ownership,
leasing, maintenance and/or operation of the Project and Common Areas and
land on which they are located, (which shall not include cost of
individual tenant improvements, management or marketing cost associated
with leasing activities). By way of explanation and clarification, but
not by way of limitation, these Operating Expenses will include the
following:
(a) Wages and salaries of all employees engaged in
operation and maintenance of the Building, employer's social
security taxes, unemployment taxes or insurance, and any other
taxes which may be levied on such wages and salaries, the cost of
disability and hospitalization insurance, pension or retirement
benefits, and any other fringe benefits for such employees.
(b) All supplies and materials used in operation and
maintenance of the Project.
(c) Cost of all utilities, including water, sewer,
electricity, gas and fuel oil used by the Project and not charged
directly to another tenant.
(d) Cost of Project management, janitorial services,
accounting and legal services, ground lease payments, trash and garbage
removal, servicing and maintenance of all systems and
equipment including, but not limited to, elevators, plumbing,
heating, air conditioning, ventilating, lighting, electrical,
security and fire alarms, fire pumps, fire extinguishers and
hose cabinets, mail chutes, guard service, alarm system,
painting, window cleaning, landscaping and gardening.
(e) Cost of casualty and liability insurance applicable to
the Project and Landlord's personal property used in connection
therewith.
(f) Cost of capital improvements, provided said capital
improvements are intended to reduce other Operating Expenses or
are a result of government requirements, excluding any such
capital improvements required to cure existing violations of law
as of the date hereof. Said capital improvements shall be
amortized over their deemed useful life.
(g) Costs arising from implementation of Legal Requirements
of Legal Authorities (defined below).
Landlord agrees to maintain accounting books and records
reflecting Operating Expenses of the Project in accordance with
generally accepted accounting principles.
(3) "Taxes" shall mean all impositions, taxes, assessments
(special or otherwise), water and sewer charges and rents, and other
governmental liens or charges of any and every kind, nature and sort
whatsoever, ordinary and extraordinary, foreseen and unforeseen, and
substitutes therefor, including all taxes whatsoever (except only those
taxes of the following categories: any inheritance, estate succession,
transfer or gift taxes imposed upon Landlord or any income taxes
specifically payable by Landlord as a separate tax paying entity without
regard to Landlord's income source as arising from or out of the Project
and/or the land on which it is located) attributable in any manner to the
Project, the land on which the Project is located, the ground leasehold
interest of Landlord, or the rents (however the term may be defined)
receivable therefrom or any part thereof, or any use thereof, or any
facility located therein or thereon or used in conjunction therewith or
any charge or other payment required to be paid to any governmental
authority, whether or not any of the foregoing shall be designated "real
estate tax", "sales tax", "rental tax", "excise tax", "business tax", or
designated in any other manner.
(4) Landlord shall notify Tenant within ninety (90) days after the
end of each calendar year hereafter ensuing during the Term, of the
amount which Landlord estimates (as evidenced by budgets prepared by or
on behalf of Landlord) will be the amount of Tenant's proportionate share
of Operating Expenses and Tenant's proportionate share of Taxes for the
then current calendar year and Tenant shall pay such sum in advance to
Landlord in equal monthly installments, during the balance of said
calendar year, on the first day of each remaining month in said calendar
year commencing on the first day of the first month following Tenant's
receipt of such notification. Within ninety (90) days following the end
of each calendar year during the Term hereof, Landlord shall submit to
Tenant a statement showing the actual amount which should have been paid
by Tenant with respect to Operating Expenses and Taxes for the past
calendar year, the amount thereof actually paid during that year by
Tenant and the amount of the resulting balance due thereon, or
overpayment thereof, as the case may be. Within thirty (30) days after
receipt by Tenant of said statement, Tenant shall have the right in
person to inspect Landlord's books and records, at Landlord's office,
during normal business hours, after four days' prior written notice,
showing the Operating Expenses and Taxes for the Project for the calendar
year covered by said statement. Said statement shall become final and
conclusive between the parties, their successors and assigns as to the
matters set forth therein unless Landlord receives written objections
with respect thereto within said thirty (30) day period.
-2-
<PAGE>
Any balance shown to be due pursuant to said statement shall be paid by
Tenant to Landlord within thirty (30) days following Tenant's receipt
thereof and any overpayment shall be immediately credited against
Tenant's obligation to pay expected additional rent in connection with
anticipated increases in Operating Expenses and Taxes or, if by reason of
any termination of the Lease no such future obligation exists, refunded
to Tenant. Anything herein to the contrary notwithstanding, Tenant shall
not delay or withhold payment of any balance shown to be due pursuant to
a statement rendered by Landlord to Tenant, pursuant to the terms hereof,
because of any objection which Tenant may raise with respect thereto and
Landlord shall immediately credit any overpayment found to be owing to
Tenant against Tenant's proportionate share of Operating Expenses and
Taxes for the then current calendar year (and future calendar years, if
necessary) upon the resolution of said objection or, if at the time of
the resolution of said objection the Term has expired, immediately refund
to Tenant any overpayment found to be owing to Tenant.
With respect to calendar year 1999, Landlord estimates Tenant's
Operating Expenses and Taxes, exclusive of electricity and janitorial
services, to be $4.50 per rentable square foot. Tenant's monthly payment
for its proportionate share of estimated Operating Expenses and Taxes
shall be $5,319.75, ("Additional Rent") exclusive of sales or other
required taxes.
Each payment shall be without any offset or deduction whatever, on
or before the first day of the month, in lawful (legal tender for public
or private debts) money of the United States of America, at the
Management Office of the Building or elsewhere as designated from time to
time by Landlord's written notice to Tenant.
In addition to Additional Rent, Tenant shall pay to Landlord each
month a sum equal to any sales tax, tax on rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed
based upon the privilege of renting the space leased hereunder or upon
the amount of rentals collected therefor. Nothing herein shall, however,
be taken to require Tenant to pay any part of any Federal and State Taxes
on income imposed upon Landlord.
B. Additional Rent due by reason of the provisions of subsection
3A and this subsection 3B for the final months of this Lease is due and
payable even though it may not be calculated until subsequent to the
termination date of the Lease; the Operating Expenses and Taxes for the
calendar year during which the Lease terminates shall be prorated
according to that portion of said calendar year that this Lease was
actually in effect. Tenant expressly agrees that Landlord, at Landlord's
sole discretion, may apply the security deposit specified in section 5
hereof, if any, in full or partial satisfaction of any additional rent
due for the final month of this Lease by reason of the provisions of
subsection 3A and this subsection 3B. If said security deposit is greater
than the amount of any such additional rent and there are no other sums
or amounts owed Landlord by Tenant by reason of any other terms,
provisions, covenants or conditions of this Lease, then Landlord shall
refund the balance of said security deposit to Tenant as provided in
section 5. Nothing herein contained shall be construed to relieve Tenant,
or imply that Tenant is relieved, of the liability for or the obligation
to pay any Additional Rent due for the final month of this Lease by
reason of the provisions of subsection 3A and this subsection 3B if said
security deposit is less than such Additional Rent, nor shall Landlord be
required to first apply said security deposit to such Additional Rent if
there are any other sums or amounts owed Landlord by Tenant by reason of
any other terms, provisions, covenants or conditions of this Lease.
C. Any reference in this Lease to "Rent" or "rent" includes Base
Rent and Additional Rent.
TIME OF PAYMENT
4. Tenant shall promptly pay Base Rent, as the same may be
adjusted from time to time, and Additional Rent and Charges for work
performed on order of Tenant, and any other charges that accrue under
this Lease, at the times and place stated in this Lease.
SECURITY DEPOSIT
5. Tenant, within ten (10) days of the execution of this Lease,
will deliver to Landlord a security deposit in the amount of One Hundred
Twenty-Five Thousand and 00/100 Dollars ($125,000.00) ("Security
Deposit"), which sum shall be retained by Landlord as security for the
payment by Tenant of the rents and all other payments herein agreed to be
paid by Tenant, and for the faithful performance by Tenant of the terms,
provisions, covenants and conditions of this Lease. In the event that
Tenant is in good standing of its obligations under this lease, then on
the first day of Month 16 the Security Deposit will be reduced to
Fifty-seven Thousand Six Hundred Thirty and 63/100 Dollars ($57,630.63).
The form of the
-3-
<PAGE>
Security Deposit shall, at Tenant's option be either (i) cash or
cashier's check, or (ii) a clean, irrevocable letter of credit issued by
a bank and in form both reasonably acceptable to the Landlord. It is
agreed that Landlord, at Landlord's option, may at the time of any
default by Tenant under any of the terms, provisions, covenants or
conditions of the Lease (unless Tenant is diligently pursuing cure of the
default as permitted under the Lease) apply said sum or any part thereof
toward the payment of the rents and all other sums payable by Tenant
under this Lease, and towards the performance of each and every one of
Tenant's covenants under this Lease, but such covenants and Tenant's
liability under this Lease shall thereby be discharged only pro tanto;
that Tenant shall remain liable for any amounts that such sum shall be
insufficient to pay; that Landlord does utilize any of the security
deposit during the Term, Tenant shall immediately repay such amount so
that the security deposit shall remain in the total amount described
above; that Landlord may exhaust any and all rights and remedies against
Tenant before resorting to said sum, but nothing herein contained shall
require or be deemed to require Landlord to do so; that, in the event
this deposit shall not be utilized for any such purposes, then such
deposit shall be returned by Landlord to Tenant within thirty (30) days
next after the expiration of the Term or the determination and payment of
the amount due under Section 3A of this Lease, if any, whichever later
occurs. Landlord shall not be required to pay Tenant any interest on said
security deposit.
USE
6. Tenant will use and occupy the Premises for the following use
or purpose and for no other use or purpose: GENERAL OFFICE.
QUIET ENJOYMENT
7. Upon payment by Tenant of the rents herein provided, and upon
the observance and performance of all terms, provisions, covenants and
conditions on Tenant's part to be observed and performed, Tenant shall,
subject to all of the terms, provisions, covenants and conditions of this
Lease, peaceably and quietly hold and enjoy the Premises for the Term.
INSURANCE PREMIUMS
8. If Landlord's insurance premiums exceed the standard premium
rates because the nature of Tenant's operation results in extra hazardous
exposure, then Tenant shall, upon receipt of appropriate invoices from
Landlord, reimburse Landlord for such increase in premiums. It is
understood and agreed between the parties hereto that any such increase
in premiums shall be considered as rent due and shall be included in any
lien for rent.
RULES AND REGULATIONS
9. Tenant agrees to comply with all reasonable rules and
regulations Landlord may adopt from time to time for operation of the
Building and parking facilities and protection and welfare of Building
and Parking facilities, its tenants, visitors and occupants. The present
rules and regulations, which Tenant hereby agrees to comply with,
entitled "Rules and Regulations" are attached to this Lease. Any future
rules and regulations shall become a part of this Lease, and Tenant
hereby agrees to comply with the same upon delivery of a copy thereof to
Tenant providing the same do not materially deprive Tenant of its rights
established under this Lease.
GOVERNMENTAL REQUIREMENTS
10. Tenant shall faithfully observe in the use of the Premises all
Legal Requirements of all Legal Authorities. For the purposes of this
Lease, "Legal Requirements" means any law, statute, code, rule,
regulation, ordinance, order, judgment, decree, writ, injunction,
franchise, permit, certificate, license (including any beer, wine, or
liquor license), authorization, registration, or other direction or
requirement of any Legal Authority, which is now or in the future
applicable to the Premises, including those not within the present
contemplation of the parties and "Legal Authority" means any domestic or
foreign federal, state, county, municipal, or other government or
governmental or quasi-governmental department, commission, board, bureau,
court, agency, or instrumentality having jurisdiction or authority over
Landlord, Tenant and/or all or any part of the Premises.
Tenant shall:
A. neither cause nor permit the Premises to be used to
generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, or process Hazardous Materials, except
in compliance with all Legal Requirements;
B. neither cause nor permit a release or threatened release
of Hazardous Materials onto the Premises or any other property as
a result of any intentional or unintentional act or omission on
the part of Tenant;
C. comply with all applicable Legal Requirements related to
Hazardous Materials;
-4-
<PAGE>
D. conduct and complete all investigations, studies,
sampling, and testing, and all remedial, removal, and other
actions on, from, or affecting the Premises in accordance with
such applicable Legal Requirements and to the satisfaction of
Landlord;
E. upon the expiration or termination of this Lease,
deliver the Premises to Landlord free of all Hazardous Materials
caused by Tenant; and
F. defend, indemnify, and hold harmless Landlord and
Landlord's employees and other agents and other agents from and
against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs, or expenses of any kind or nature,
known or unknown, contingent or otherwise (including, without
limitation, accountants' and attorneys' fees (including fees for
the services of paralegals and similar persons), consultant fees,
investigation and laboratory fees, court costs, and litigation
expenses at the trial and all appellate levels), arising out of,
or in any way related to (a) the presence, disposal, release, or
threatened release, by or caused by Tenant or its agents, of any
Hazardous Materials which are on, from, or affecting the soil,
water, vegetation, buildings, personal property, persons, animals
or otherwise; (b) any personal injury, including wrongful death,
or damage to property, real or personal, arising out of or related
to such Hazardous Materials; (c) any lawsuit brought, threatened,
or settled by Legal Authorities or other parties, or order by
Legal Authorities, related to such Hazardous Materials; and/or (d)
any violation of Legal Requirements related in any way to such
Hazardous Materials. The provisions of this Section shall survive
the expiration or termination of this Lease. Hazardous materials
are any oil and petroleum products and their byproducts, asbestos,
polychlorobiphenols, flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials as defined under any Legal
Requirements, including, without limitation, the following
statutes and the regulations promulgated under their authority:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. /section/ /section/
9601 et seq.); (b) the Hazardous Materials Transportation Act, as
amended (49 U.S.C. /sectio/ /section/ 1801 et seq.); (c) the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. /section/
/section/ 6901 et seq.); and (d) the Water Pollution and Control Act,
as amended (33 U.S.C. 1317 et seq.).
SERVICES
11. Landlord will furnish the following services to Tenant:
Automatically operated elevator service, public stairs, electrical
current for lighting, incidentals and normal office use, and water at
those points of supply provided for general use of its tenants at all
times and on all days throughout the year.
No electric current shall be used except that furnished or
approved by Landlord, nor shall electric cable or wire be brought into
the Premises, except upon the written consent and approval of Landlord.
Tenant shall use only office machines and equipment that operate on the
Building's standard electric circuits, but which in no event shall
overload the Building's standard electric circuits from which Tenant
obtains electric current. Any consumption of electric current in excess
of 4.0 watts per square foot or in excess of that considered by Landlord
to be usual, normal and customary for all Tenants, or which require
special circuits or equipment (the installation of which shall be at
Tenant's expense after approval in writing by Landlord) shall be paid for
by Tenant as Additional Rent paid to Landlord in an amount to be
determined by Landlord based upon Landlord's estimated cost of such
excess electric current consumption or based upon the actual cost thereof
if such excess electric current consumption is separately metered.
Such services shall be provided as long as Tenant is not in
default under any of the terms, provisions, covenants and conditions of
this Lease, subject to interruption caused by repairs, renewals,
improvements, changes to service, alterations, strikes, lockouts, labor
controversies, inability to obtain fuel or power, accidents, breakdowns,
catastrophes, national or local emergencies, hurricanes, natural
disasters, windstorms, acts of God and conditions and cause beyond the
control of Landlord, and upon such happening, no claim for damages or
abatement of rent for failure to furnish any such services shall be made
by Tenant or allowed by Landlord.
Tenant shall have the right to request Landlord to provide
cleaning services, deemed by Landlord to be normal and usual in
comparable office buildings, on Monday through Friday, and said cleaning
services shall be added to the cost of Tenant's Additional Rent.
TENANT UTILITIES
11C. It shall be the responsibility of Tenant to pay for all
utilities with respect to the Premises when due to Landlord or to utility
companies, as applicable. Tenant shall take all necessary actions to
assure that no liens arise against the Premises or other portion of the
Project as a result of Tenant's failure to pay for electricity, telephone
or other charges. To the extent any utility(ies) servicing the Premises
are not separately metered for the Premises, then the expense of such
utility service shall be included as part of the Operating Expenses. In
no event shall Landlord be responsible for the quality, quantity, failure
or interruption of any of such utility services to the Premises and/or
any other portion of the Project.
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TENANT IMPROVEMENTS
12. Improvements, if any, to be made to the Premises by Landlord
are specifically set forth in the Work Letter attached as Exhibit "B" and
thereto are no others. All leasehold improvements (as distinguished from
trade fixtures and apparatus) installed in the Premises at any time,
whether by or on behalf of Tenant or by or on behalf of Landlord, shall
not be removed from the Premises at any time, unless such removal is
consented to in advance by Landlord; and at the expiration of this Lease
(either on the Termination Date or upon such earlier termination as
provided in this Lease), all such leasehold improvements shall be deemed
to be part of the Premises, and title thereto shall vest solely in
Landlord without payment of any nature to Tenant. All trade fixtures and
apparatus (as distinguished from leasehold improvements) owned by Tenant
and installed in the Premises shall remain the property of Tenant and
shall be removable at any time, including upon the expiration of the
Term; provided Tenant shall not at such time be in default of any terms
or covenants of this Lease, and provided further, that Tenant shall
repair any damage to the Premises caused by the removal of said trade
fixtures and apparatus and shall restore the Premises to substantially
the same condition as existed prior to the installation of said trade
fixtures and apparatus. The taking of possession by Tenant (or any
permitted assignee or subtenant of Tenant) of all or any portion of the
Premises for the conduct of business will be deemed conclusive evidence
that Tenant has found the Premises, and all of their fixtures and
equipment, acceptable.
TENANT WORK
12A. Any charges against Tenant by Landlord for services or for
work done on the Premises by order of Tenant, or otherwise accruing under
this Lease, shall be considered as rent due and shall be included in any
lien for rent.
REPAIR OF LEASED PREMISES
13. Tenant shall, at Tenant's own expense, keep the Premises in
good repair and tenantable condition during the Term and shall replace at
its own expense any and all broken glass caused by Tenant in and about
the Premises. Tenant shall make no alterations, additions or improvements
in or to the Premises without the written consent of Landlord, which
shall not be unreasonably withheld, but may be predicated upon but not
limited to Tenant's use of contractors who are acceptable to Landlord;
and all additions, fixtures, carpet or improvements, except only movable
office furniture, shall be the property of Landlord from date of location
in the Premises and shall remain a part of the Premises at the expiration
of this Lease.
It is further agreed that this Lease is made by Landlord and
accepted by Tenant with the distinct understanding and agreement that
Landlord shall have the right and privilege to make and build additions
to the Building of which the Premises are a part, and make such
alterations and repairs to said Building as it may deem wise and
advisable without any liability to the Tenant therefor.
INDEMNIFICATION
14. Tenant further agrees that Tenant will pay all liens of
contractors, subcontractors, mechanics, laborers, materialmen, and other
items of like character, and will indemnify Landlord against all
expenses, costs, and charges, including bond premiums for release of
liens and attorneys' fees and costs reasonably incurred in and about the
defense of any suit in discharging the said Premises or any part thereof
from any liens, judgments, or encumbrances caused or suffered by Tenant.
In the event any such lien shall be made or filed, Tenant shall bond
against or discharge the same within ten (10) days after the same has
been made or filed. It is understood and agreed between the parties
hereto that the expenses, costs and charges above referred to shall be
considered as rent due and shall be included in any lien for rent.
Tenant herein shall not have any authority to create any liens for
labor or materials on Landlord's interest in the Premises and all persons
contracting with Tenant for the destruction or removal of any facilities
or other improvements or for the erection, installation, alteration, or
repair of any facilities or other improvements on or about the Premises,
and all materialmen, contractors, subcontractors, mechanics, and laborers
are hereby charged with notice that they must look only to Tenant and to
Tenant's interests in the Premises to secure the payment of any bill for
work done or material furnished at the request or instruction of Tenant.
PARKING
15. Landlord shall provide Tenant seventy (70) unassigned parking
spaces at no charge. Tenant shall comply with Landlord's procedures and
policies in operating the Building parking areas. Landlord shall not be
liable for any damage of any nature whatsoever to, or any theft of,
automobiles or other vehicles or the contents of them, while in or about
Building parking areas.
ESTOPPEL STATEMENT
16. From time to time, upon not less than ten (10) days prior
request by Landlord, Tenant shall deliver to Landlord a statement in
writing certifying (a) that this Lease is unmodified and in full force
and effect (or, if there have been
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modifications, that the Lease as modified is in full force and effect and
stating the modifications); (b) the dates to which the rent and other
charges have been paid; (c) that Landlord is not in default under any
provisions of this Lease or, if in default, the nature thereof in detail;
and (d) such other matters pertaining to the Lease as Landlord may
request. It is intended that any such statement delivered pursuant to
this section may be relied upon by any prospective purchaser or mortgagee
and their respective successors and assigns and Tenant shall be liable
for all loss, cost or expense resulting from the failure of any sale or
funding of any loan caused by any failure to furnish the estoppel
statement or misstatement contained in such estoppel statement. Tenant
hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with
full power and authority to execute and deliver in the name of Tenant
such estoppel certificate if Tenant fails to deliver the same within ten
(10) days of Landlord's request therefor. This appointment is a power
coupled with interest and is a material inducement to Landlord to enter
into this Lease.
SUBORDINATION
17. If the Building and/or Premises are at any time subject to a
mortgage and/or deed of trust or ground lease, and Tenant has received
written notice from Mortgagee or ground lessor of same, then in any
instance in which Tenant gives notice to Landlord alleging default by
Landlord hereunder, Tenant will also simultaneously give a copy of such
notice to each Landlord's Mortgagee and/or ground lessor and each
Landlord's Mortgagee and/or ground lessor shall have the right (but not
the obligation) to cure or remedy such default during the period that is
permitted to Landlord hereunder, plus an additional period of thirty (30)
days, and Tenant will accept such curative or remedial action (if any)
taken by Landlord's Mortgagee and/or ground lessor with the same effect
as if such action had been taken by Landlord.
This Lease shall be subject and subordinate to any mortgage and/or
ground lease now or hereafter encumbering the Building. This provision
shall be self-operative without the execution of any further instruments.
Notwithstanding the foregoing, however, Tenant hereby agrees to execute
any instrument(s) which Landlord may deem desirable to evidence the
subordination of this Lease to any and all such mortgages and/or ground
lease.
ATTORNMENT
18. If the interests of Landlord under this Lease shall be
transferred voluntarily or by reason of foreclosure or other proceedings
for enforcement of any mortgage and/or ground lease on the Premises,
Tenant shall be bound to such transferee (herein sometimes called the
"Purchaser") for the remaining balance of the Term, and any extensions or
renewals thereof which may be effective in accordance with the terms and
provisions hereof with the same force and effect as if the Purchaser were
Landlord under this Lease, and Tenant does hereby agree to attorn to the
Purchaser, including the Mortgagee under any such mortgage and/or lessor
under any such ground lease if it be the Purchaser, as its Landlord, said
attornment to be effective and self-operative without the execution of
any further instruments upon the Purchaser succeeding to the interest of
Landlord under this Lease. The respective rights and obligations of
Tenant and the Purchaser upon such attornment, to the extent of the then
remaining balance of the Term of this Lease and any such extensions and
renewals, shall be and are the same as those set forth herein. In the
event of such transfer of Landlord's interests, Landlord shall be
released and relieved from all liability and responsibility thereafter
accruing to Tenant under this Lease or otherwise and Landlord's successor
by acceptance of rent from Tenant hereunder shall become liable and
responsible to Tenant in respect in all obligations of the Landlord under
this Lease.
ASSIGNMENT
19. Without the written consent of Landlord first obtained in each
case, Tenant shall not sublease, assign, transfer, mortgage, pledge, or
otherwise encumber or dispose of this Lease or underlet the Premises or
any part thereof or permit the Premises to be occupied by other persons.
Landlord agrees to respond to any Tenant request within fifteen (15) days
of receipt (failure of Landlord to respond timely shall be deemed to be
an acceptance of request). Tenant shall be entitled to assign or sublease
this Lease to an affiliated entity, provided Tenant remains liable for
the performance of any assignee or sublessee. In the case of a
subletting, Landlord's consent may be predicated, among other things,
upon Landlord becoming entitled to collect and retain all rentals payable
under the prime Lease and fifty percent (50%) of all rental profits from
a sublease. If this Lease be assigned, or if the Premises or any part
thereof be underlet or occupied by anybody other than Tenant, Landlord
may, after default by Tenant, collect or accept rent from the assignee,
undertenant, or occupant and apply the net amount collected or accepted
to the rent herein reserved, but no such collection or acceptance shall
be deemed a waiver of this covenant or the acceptance of the assignee,
undertenant, or occupant as Tenant, nor shall it be construed as or
implied to be a release of Tenant from the further observance and
performance by Tenant of the terms, provisions, covenants and conditions
herein contained.
SUCCESSORS AND ASSIGNS
20. All terms, provisions, covenants and conditions to be observed
and performed by Tenant shall be applicable to and binding upon Tenant's
respective heirs, administrators, executors, successors and assigns,
subject, however, to the restrictions as to assignment or subletting by
Tenant as provided herein. All expressed covenants of this Lease shall be
deemed to be covenants running with the land.
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HOLD HARMLESS OF LANDLORD
21. In consideration of said Premises being leased to Tenant for
the above rent, Tenant agrees that Tenant, at all times, shall indemnify
and keep Landlord harmless from all losses, damages, liabilities and
expenses, which may arise or be claimed against Landlord and be in favor
of any persons, firms or corporations, consequent upon or arising from
the use of occupancy of the Premises by Tenant, or consequent upon or
arising from any acts, omissions, neglect or fault of Tenant, his agents,
servants, employees, licensees, visitors, customers, patrons or invitees,
or consequent upon or arising from Tenant's failure to comply with any
laws, statutes, ordinances, codes or regulations as herein provided; that
Landlord shall not be liable to Tenant for any damages, losses or
injuries to the persons or property of Tenant which may be caused by the
acts, neglect, omissions or faults of any persons, firms or corporations,
except when such injury, loss or damage results from gross negligence of
Landlord, his agents or employees, and that Tenant will indemnify and
keep harmless Landlord from all damages, liabilities, losses, injuries,
or expenses which may arise or be claimed against Landlord and be in
favor of any persons, firms or corporations, for any injuries or damages
to the person or property of any persons, firms or corporations, where
said injuries or damages arose about or upon said Premises as a result of
the negligence of Tenant, his agents, employees, servants, licensees,
visitors, customers, patrons, and invitees. All personal property placed
or moved into the Premises or Building shall be at the risk of Tenant or
the owner thereof, and Landlord shall not be liable to Tenant for any
damage to said personal property. Tenant shall maintain at all times
during the Term an insurance policy or policies in an amount or amounts
sufficient, in Landlord's opinion, to indemnify Landlord or pay
Landlord's damages, if any, resulting from any matters set forth in this
section.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and
shall pay all costs, expenses and reasonable attorneys' fees incurred or
paid by Landlord in connection with such litigation and any appeal
thereof.
ATTORNEYS' FEES
22. If either party defaults in the performance of any of the
terms, provisions, covenants and conditions of this Lease and by reason
thereof the other party employees the services of an attorney to enforce
performance of the covenants, or to perform any service based upon
defaults, then in any of said events the prevailing party shall be
entitled to reasonable attorneys' fees and all expenses and costs
incurred by the prevailing party pertaining thereto (including costs and
fees relating to any appeal) and in enforcement of any remedy. Tenant
shall be responsible to pay Landlord's attorneys' fees for enforcement of
Tenant's obligations under this Lease, whether suit be brought or not.
DAMAGE OR DESTRUCTION
23. In the event all or part of the Premises shall be destroyed or
so damaged or injured by fire, windstorm, hurricane, natural disaster, or
other casualty, during the Term, whereby the same shall be rendered
untenantable, then Landlord shall have the right, but not the obligation,
to render such Premises tenantable by repairs within 360 days therefrom;
Landlord shall have the further right, at its election, to cancel this
Lease as to all or the untenantable portion of the Premises.
Landlord agrees that, within 60 days following damage or
destruction, it shall notify Tenant with respect to whether or not
Landlord intends to restore the Premises. If said Premises are not
rendered tenantable within the aforesaid 360 days it shall be optional
with either party hereto, no later than the date that Premises are in
fact rendered tenantable, to cancel this Lease as to the tenantable
portion, and in the event of such cancellation the rent shall be paid
only to the date of such fire or casualty. The cancellation herein
mentioned shall be evidenced in writing. During any time that all or a
portion of the Premises are untenantable due to causes set forth in this
Section, the Base Rent or a just and fair proportion thereof shall be
abated.
Notwithstanding the foregoing, (a) should damage or destruction
occur during the last twelve months of the Term, either Landlord or
Tenant shall have the option to terminate this Lease as to the
untenantable portion of the Premises, effective on the date of damage or
destruction, provided notice to terminate is given within 30 days of the
date of such damage or destruction; (b) should damage, destruction or
injury occur by reason of Tenant's negligence, Landlord shall have the
right, but not the obligation, to render the Premises tenantable within
360 days of the date of damage, destruction or injury and no abatement of
Rent shall occur and Tenant shall not have such option to terminate.
INSURANCE
23A. The Landlord assumes no liability or responsibility
whatsoever with respect to the conduct and operation of the business to
be conducted in the Premises. The Landlord shall not be liable for any
accident to or injury to any person or persons or property in or about
the Premises or the Project which are caused by the conduct and operation
of said business or by virtue of equipment or property of the Tenant in
said Premises. The Tenant agrees to hold the Landlord harmless against
all such claims.
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(1) Tenant shall, at Tenant's sole expense, obtain and keep
in force during the Term and any extension or renewal hereof: (i)
fire and extended coverage insurance with vandalism and malicious
mischief endorsements and a sprinkler leakage endorsement (where
applicable), on all of its personal property, including removable
trade fixtures, located in the Premises, and on all leasehold
improvements and any future additions and improvements made by
Tenant; and (ii) comprehensive general liability insurance,
including contractual liability coverage, insuring Landlord (as an
additional insured) and Tenant against any liability arising out
of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto.
(2) Said insurance shall be with insurance companies
approved by Landlord, which approval shall not be unreasonably
withheld. Such companies shall be responsible insurance carriers
authorized to issue the relevant insurance, authorized to do
business in Florida and at least A-rated in the most current
edition of BEST'S INSURANCE Reports. Comprehensive general
liability insurance, including contractual liability coverage,
shall have minimum limits of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00) for any loss of or damage to property from any one
accident, and ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) for
death of or injury to any one person from any one accident. Fire
and extended coverage insurance with vandalism and malicious
mischief endorsements and a sprinkler leakage endorsement shall
have limits not less than the replacement cost of all property
(personal or otherwise) and capital improvements in the premises.
The limits of said insurance shall not, however, limit the
liability of the Tenant hereunder. The policies cannot contain
provisions which deny coverage because the loss is due to the
fault of Landlord or Tenant. If Tenant shall fail to procure and
maintain said insurance, Landlord may, but shall not be required
to, procure and maintain same, but at the expense of Tenant.
Tenant shall deliver to Landlord, prior to occupancy of the
Premises, copies of policies of liability insurance required
herein, or certificates evidencing the existence and amounts of
such insurance, with loss payable clauses satisfactory to
Landlord. No policy shall be cancelable or subject to reduction of
coverage except after thirty (30) days prior written notice to
Landlord. Notwithstanding anything herein to the contrary,
Landlord shall have the right to review the Tenant's insurance
once every year and to reasonably require Tenant to alter its
insurance coverage to cover the effects of inflation and to
include or eliminate certain provisions in the Tenant's insurance
policy which reflect the then-current industry standards for this
type of insurance coverage.
EMINENT DOMAIN
24. If there shall be taken during the Term any part of the
Premises, parking facilities or Building, other than a part not
interfering with maintenance, operations, or use of the Building,
Landlord may elect to terminate this Lease or to continue same in effect.
If Landlord elects to continue the Lease, the rent shall be reduced in
proportion to the area of the Premises so taken and Landlord shall repair
any damage to the Premises, resulting from such taking. If any part of
the Premises is taken by condemnation or Eminent Domain which renders the
Premises unsuitable for its intended use, the Tenant may elect to
terminate this Lease, or if any part of the Premises is so taken which
does not render the Premises unsuitable for its intended use, this Lease
shall continue in effect and the rental shall be reduced in proportion to
the area of the Premises so taken and Landlord shall repair any damage to
the Premises resulting from such taking. If all of the Premises is taken
by condemnation or Eminent Domain, this Lease shall terminate on the date
of the taking. All sums awarded (or agreed upon between Landlord and the
condemning authority) for the taking of the interest of Landlord and/or
Tenant, whether as damages or as compensation, and whether for partial or
total condemnation, will be the property of Landlord. If this Lease
should be terminated under any provisions of this section, Rent shall be
payable up to the date that possession is taken by the authority, and
Landlord will refund to Tenant any prepaid unaccrued Rent less any sum or
amount then owing by Tenant to Landlord.
ABANDONMENT
25. If, during the Term, Tenant shall abandon, vacate or remove
from the Premises the major portion of the goods, wares, equipment or
furnishings usually kept on said Premises, or shall cease doing business
in the Premises, or shall suffer the rent to be in arrears, Landlord may,
at its option, declare a default of this Lease and seek remedies in the
manner stated in Section 27 hereof, or Landlord may enter the Premises as
the agent of Tenant by force or otherwise, without being liable in any
way therefor and relet the Premises with or without any furniture that
may be therein, as the agent of Tenant, at such price and upon such terms
and for such duration of time as Landlord may determine, and receive the
rent therefor, applying the same to the payment of Rent, and if the full
Rent shall not be realized by Landlord over the expenses to Landlord of
such reletting, Tenant shall pay any deficiency.
DEFAULT
26. The occurrence of any of the following during the Term shall
constitute an Event of Default by Tenant:
A. Tenant shall fail to pay when due Base Rent, Additional Rent or
any under charges that accrue under this Lease;
B. Tenant shall fail to pay when due any other sums, fees,
charges, costs, or expenses which are payable
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under this Lease;
C. Tenant shall, other than in the manner permitted under this
Lease, make or permit or suffer to occur any assignment (including any
transfer of interest in Tenant which is deemed to be an assignment under
this Lease), sublease or occupancy arrangement, conveyance, transfer,
conditional or collateral assignment, pledge, hypothecation, or other
encumbrance, whether by operation of law or otherwise, of this Lease or
any interest in this Lease;
D. Tenant shall fail in any other way in the performance or
observance of any of the non-material terms and conditions of this Lease
and within ten (10) days shall not have cured such default or, if
impossible of cure within such time but possible of cure within sixty
(60) days, begun and diligently pursued such cure to completion;
E. There shall be filed by or against Tenant or any Guarantor of
this Lease in any court or other tribunal a petition in bankruptcy or
insolvency proceedings or for reorganization or for the appointment of a
receiver or trustee of all or substantially all of Tenant's, or any
Guarantor's, property, unless such petition shall be filed against Tenant
or any Guarantor of this Lease and Tenant or such Guarantor shall in good
faith promptly thereafter commence and diligently prosecute any and all
proceedings appropriate to secure the dismissal of such petition and
shall secure such dismissal within thirty (30) days of its filing;
F. Tenant or any Guarantor of this Lease shall be adjudicated a
bankrupt or an insolvent or take the benefit of any federal
reorganization or composition proceeding, make an assignment for the
benefit of creditors, or take the benefit of an insolvency law;
G. A trustee in bankruptcy or a receiver shall be appointed or
elected or had for Tenant or any Guarantor of this Lease, whether under
federal or state laws;
H. Tenant's interest under this Lease shall be sold under any
execution or process of law;
I. The Premises shall be abandoned or deserted or Tenant shall
fail to make continuous use of the Premises for one (1) month for the
Use; or
J. Tenant shall fail to maintain current, duly issued occupational
licenses, or any other permit or license required by an applicable legal
authority for its operations at the Premises or Tenant shall fail to meet
the insurance requirements of this Lease and provide Certificates of
Insurance (and policies if requested) evidencing such compliance.
REMEDIES
27. A. In the event of the occurrence of an Event of Default by
Tenant, Landlord, at Landlord's option, may elect to do one or more of
the following:
(1) Accelerate all of the remaining Rent for the Term, in
which event all Rent shall become immediately due and payable;
(2) Terminate this Lease as provided by this Section and
re-enter the Premises and remove all persons and property from the
Premises, either by summary proceedings or by any other suitable
action or proceeding at law, or otherwise; or
(3) Without terminating this Lease, re-enter the Premises
and remove all persons and property from the Premises, either by
summary proceedings or by any other suitable action or proceeding
at law, or otherwise, and relet all or any part of the Premises.
B. If Landlord elects to terminate this Lease:
(1) Landlord shall give notice of such termination, which
shall take effect ten (10) days after such notice is given, or such
greater number of days as is set forth in such notice, fully and
completely as if the effective date of such termination were the date
originally set forth in this Lease for the expiration of the Term;
(2) Tenant shall quit and peacefully surrender the Premises
to Landlord, without any payment by Landlord for doing so, on or
before the effective date of termination; and
(3) All Rent, including all Base Rent and Additional Rent
(including arrearages), shall become due and shall be paid up to
the effective date of termination, together with such expenses,
including attorneys' fees, as Landlord shall incur in connection
with such termination.
C. No receipts of monies by Landlord from Tenant after termination
of this Lease shall
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reinstate, continue, or extend the Term, affect any Notice previously
given by Landlord to Tenant, or operate as a waiver of the right of
Landlord to enforce the payment of Rent.
D. If Landlord shall terminate this Lease, Landlord shall be
entitled to retain, free of trust, all sums then held by Landlord
pursuant to any of the provisions of this Lease. In the interim following
such termination until the retention of such sums by Landlord free of
trust, such sums shall be available to Landlord, but not to Tenant,
pursuant to and for the purposes provided by the terms and conditions of
this Lease.
E. In the event of any re-entry and/or dispossession by summary
proceedings or otherwise without termination of this Lease:
(1) All Rent shall become due and shall be paid up to the
time of such re-entry and/or dispossession, together with such
expenses, including attorneys' fees, as Landlord shall incur in
connection with such re-entry and/or dispossession by summary
proceedings or otherwise; and
(2) All Rent for the remainder of the Term may be
accelerated and due in full, the collection of such sums being
subject to the provisions of Subsection F, below; and
(3) Landlord may relet all or any part of the Premises,
either in the name of Landlord or otherwise, for a term or terms
which may, at Landlord's option, be equal to, less than, or
greater than the period which would otherwise have constituted the
balance of the Term. In connection with such reletting:
(a) Tenant or Tenant's representative shall pay, as
Additional Rent, to Landlord, as they are incurred by
Landlord, such reasonable expenses as Landlord may incur in
connection with reletting, including, without limitation,
legal expenses, attorneys' fees, brokerage commissions, and
expenses incurred in altering, repairing, and putting the
Premises in good order and condition and in preparing the
Premises for reletting;
(b) Tenant or Tenant's representative shall pay to
Landlord, in monthly installments on the due dates for Rent
payments for each month of the balance of the Term, the
amount by which any Rent payment exceeds the net amount, if
any, of the rents for such period collected on account of
the reletting of the Premises; any suit brought to collect
such amount for any month or months shall not prejudice in
any way the rights of Landlord to collect the deficiency
for any subsequent month or months by a similar action or
proceeding;
(c) At Landlord's option exercised at any time,
Landlord shall be entitled to recover immediately from
Tenant, in addition to any other proper claims, but in lieu
of and not in addition to any amount which would thereafter
become payable under the preceding subsection, a sum equal
to the amount by which the sum of the Rent for the balance
of the Term, compound discounted at a reasonable rate
selected by Landlord to its then-present worth, exceeds the
net rental value of the Premises, compound discounted at
the same annual rate to its then-present worth, for the
balance of the Term. In determining such net rental value
of the Premises, the rent realized by any reletting of the
Premises, if such reletting is upon terms (other than
rental amounts) generally comparable to the terms of this
Lease, shall be deemed to be such net rental value; and
(d) At Landlord's option, Landlord may make such
alterations and/or decorations in or upon the Premises as
Landlord, in Landlord's sole judgment, considers advisable
and necessary for the purpose of reletting the Premises;
the making of such alterations and/or decorations shall not
operate or be construed to release Tenant from liability
under this Section; the cost of all such alterations and/or
decorations shall be paid by Tenant to Landlord as
Additional Rent.
F. Landlord shall have, receive, and enjoy as Landlord's sole and
absolute property, any and all sums collected by Landlord as rent or
otherwise upon reletting the Premises after Landlord shall resume
possession of the Premises as provided by this Lease, including, without
limitation, any amounts by which the sum or sums so collected shall
exceed the continuing liability of Tenant under this Lease. If Landlord
shall have accelerated Rent payments and collected same from Tenant, and
subsequently shall have relet the Premises, then Landlord, after
deducting all costs related to reletting, including, but not limited to,
those described or anticipated in this Section, shall pay to Tenant the
amount remaining which is collected as Rent for each month, to the extent
Landlord shall have previously received the Rent for such month from
Tenant.
G. Landlord and Tenant agree that after the commencement of suit
for possession of the Premises or after final order or judgment for the
possession of the Premises, Landlord may demand, receive, and collect any
monies due or coming due without in any manner affecting such suit,
order, or judgment. All such monies collected shall be deemed to be
payments on account of the use and occupation of the Premises, or, at the
election of Landlord, on account of Tenant's liability under this Lease.
H. The words "re-enter" and "re-entry", as used in this Section,
are not and shall not be restricted to their technical legal meaning, but
are used in the broadest sense.
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I. Tenant waives all rights of redemption which may otherwise be
provided by any legal requirement in the event that Landlord shall,
because of the occurrence of an Event of Default by Tenant, obtain
possession of the Premises under legal proceedings, or pursuant to
present or future law or to the terms and conditions of this Lease.
J. Landlord, in addition to other rights and remedies it may have,
shall have the right to (a) keep in place and use all of the furniture,
fixtures, and equipment in the Premises, including that which is owned by
or leased to Tenant, and (b) to remove all or any part of Tenant's
property from the Premises and any property removed may be sold, disposed
of, or stored in any public warehouse or elsewhere at the cost of and for
the account of Tenant. Landlord shall not be responsible for the care or
safekeeping of such property, whether in transport, storage or otherwise.
Tenant waives any and all claim against Landlord for loss, destruction
and/or damage or injury which may be occasioned by any of the aforesaid
acts; Tenant shall be liable to Landlord for costs incurred by Landlord
in connection with any storage, transport or other acts anticipated in
this Section and shall hold harmless and indemnify Landlord from all
loss, damage, cost, expense and liability in connection therewith. No
re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease
unless a written notice of such intention is given to Tenant.
Notwithstanding any such re-letting without termination, Landlord may at
all times thereafter elect to terminate this Lease for such previous
default. Any such re-entry shall be allowed by Tenant without hindrance,
and Landlord shall not be liable in damages for any such re-entry, or
guilty of trespass or forcible entry.
K. Landlord shall be entitled, without notice or bond, to the
issuance of pre-judgment writs of replevin, pre-judgment distress writs,
attachment writs, break open orders, orders authorizing the locking of
the Premises to protect Landlord's lien on personal property, fixtures
and equipment, and such other orders as may be issued by a court of law
or equity. Landlord shall have the right to take possession as allowed
under Chapter 78, Florida Statutes. The remedies described in this
Section are cumulative and in addition to and without waiver of all
remedies allowed Landlord by this Lease or by case law, common law and
statute now or hereinafter in effect. Tenant agrees that the rights and
remedies granted Landlord in this Section are commercially reasonable.
ADMINISTRATIVE CHARGES
28. In the event a Rent payment is not received within five (5)
business days after its due date, interest shall be due thereon at the
rate of 18% per annum, on the then total Rent due and unpaid. This
interest shall accrue on the amount unpaid, including prior interest and
administrative fees and late charges, and shall become immediately due
and payable from Tenant to Landlord, without notice or demand, at the
place of payment. In the event any check, bank draft or negotiable
instrument given for any payment under this Lease shall be dishonored at
any time for any reason whatsoever not attributable to Landlord, Landlord
shall be entitled, in addition to any other remedy that may be available,
to an administrative charge of Two Hundred Dollars ($200.00). These
provisions for administrative fees and late charges are not, and shall
not be deemed, grace periods. Such administrative fees and late charges
are not penalties, but liquidated damages to defray administrative,
collection, and related expenses due to Tenant's failure to make such
Rent payment when due or failure to process the dishonored instrument. An
additional administrative fee and late charge shall become immediately
due and payable on the first day of each month for which all or a portion
of a Rent payment (together with any administrative fee and late charge)
remains unpaid, and for each dishonored instrument.
LIEN FOR PAYMENT OF RENT
29. Landlord shall have, and Tenant grants to Landlord, a security
interest in any furnishings, equipment, fixtures, inventory, and other
personal property of any kind belonging to Tenant, or the equity of
Tenant in such items, on the Premises or elsewhere (to the extent that
such property is owned by Tenant). No lien rights shall extend to any
personal property owned by any employee, officer or director of Tenant
that may be located on the Premises. Such security interest is granted
for the purposes of securing the payment of Rent and other charges,
assessments, penalties, and damages required under this Lease to be paid
by Tenant, and of securing the performance of all other obligations of
Tenant under this Lease. Upon Tenant's default or breach of any terms and
conditions of this Lease, Landlord shall have all remedies available
under applicable law, equity or as provided in this Lease including
without limitation, the right to take possession of any or all of the
items referred to in this Section and dispose of them by public or
private sale in a commercially reasonable manner. Landlord shall also
have the right to relinquish possession of all or any portion of such
furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents
to Landlord a copy of any instruments represented to Landlord by Claimant
to have been executed by Tenant (or any predecessor of Tenant) granting
Claimant the right under various circumstances to take possession of such
furniture, fixtures, equipment or other property, without the necessity
on the part of Landlord to inquire into the authenticity of said
instrument's copy of Tenant's or Tenant's predecessor's signature thereon
and without the necessity of Landlord making any nature of investigation
or inquiry as to the validity of the factual or legal basis upon which
Claimant purports to act; and Tenant agrees to indemnify and hold
Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion
of such furniture, fixtures, equipment or other property to Claimant. The
provision for a landlord's lien as described in this Article shall be in
addition to, and not in substitution for, any landlord's lien and similar
remedies otherwise provided by statutory or common law.
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To the extent, if any, that this Lease grants Landlord any
lien or lien rights greater than provided by the laws of the State
of Florida pertaining to landlords' liens, this Lease is intended
as and constitutes a security agreement within the meaning of the
Uniform Commercial Code. Landlord, in addition to the rights
prescribed in this Lease, shall have a Security Interest, as that
term is defined under this state's Uniform Commercial Code, in the
items referred to in this Section to secure the payment to
Landlord of the various amounts provided for in this Lease. Tenant
agrees to and shall execute and deliver to Landlord such financing
statements and such further assurances as Landlord may, from time
to time, consider necessary to create, perfect, and preserve the
lien described and all additional substitutions, replacements, and
accessions thereto, and all proceeds of its or their sale or the
disposition (under the Uniform Commercial Code, other statutory
provisions, or otherwise). Landlord, at the expense of Tenant, may
cause such financing statements and assurances to be recorded and
re-recorded, filed and re-filed, and renewed or continued, at such
times and places as may be required or permitted by law to create,
perfect, and preserve such items. In the event Tenant fails to
promptly execute and return to Landlord such financing statements
and other instruments as Landlord may require to create, preserve,
and perfect its lien, Tenant shall and does hereby designate
Landlord to act as Tenant's agent and attorney in fact for the
sole and limited purpose of executing such financing statements
and other instruments and any such execution by Landlord pursuant
to this Lease shall be effective and binding upon Tenant as though
executed originally by Tenant, such designation being a power
coupled with an interest which gives full power and authority to
execute and deliver the designated documentation on behalf of
Landlord and which is a material inducement to Landlord to enter
into this Lease. Tenant's designation of Landlord as agent and
attorney-in-fact hereunder shall not be subject to revocation
until this Lease is terminated.
WAIVER OF DEFAULT
30. Failure of Landlord to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord shall have the
right to declare any such default at any time and take such action as
might be lawful or authorized hereunder, in law and/or in equity. No
waiver by Landlord of a default by Tenant shall be implied, and no
express waiver by Landlord shall affect any default other than the
default specified in such waiver and that only for the time and extension
therein stated.
No waiver of any term, provision, condition or covenant of this
Lease by Landlord shall be deemed to imply or constitute a further waiver
by Landlord of any other term, provision, condition or covenant of this
Lease. In addition to any rights and remedies specifically granted
Landlord herein, Landlord shall be entitled to all rights and remedies
available at law and in equity, whether existing at time of execution or
of enforcement of this Lease, in the event that Tenant shall fail to
perform any of the terms, provisions, covenants or conditions of this
Lease on Tenant's part to be performed or fails to pay Base Rent,
Additional Rent or any other sums due Landlord when due. All rights and
remedies specifically granted to Landlord herein, by law and in equity
shall be cumulative and not mutually exclusive.
RIGHT OF ENTRY
31. Landlord, or any of its agents, shall have the right to enter
the Premises during all reasonable hours to examine the same or to make
such repairs, additions or alterations as may be deemed necessary for the
safety, comfort, or preservation thereof, or to said Building, or to
exhibit said Premises at any time within one hundred fifty (150) days
before the expiration of this Lease. Landlord shall provide Tenant with
prior notice and agrees to use its efforts not to interfere with daily
business operations. Said right of entry shall likewise exist for the
purpose of removing placards, signs, fixtures, alterations, or additions
which do not conform to this Lease.
NOTICE
32. Any notice given Landlord as provided for in this Lease shall
be sent to Landlord by registered mail addressed to Landlord at
Landlord's Management Office. Any notice to be given Tenant under the
terms of this Lease, unless otherwise stated herein, shall be in writing
and shall be personally delivered or sent by registered mail or by
nationally (U.S.) recognized overnight delivery service to the office of
Tenant in the Building. Either party, from time to time, by such notice,
may specify another address in the continental United States to which
subsequent notice shall be sent.
LANDLORD CONTROLLED AREAS
33. All automobile parking areas, driveways, entrances and exits
thereto, Common Areas, and other facilities furnished by Landlord,
including all parking areas, truck way or ways, loading areas, pedestrian
walkways and ramps, landscaped areas, stairways, corridors, and other
areas and improvements provided by Landlord for the general use, in
common, of tenants, their officers, agents, employees, servants,
invitees, licensees, visitors, patrons and customers, shall be at all
times subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to establish, modify and
enforce rules and regulations with respect to all facilities and areas
and improvements; to police same; from time to time to change the area,
level and location and arrangement of parking areas and other facilities
hereinabove referred to; to restrict parking by and enforce parking
charges (by operation of meters or otherwise) to tenants, their officers,
agents, invitees, employees, servants, licensees, visitors, patrons and
customers; to close all or any portion of
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said areas or facilities to such extent as may in the opinion of
Landlord's counsel be legally sufficient to prevent a dedication thereof
or the accrual of any rights to any person or the public therein; to
close temporarily all or any portion of the public areas, Common Areas or
facilities; to discourage non-tenant parking; and to do and perform such
other acts in and to said areas and improvements as, in the sole judgment
of Landlord, Landlord shall determine to be advisable with a view to the
improvement of the convenience and use thereof by tenants, their
officers, agents, employees, servants, invitees, visitors, patrons,
licensees and customers. Landlord will operate and maintain the Common
Areas and other facilities referred to in such reasonable manner as
Landlord shall determine from time to time. Without limiting the scope of
such discretion, Landlord shall have the full right and authority to
designate a manager of the parking facilities and/or Common Areas and
other facilities who shall have full authority to make and enforce rules
and regulations regarding the use of the same or to employ all personnel
and to make and enforce all rules and regulations pertaining to and
necessary for the proper operation and maintenance of the parking areas
and/or Common Areas and other facilities. Reference in this section to
parking areas and/or facilities shall in no way be construed as giving
Tenant hereunder any rights and/or privileges in connection with such
parking areas and/or facilities unless such rights and/or privileges are
expressly set forth in this Lease.
CONDITION OF PREMISES
ON TERMINATION OF LEASE
AND HOLDING OVER
34. Tenant agrees to surrender to Landlord, at the end of the Term
and/or upon any cancellation of this Lease, said Premises in as good
condition as said Premises were at the beginning of the Term of this
Lease, ordinary wear and tear and damage by fire or other casualty not
caused by Tenant's negligence excepted. Tenant agrees that if Tenant does
not surrender said Premises to Landlord at the end of the Term then
Tenant will pay to Landlord double the amount of the current rental for
each month or portion thereof that Tenant holds over plus all damages
that Landlord may suffer on account of Tenant's failure to so surrender
to Landlord possession of said Premises, and will indemnify and hold
Landlord harmless from and against all claims made by any succeeding
Tenant of said Premises against Landlord on account of delay of Landlord
in delivering possession of said Premises to said succeeding tenant so
far as such delay is caused by failure of Tenant to so surrender the
Premises.
No receipt of money by Landlord from Tenant after termination of
this Lease or the service of any notice of commencement of any suit or
final judgment for possession shall reinstate, continue or extend the
Term or affect any such notice, demand, suit or judgment, unless
specifically agreed to in writing by Landlord and Tenant.
No act or thing done by Landlord or its agents during the Term
shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless it
be made in writing and subscribed by a duly authorized officer or agent
of Landlord.
OCCUPANCY TAX
35. Tenant shall be responsible for and shall pay before
delinquency all municipal, county or state taxes assessed during the Term
of this Lease against any occupancy interest or personal property of any
kind, owned by or placed in, upon or about the Premises by Tenant.
SIGNS
36. Landlord shall have the right to install signs on the interior
or exterior of the Building and Premises and/or change the Building's
name or street address. Landlord shall provide space on the Building
tenant directory for the name of Tenant, and provide Tenant with building
standard signage at the entrance to its Premises at Landlord's expense.
If Landlord changes the building address, Landlord agrees to pay all
reasonable costs associated with reprinting Tenant's stationery, business
cards, marketing materials and the like.
TRIAL BY JURY
37. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON
ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, AND TENANT'S USE OR OCCUPANCY OF THE
PREMISES. Tenant further agrees that it shall not interpose any
counterclaim or counterclaims, except compulsory counterclaims, in a
summary proceeding or in any action based upon nonpayment of rent or any
other payment required of Tenant hereunder. Upon Landlord's request,
Tenant shall participate in mediation of a dispute between Landlord and
Tenant; the cost of a mediator shall be borne equally by Landlord and
Tenant.
RELOCATION OF TENANT
38. Landlord expressly reserves the right at Landlord's sole cost
and expense, to remove Tenant from the Premises and to relocate Tenant in
some other space within the Building, which other space shall be
decorated by Landlord at
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Landlord's expense. Landlord shall have the right, in Landlord's sole
discretion, to use such decorations and materials as may have been used
in the original Premises. Nothing herein contained shall be construed to
relieve Tenant or imply that Tenant is relieved of the liability for or
obligation to pay any Additional Rent due by reason of the provisions of
Section 3A of this Lease, the provisions of which section shall be
applied to the space in which Tenant is relocated on the same basis as
said provisions were applied to the Premises from which Tenant is
removed. Tenant agrees that Landlord's exercise of its election to remove
and relocate Tenant shall not terminate this Lease or release Tenant, in
whole or in part, from Tenant's obligation to pay the rents and perform
the covenants and agreements hereunder for the full Term. Landlord agrees
to pay all reasonable costs of relocation including moving expenses,
phones/computer installation, printing new business cards and marketing
materials, and any other costs incurred due to relocation.
CROSS DEFAULT
39. If the term of any lease, other than this Lease, made by
Tenant for any other space in the Building shall be terminated or
terminable after the making of this Lease because of any default by
Tenant under such other lease, such default shall, ipso facto, constitute
a default hereunder and empower Landlord, at Landlord's sole option, to
terminate this Lease as herein provided in the event of default.
INVALIDITY OF PROVISION
40. If any term, provision, covenant or condition of this Lease or
the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease or the
application of such term, provision, covenant or condition to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and each term, provision,
covenant or condition of this Lease shall be valid and be enforceable to
the fullest extent permitted by law. This Lease shall be construed in
accordance with the laws of the State of Florida.
TIME OF ESSENCE
41. Time is of the essence of all the terms, provisions, covenants
and conditions of this Lease.
MISCELLANEOUS
42. The terms Landlord and Tenant as herein contained shall
include singular and/or plural, masculine, feminine and/or neuter, heirs,
successors, executors, administrators, personal representatives and/or
assigns wherever the context so requires or admits. The terms,
provisions, covenants and conditions of this Lease are expressed in the
total language of this Lease Agreement and the section headings are
solely for the convenience of the reader and are not intended to be all
inclusive. Any exhibit or attachment or formally executed addendum to or
modification of this Lease shall be expressly deemed incorporated by
reference herein unless a contrary intention is clearly stated therein.
EFFECTIVE DATE
43. Submission of this instrument for examination does not
constitute an offer, right of first refusal, reservation of or option for
the Premises or any other space or premises in, on or about the Building.
This instrument becomes effective as a lease only upon execution and
delivery by both Landlord and Tenant.
ENTIRE AGREEMENT
44. This Lease contains the sole and entire agreement between the
parties hereto and supersedes all previous written or oral negotiations
or agreements between the parties with respect to the subject matter of
this Lease, and it may be modified only by an agreement in writing signed
by Landlord and Tenant. No surrender of the Premises, or of the remainder
of the term of this Lease, shall be valid unless accepted by Landlord in
writing. Tenant acknowledges and agrees that Tenant has not relied upon
any statement, representation, prior written or contemporaneous oral
promises, agreements or warranties except such as are expressed herein.
All of the parties to this Lease have participated in its negotiations
and preparation; accordingly, this Lease shall not be more strictly
construed against any one of the parties.
BROKERAGE
45. Tenant represents and warrants that it has dealt with no
broker, agent or other person other than Landlord, Landlord's broker ACP
Realty Services, LLC (which entity is related to Landlord) and Cushman &
Wakefield of Florida, Inc. (C&W) in connection with this transaction and
that no broker, agent or other person, other Landlord's broker ACP Realty
Services, LLC or C&W brought about this transaction. Tenant agrees to
indemnify and hold harmless Landlord from and against any claims by any
other broker, agent or other person claiming a commission or other form
of compensation by virtue of having dealt with Tenant with regard to this
leasing transaction. In case Landlord shall be made a party to litigation
by any other broker, agent or person claiming a commission or other form
of compensation by virtue of having dealt with Tenant with regard to this
leasing transaction, then Tenant shall protect and hold harmless and
shall pay all costs, expenses and attorney's fees incurred or paid by
Landlord in connection with such litigation and/or appeal. The provisions
of this section shall survive the termination of this Lease.
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FORCE MAJEURE
46. Landlord shall not be required to perform any term, condition,
or covenant in this Lease so long as such performance is delayed or
prevented by force majeure, which shall mean acts of God, labor disputes
(whether lawful or not), material or labor shortages, restrictions by any
governmental authority, civil riots, floods, and any other cause not
reasonably within the control of Landlord and which by the exercise of
due diligence Landlord is unable, wholly or in part, to prevent or
overcome. Lack of money shall not be deemed force majeure.
STATUTORY RADON GAS NOTICE
47. Radon Gas: Radon is a naturally occurring radioactive gas that
when it has accumulated in a building in sufficient quantity, 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.
NO WAIVER
48. No waiver by Landlord of any breach by Tenant of any term or
condition of this Lease, and no failure by Landlord to exercise any right
or remedy in respect of any such breach, shall constitute a waiver or
relinquishment for the future, or bar any right or remedy of Landlord, in
respect of any other breach of such term or condition or any breach of
any other term or condition of this Lease. No payment by Tenant or
receipt of payment by Landlord of an amount less than the full amount
then due Landlord under this Lease shall be construed as anything other
than a partial payment of such sum then due and owing. No endorsement or
statement on any check or letter or any form of payment of accompanying
document shall be deemed to be an accord or satisfaction or other form of
settlement; Landlord may accept any such payment without prejudice to its
rights to recover the balance of sums due and owing under this Lease or
to pursue any other remedy permitted under this Lease.
SURVIVAL
49. All obligations of Tenant which are or may be intended by
their nature to be performed and/or complied with after the expiration or
earlier termination of this Lease shall survive such expiration or
termination. Express provisions in this Lease which require or permit
survival in specific instances, or as to specific obligations, shall not
be deemed a limitation upon the generality of this survival clause.
PROVISIONS SEVERABLE
50. Every provision of this Lease shall be valid and be enforced
to the fullest extent permitted by law. If any provision of this Lease,
or the application of such provision to any person or circumstance, shall
be determined by appropriate judicial authority to be illegal, invalid,
or unenforceable to any extent, such provision shall, only to such
extent, be deemed stricken from this Lease as if never included. The
remainder of this Lease, and the application of such provision to persons
or circumstances other than those as to which such provision is held
illegal, invalid, or unenforceable, shall not be affected.
BINDING EFFECT
51. The terms and conditions of this Lease shall bind the parties
and their respective successors and assigns, and shall inure to the
benefit of the parties and their respective permitted successors and
assigns. Any waiver of rights by either party shall be deemed not only to
be a waiver of such rights by such party but also a waiver of such rights
for and on behalf of such party's successors and assigns. This Lease may
be changed, amended, or modified only by an agreement in writing signed
by the party against whom such change, amendment, or modification is
sought to be enforced. If Tenant, with Landlord's consent, shall occupy
the Premises prior to the beginning of the Term as specified above, all
provisions of this Lease shall be in full force and effect connecting
upon such occupancy, and rent for such period shall be paid by Tenant at
the same rate herein specified. Tenant recognizes and acknowledges that
the provisions of this paragraph are material inducements to Landlord to
enter into this Lease.
EXISTING LEASE
52. Upon lease commencement, Landlord shall terminate
simultaneously Tenant's Lease Agreement at Corporate Square, 1500 NW 62nd
Street, Suite 404, Fort Lauderdale, Florida.
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OPTION TO EXTEND
53. Provided that Tenant is not in default, Tenant shall have the
option to extend the Lease Term for one (1) additional term of five (5)
years. Base Rent and Additional Rent terms during the extension option
period shall be at the then current market terms and conditions, all as
determined by Landlord. All other terms and conditions shall remain as
stated in the Lease. Landlord agrees that it will negotiate in good faith
regarding market terms and conditions. Prior to the expiration of Month
75 of the Lease, Tenant shall provide Landlord written notice that it
intends to enter discussions regarding the extension option. Within 30
days of receipt of Tenant's notice, Landlord shall deliver a lease
addendum specifying the Base Rent amount and Additional Rent estimates
for the extension. Tenant shall have fifteen (15) days to execute the
addendum from the date of receipt.
YEAR 2000
54. Landlord shall be responsible, at its sole expense, to assure
that all building management systems are Year 2000 compliant. Landlord
shall be liable for all damages to Tenant and caused by Landlord's
inability or failure to achieve Year 2000 compliance.
IN WITNESS WHEREOF, the parties hereto, have signed, sealed and delivered
this Lease in quadruplicate at Broward County, Florida, on the date and year
first above written.
WITNESSES: LANDLORD: ACP OFFICE I LLC
/S/ CANDY CARLSON By: /S/ ILLEGIBLE
- -------------------------- -----------------------
Name: CANDY CARLSON Name: ILLEGIBLE
- -------------------------- -----------------------
/S/ PAUL W. FLESH Its: ILLEGIBLE
- -------------------------- -----------------------
Name: PAUL W. FLESH
WITNESSES: TENANT: LEGAL CLUB OF AMERICA CORPORATION
/S/ MARCI A. RUBIN By: /S/ MATT J. COHEN
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Name: MARCI A. RUBIN Name: MATT COHEN
- -------------------------- -----------------------
/S/ PATTI RUTLEDGE Its: CFO
- -------------------------- -----------------------
Name: PATTI RUTLEDGE
EXHIBITS:
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Exhibit A - Floorplan
Exhibit B - Workletter
Exhibit C - Rules and Regulations
Exhibit D - Tenant Acceptance Letter
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EXHIBIT "A"
Diagram of floor plan.
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EXHIBIT "B"
Tenant accepts leased premises in "as is" condition, except as listed below:
1. Landlord shall install new 26 oz. loop pile carpet.
2. Landlord shall repaint walls with two (2) coats of flat latex paint.
3. Landlord shall install new building standard solid oak wood double-entry
doors.
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EXHIBIT "C"
RULES AND REGULATIONS
The following Rules and Regulations, hereby accepted by Tenant, are
prescribed by Landlord to enable Landlord to provide, maintain, and operate, to
the best of Landlord's ability, orderly, clear and desirable premises, Building
and parking facilities for the Tenants therein at as economical a cost as
reasonably possible and in as efficient a manner as reasonably possible, to
assure security for the protection of Tenants so far as reasonably possible, and
to regulate conduct in and use of said Premises, Building and Parking facilities
in such manner as to minimize interference by others in the proper use of same
by Tenant.
1. Tenant, its officers, agents, servants and employees shall not block or
obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of Building or garage, or place, empty or throw any
rubbish, litter, trash or material of any nature into such areas, or
permit such areas to be used at any time except for ingress or egress of
Tenant, its officers, agents, servants, employees, patrons, licensees,
customers, visitors or invitees.
2. The movement of furniture, equipment, machines, merchandise or materials
within, into or out of the Premises, Building or parking facilities shall
be restricted to time, method and routing of movement as determined by
Landlord upon request from Tenant and Tenant shall assume all liability
and risk to property, Premises and Building in such movement. Tenant
shall not move furniture, machines, equipment, merchandise or materials
within, into or out of the Building. Premises or garage facilities
without having first obtained a written permit from Landlord twenty-four
(24) hours in advance. Safes, large files, electronic data processing
equipment and other heavy equipment or machines shall be moved into
Premises, Building or parking facilities only with Landlord's written
consent and placed where directed by Landlord.
3. No sign, door plaque, advertisement or notice shall be displayed, painted
or affixed by Tenant, its officers, agents, servants, employees, patrons,
licensees, customers, visitors, or invitees in or on any part of the
outside or inside of the Building, garage facilities or Premises without
prior written consent of Landlord and then only of such color, size,
character, style and materials and in such places as shall be approved
and designated by Landlord. Signs on doors and entrances to Premises
shall be placed thereon by a contractor designated by Landlord and paid
for by Tenant.
4. Landlord will not be responsible for lost or stolen property, equipment,
money or any article taken from Premises, Building or parking facilities
regardless of how or when loss occurs, except in the case of gross
negligence by Landlord and its agents.
5. No additional locks shall be placed on any door or changes made to
existing locks in Building without the prior written consent of Landlord.
Landlord will furnish two keys to each lock on doors in the Premises and
Landlord, upon request of Tenant, shall provide additional duplicate keys
at Tenant's expense. Landlord may at all times keep a pass key to the
Premises. All keys shall be returned to Landlord promptly upon
termination of this Lease.
6. Tenant, its officer, agents, servants or employees shall do no painting
or decorating in the Premises, or mark, paint or cut into, drive nails or
screw into or in any way deface any part of Premises or Building without
the prior written consent of Landlord. If Tenant desires signal,
communication, alarm or other utility or service connection installed or
changed, such work shall be done at expense of Tenant, with the approval
and under the direction of Landlord.
7. Landlord reserve the right to: (i) close the Building at 6:00 P.M.,
subject, however, to Tenant's right to admittance under regulations
prescribed by Landlord, and to require the persons entering the Building
to identify themselves and establish their right to enter or to leave the
Building; (ii) close all parking areas between the hours of 9:00 P.M. and
7:00 A.M. during week days; (iii) close all parking areas on weekends and
holidays.
8. Tenant, its officers, agents, servants and employees shall not permit the
operation of any musical or sound producing instruments or device which
may be heard outside Premises, Building or parking facilities, or which
may emanate electrical waves which will impair radio or television
broadcasting or reception from or in Building.
9. Tenant, its officers, agents, servants and employees shall, before
leaving Premises unattended, close and lock all doors and shut off all
utilities; damage resulting from failure to do so shall be paid by
Tenant. Each Tenant before the closing of the day and leaving the said
Premises shall see that all blinds and/or draperies are pulled and drawn.
10. All plate and other glass now in Premises or Building which is broken
through cause attributable to Tenant, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be
replaced by and at expense of Tenant under the direction of Landlord.
11. Tenant shall give Landlord prompt notice of all accidents to or defects
in air conditioning equipment,, plumbing, electric facilities or any part
or appurtenance of Premises.
12. The plumbing facilities shall not be used for any other purpose than that
for which they are constructed, and no foreign substance of any kind
shall be thrown therein, and the expense of any breakage, stoppage, or
damage resulting from a violation of this provision shall be borne by
Tenant, who shall, or whose officers, employees, agents, servants,
patrons, customers, licensees, visitors or invitees shall have
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caused it.
13. All contractors and/or technicians performing work for Tenant within the
Premises, Building or parking facilities shall be referred to Landlord
for approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephones, telegraph
equipment, electrical devices and attachments, and all installations
affecting floors, walls, windows, doors, ceiling, equipment or any other
physical feature of the Building, Premises or parking facilities. None of
this work shall be done by Tenant without Landlord's prior written
approval.
14. 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 without the prior written consent of Landlord.
15. Glass panel doors that reflect or admit light into the passageways or
into any place in the Building shall not be covered or obstructed by the
Tenant, and Tenant shall not permit, erect, and/or place drapes,
furniture, fixtures, shelving, display cases or tables, lights or signs
and advertising devices in front of or in proximity of interior and
exterior windows, glass panels, or glass doors providing a view into the
interior of the Premises unless same shall have first been approved in
writing by Landlord.
16. Canvassing, soliciting and peddling in the Building or parking facilities
is prohibited and each Tenant shall cooperate to prevent the same. In
this respect, Tenant shall promptly report such activities to the
Building Manager's office.
17. There shall not be used in any space, or in the public halls of the
Building, either by any 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.
18. The work of Landlord's janitors or cleaning personnel shall not be
hindered by Tenant after 5:30 P.M. and such work may be done at any time
when the offices are vacant. The windows, doors and fixtures may be
cleaned at any time. Tenant shall provide adequate waste and rubbish
receptacles, cabinets, bookcases, map cases, etc., necessary to prevent
unreasonable hardship to Landlord in discharging its obligation regarding
cleaning service. In this regard, Tenant shall also empty all glasses,
cups and other containers holding any type of liquid whatsoever.
19. In the event Tenant must dispose of crates, boxes, etc., which will not
fit into office wastepaper baskets, it will be the responsibility of
Tenant with Landlord's assistance to dispose of same. In no event shall
Tenant set such items in the public hallways or other areas of Building
or parking facilities, excepting Tenant's own Premises, for disposal.
20. Tenants are cautioned in purchasing furniture and equipment that the size
is limited to such as can be placed on the elevator and will pass through
the doors of the Premises. Large pieces should be made in parts and set
up in the Premises. Landlord reserves the right to refuse to allow to be
placed in the Building any furniture or equipment of any description
which does not comply with the above conditions.
21. Tenant will be responsible for any damage to the Premises, including
carpeting and flooring, as a result of rust or corrosion of file
cabinets, roller chairs, metal objects or spills of any type of liquid.
22. If the Premises demised to any Tenant become infested with vermin, such
Tenant, at its sole cost and expense, shall cause its premises to be
exterminated from time to time, to the satisfaction of Landlord, and
shall employ such exterminators therefor as shall be approved by
Landlord.
23. Tenant shall not install any antenna or aerial wires, or radio or
television equipment, or any other type of equipment, inside or outside
of the Building, without Landlord's prior approval in writing, and upon
such terms and conditions as may be specified by Landlord in each and
every instance.
24. Tenant shall not advertise the business, profession or activities of
Tenant in any manner which violates the letter or spirit of any code of
ethics adopted by any recognized association or organization pertaining
thereto, or use the name of the Building for any purpose other than that
of the business address of Tenant or use any letterheads, envelopes,
circulars, notices, advertisements, containers or wrapping material
without Landlord's express consent in writing.
25. Tenant, its officers, agents, employees, servants, patrons, licensees,
customers, invitees and visitors shall not solicit business in the
Building's parking facilities or Common Areas, nor shall Tenant
distribute any handbills or other advertising matter in automobiles
parked in the Building's parking facilities.
26. Tenant shall not conduct its business in such manner as to create any
nuisance, or interfere with, annoy or disturb any other tenant in the
Building, or Landlord in its operation of the Building or commit waste or
suffer or permit waste to be committed in the Leases Premises, Building
or parking facilities. In addition, Tenant shall not allow its officers,
agents, employees, servants, patrons, customers, licensees and visitors
to conduct themselves in such manner as to create any nuisance or
interfere with, annoy or disturb any other tenant in the Building or
Landlord in its operation of the Building or commit waste or suffer or
permit waste to be committed in the Leases Premises, Building or parking
facilities.
27. Tenant, its officers, agents, servants and employees shall not install or
operate any refrigerating, heating or air conditioning apparatus or carry
on any mechanical operation or bring into Premises, Building or garage
facilities any inflammable fluids or explosives without written
permission of Landlord.
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28. Tenant, its officers, agents, servants or employees shall not use
Premises, Building or garage facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food without the prior
written consent of the Landlord.
29. Tenant, its officers, agents, servants, employees, patrons, licensees,
customers, visitors or invitees shall not bring into garage facilities,
Building or Premises or keep on Premises any fish, fowl, reptile, insect,
or animal or any bicycle or other vehicle without the prior written
consent of Landlord, wheel chairs and baby carriages excepted.
30. Neither Tenant nor any officer, agent, employee, servants, patron,
customer, visitor, licensee or invitee of any Tenant shall go upon the
roof of the Building without the written consent of the Landlord or the
authorization of the Heliport administration.
31. Tenant's employing laborers or others outside of the Building shall not
have their employees paid in the Building, but shall arrange to pay their
payrolls elsewhere.
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EXHIBIT "D"
TENANT ACCEPTANCE LETTER
This declaration is hereby attached to and made part of the lease dated
_____________ entered into by and between ACP Office I LLC as Landlord and LEGAL
CLUB OF AMERICA CORPORATION as Tenant.
The undersigned, as Tenant, hereby confirms as of the ____day of
__________, 1999 the following:
1. Tenant has accepted possession of the Premises on ________, 1999
and is currently able to occupy the same.
2. The Commencement Date as defined in the Lease is _________, 1999.
3. The obligation to commence the payment of rent commenced or will
commence on ______________, 1999.
4. All alterations and improvements required to be performed by
Landlord pursuant to the terms of the Lease to prepare the entire
Premises for Tenant's initial occupancy have been satisfactorily
completed, except for the following.
N/A
-----------------------------------------------------.
-------------------------------------------------------------.
5. As of the date hereof, Landlord has fulfilled all of its
obligations under the Lease.
6. The Lease is in full force and effect and has not been modified,
altered, or amended, except pursuant to any instruments described
above.
7. There are no offsets or credits against Base Rent or Additional
Rent, nor has any Base Rent or Additional Rent been prepaid except
as provided pursuant to the terms of the Lease.
8. Tenant has no notice of any prior assignment, hypothecation, or
pledge of the Lease or any rents due under the Lease.
TENANT
WITNESSES: LEGAL CLUB OF AMERICA CORPORATION
_________________________ By: ___________________________
_________________________ As: ___________________________
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EXHIBIT 10.e
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
July 1, 1997, between And Justice for All, Inc., a Florida corporation (the
"Company"), with a principal place of business at 1500 NW 62nd Street, Suite
404, Ft. Lauderdale, FL 33309, and Brett Merl, an individual (the "Executive"),
whose address is 10213 Vestal Court, Coral Springs, Florida 33071.
PRELIMINARY STATEMENT:
The Company is engaged in the "Business" (as defined in Section 6(h),
below); the Executive has experience and expertise in the Business; the Company
wishes to employ the Executive and the Executive wishes to be employed by the
Company, all subject to the terms, conditions and covenants contained herein.
The Company has established a valuable reputation of expertise and goodwill in
the Business; the Executive, has and will become familiar with, and currently
possesses, the manner, methods, trade secrets and other confidential information
pertaining to the Business, including the Company's customers and referral base.
NOW, THEREFORE, in consideration of the mutual covenants and premises
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby conclusively acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, all upon the terms and conditions set
forth herein. The above Preliminary Statement is true and correct, and is
incorporated herein by reference.
2. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD.
(a) The Executive shall serve as the CHIEF EXECUTIVE OFFICER
of the Company, with such duties, authority, and responsibilities as are
commensurate with such position. By his execution hereof the Executive accepts
such duties, authority, and responsibilities. In exercising his duties and
responsibilities hereunder, the Executive shall have all the power and authority
necessary to fulfill and discharge his duties and responsibilities hereunder and
shall abide by any lawful directions given by the Board of Directors of the
Company or its Chief Executive Officer or President. Notwithstanding the
foregoing, the Executive shall not, in connection with his employment hereunder,
cause or permit the Company or any of its subsidiaries to enter into any
agreement, commitment or arrangement with, or pay any fees or other amounts to
any person not dealing at arm's length with the Executive without first
disclosing the nature of such relationship to the President or Chief Executive
Officer of the Company and obtaining the prior written approval of the President
or Chief Executive Officer to any such agreement, commitment, arrangement or
payment. The Executive shall be responsible for such additional duties
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commensurate with his position may be reasonably determined by the President or
Chief Executive Officer of the Company from time to time.
(b) During the term of his employment hereunder, the Executive
shall devote substantially all of his working time and attention to such duties
as set forth in Section 3(a), and the Executive shall faithfully and diligently
serve and endeavor to further the interests of the Company and otherwise to
discharge his obligations under this Agreement. This provision shall not be
construed to prevent the Executive from devoting reasonable time to civic and
charitable organizations, or from attending to his own affairs, so long as the
same do not interfere with the performance of his duties for the Company.
3. TERM. The Term of employment hereunder will commence on the date
hereof (the "Start Date") and end on July 1, 2000 (the "Term"). The Term shall
automatically renew for successive three year renewal terms after its
expiration, unless either party gives the other at least 12 months' prior
written notice of non-renewal prior to the then scheduled expiration of the Term
hereof. All provisions of the Agreement shall remain in effect during renewals
of the Term, and references to the "Term" herein shall be deemed to refer to
renewals of the Term.
4. COMPENSATION AND BENEFITS.
(a) SALARY. The Executive shall be paid a base salary (the
"Base Salary"), payable in accordance with the Company's customary payroll
policies or at such other intervals as may from time to time be used by the
Company for paying its employees generally, at an annual rate of ONE HUNDRED
TWENTY FIVE THOUSAND Dollars ($125,000.00) subject to annual increases, but not
decreases, in such compensation at the discretion of the Board of Directors,
such increases to take effect with each renewal of the Term hereunder, and
provided, however, that the minimum annual increase in Base Salary shall be at
least equal to the greater of (i) 20 percent, or (ii) the percentage increase
over the preceding year in the US Consumer Price Index (as published by the
Department of Labor, All Items).
(b) PERFORMANCE-BASED BONUS. As additional compensation, the
Executive may be entitled to receive a performance-based bonus (the "Bonus"),
payable annually. The Executive's bonus shall be paid from the Company's Senior
Executive Bonus Pool, which shall be calculated after the Company's annual
audited financial statements are prepared, as an amount equal to 20% of the
Company's pre tax income for the preceding year, as reflected in such annual
audited financial statements. The Executive shall be entitled to a share of 33
1/3% of the such amount in the Senior Executive Bonus Pool. The Bonus shall be
payable promptly after the Company's audited financial statements are prepared.
In the event that the Term shall be terminated (or shall fail to be renewed)
after the end of the fiscal year and before the Bonus is paid, such Bonus shall
nonetheless be payable when the audited financial statements are prepared as
aforesaid. In the event that the Term shall be terminated (or shall fail to be
renewed) during a fiscal year, then the Bonus shall be computed based on the
financial
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results of the Company during such fiscal year through the end of the last
calendar month immediately preceding such termination, and shall be paid
promptly after such calculation is made.
(c) EXECUTIVE BENEFITS. The Executive shall be entitled to
participate in any and all benefit programs of the Company.
(d) VACATION. During each Fiscal Year, the Executive shall be
entitled to two (2) weeks of vacation time and the Executive shall utilize such
vacation time as the Executive from time to time may determine as appropriate
with regard to the operations of the Company.
(e) BUSINESS EXPENSE REIMBURSEMENT. The Executive shall be
entitled to receive reimbursement for all reasonable, out-of-pocket expenses
incurred by him during the Term of his employment (in accordance with any
policies and procedures reasonably established by the Company) in connection
with the proper and efficient discharge of his duties hereunder, provided the
Executive properly accounts therefor by providing the Company with statements
and vouchers in form reasonably satisfactory to the Company.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE.
(a) The Company shall be entitled to terminate Executive's
employment at any time:
(i) for any reason other than for "Cause", (as that
term is defined below), upon the giving of one hundred eighty (180)
days' prior written notice of termination, provided, however, that in
the event of termination without Cause, the Company shall be liable to
pay the Executive, Base Salary for a period equal to the greater of (I)
the remaining period of the Term then in effect, or (II) two years
after termination, such Base Salary to be payable in accordance with
the Company's customary payroll policies (free and clear of any and all
offsets, defenses and counterclaims) and with continued benefits during
the applicable period in which the severance payments are made (and in
the event that the Executive's participation in any such benefit plans
or programs is prohibited by the terms thereof, then the Company shall
arrange to provide the Executive with benefits, at its sole expense,
substantially similar to those to which the Executive is entitled under
such benefit plans and programs), provided that no Bonuses shall be
payable in respect of the period during which such severance payments
are made (Executive's entitlement to severance pay shall not be
affected by any subsequent re-employment of the Executive); or
(ii) for "Cause" without severance pay or benefits.
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<PAGE>
(b) The Executive may terminate his employment with the
Company by giving notice of such termination to the Company, at any time upon
the Company's material breach hereunder or within one year after Executive
acquires actual knowledge, or receives notice from the Company, of a Change in
Control of the Company; in which case the Company shall deliver to the Executive
upon termination full payment of the "Parachute Payment," as provided in Section
5(e) below. For purposes hereof, a "Change in Control" shall mean if there is
any change in the beneficial ownership or title to voting securities of the
Company (other than pursuant to transfers among present shareholders of the
Company or underwritten public offerings of the Company's securities)
representing more than 33 1/3% of the combined voting power of the Company's
securities outstanding on the date of this Agreement, or a person not a
shareholder of the Company on the date hereof acquires the power to elect a
majority of the Board of Directors of the Company.
(c) DEATH. In the event of the Executive's death, the
Executive's designated beneficiary, or, in the absence of such designation, the
estate or other legal representative of the Executive, shall be entitled to all
accrued Base Salary through the date of Death, and an additional payment to the
Executive's estate equal to six months Base Salary.
(d) DISABILITY. In the event of the Executive's "Disability,"
as defined below, the Company may terminate employment of the Executive
hereunder without any further obligations, except as expressly set forth in this
Section 5. In the event of termination due to the Executive's Disability, the
Executive shall be entitled to receive the Executive's salary at the annual rate
in effect immediately prior to the commencement of Disability, for a period of
not less than 180 days from the date on which the Disability has commenced as
provided below. Any amounts provided for in this Section 5(d) shall be offset by
other long-term disability benefits provided to the Executive by the Company, if
any. "Disability," for the purposes of this Agreement, shall be deemed to have
occurred, at the Board of Directors' option, in the event the Executive, by
reason of mental or physical disability or illness, is unable to perform his
duties as described in Section 2 for a period (the "Period of Disability") of
more than 180 days in any one employment year, upon the Board of Directors
giving the Executive at least 30 days' written notice of its intention to so
terminate, and if the Executive is able to return to work full time before the
expiration of this 30 day period, then the Executive shall not be subject to
termination for Disability hereunder. Termination due to Disability shall be
deemed to have occurred upon the first day of the month following the
determination of Disability as defined in the preceding sentence.
(e) PARACHUTE PAYMENT. If the Executive's employment is
terminated due to (i) the occurrence of a Change of Control of the Company; or
(ii) the termination by the Executive of his employment with the Company as a
result of the Company's material breach hereof, then in any such event (an
"Event of Termination"), then (A) the Company shall pay to the Executive in a
lump sum payment (a "Parachute Payment") on the effective date of the
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termination of the Executive's Employment (the "Termination Date") an amount
equal to the sum of three times the Executive's annualized includible
compensation for the base period, as such may be defined in /section/ 280G of
the Internal Revenue code of 1986, as amended (or the regulations promulgated
thereunder) (the "Code") minus one dollar (it being the intent of this provision
that the Executive receive the maximum compensation payable under the Code in
such circumstances that is deductible to the Company and which does not trigger
the excise tax contemplated by the Code for excess parachute payments); and (B)
the Company shall maintain in full force and effect, at the Company's sole
expense (pursuant to waiver of COBRA premiums or otherwise) and for the
Executive's continued benefit until one year after the Termination Date all life
insurance, medical, health and accident, and disability plans and similar
arrangements in which the Executive was entitled to participate immediately
prior to the Event of Termination. In the event that the Executive's
participation in any such plan or program is barred by the plans or programs,
the Company shall arrange to provide the Executive with benefits, at the
Company's sole expense, substantially similar to those to which the Executive is
entitled under such plans and programs. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
this Section be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Termination Date or
otherwise; however, the Executive shall have the right (but not the obligation)
to voluntarily reduce the consideration payable to him upon a Change in Control,
in any manner the Executive may elect by written notice to the Company.
(f) TERMINATION BY THE COMPANY FOR CAUSE.
(i) Nothing herein shall prevent the Company from
terminating the Executive's employment for "Cause", as defined below.
In the event of termination for Cause, the Executive shall continue to
receive salary only for the period ending with the date of such
termination as provided in this Section 5(f), and any Bonus accruing in
respect of net pre tax income of the Company prior to the termination
as provided in Section 4(b). Any rights and benefits the Executive may
have in respect of any other compensation shall be determined in
accordance with the terms of such other compensation arrangements or
such plans or programs.
(ii) "Cause" shall mean: For purposes of this
Agreement, "cause" and "for cause" shall mean (A) any intentional
breach of the Executive's fiduciary duty to the Company that is
intended to cause, and actually causes, material injury to the
Company's business or business relationships; (B) the Executive's
breach under this Agreement that causes material damage to the Company;
(C) the Executive's gross negligence in the performance of his duties
that materially adversely affects the Company; and (D) conviction of a
felony; provided, however, that (1) the Company shall give the
Executive notice of any circumstances described in (B) or (C), above,
which notice shall describe such circumstances in reasonable detail,
and (2) no "cause" for termination shall be
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deemed to exist if the Executive shall remedy or cure the relevant
circumstances within 10 days from his receipt of such notice.
Termination for cause under clause (B) or (C) shall be effective on the
2nd business day after receipt by the Executive of a further written
notice from the Company, following expiration of the 10-day cure period
as aforesaid; provided the Executive has not previously cured the event
of cause; and termination for cause under (A) or (D) shall be effective
immediately upon receipt by the Executive of written notice of
termination. The determination of whether "Cause" for terminating
Executive's employment exists may only be made at a meeting of the
Board of Directors called for such purpose, and the Executive shall
have the right to receive prior notice of such meeting and an
opportunity to address the Board of Directors on the issue. The
Executive shall be entitled to receive upon termination for Cause (A)
any earned and unpaid Base Salary and Bonus accrued through the date of
termination; and (B) subject to the terms hereof, any benefits which
may be due to the Executive on such date under the provisions of any
employee benefit plan, program or policy.
6. COVENANT NOT TO COMPETE AND CONFIDENTIALITY.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business and that the
goodwill and patronage of the Company's Clients (as defined below) constitute a
substantial asset of the Company having been acquired through considerable time,
money and effort. Accordingly, in consideration of the execution of this
Agreement, the Executive agrees that:
(i) during the Restricted Period (as defined below)
and within the Restricted Area (as defined below), the Executive will
not, individually or in conjunction with others, directly or
indirectly, engage in any part of the Business (as defined below),
whether as an officer, director, proprietor, employer, partner,
independent contractor, investor (other than as a holder solely as an
investment of less than 2% of the outstanding capital stock of a
publicly traded corporation), consultant, advisor, agent or otherwise.
(ii) during the Restricted Period and within the
Restricted Area, the Executive will not (A) directly or indirectly
recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit (insofar
as it is in his control to do so) any business which competes directly
or indirectly with the Business of the Company (the "Competitive
Business") to employ or seek to employ for any Competitive Business any
person who is then (or was at any time within six (6) months prior to
the date Executive or the Competitive Business employs or seeks to
employ such person) employed by the Company.
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(iii) during the Restricted Period and within the
Restricted Area, the Executive will not, directly or indirectly,
compete with the Company by soliciting, inducing or influencing any of
the Company's Clients which have a business relationship with the
Company at the time during the Restricted Period to discontinue or
reduce the extent of such relationship with the Company.
(iv) during the Restricted Period, the Executive will
not interfere with, or disrupt or attempt to disrupt any present or
prospective relationship, contractual or otherwise, between the Company
and any customer, employee or agent of the Company, or anyone who was
such within the one year period before the time of termination of the
Executive's employment.
(b) CONFIDENTIALITY. In accordance with the Florida Statutes,
among others Chapter 542 and Chapter 688, the Executive acknowledges that the
Company has "trade secrets" (as that term is defined in the Florida Statutes)
and a legitimate business interest in protecting them. Further, the Executive
acknowledges that the Company's trade secrets, including but not limited to,
private or secret processes, methods and ideas (as they exist from time to
time), customer lists and information concerning the Company's products,
services, training methods, development, technical information, marketing
activities and procedures, credit and financial data concerning the Company
and/or the Company's Clients (the "Proprietary Information"), are valuable,
special and unique assets of the Company, access to and knowledge of which are
essential to the Performance of the Executive hereunder. In light of the highly
competitive nature of the industry in which the Company's business is conducted,
the Executive agrees that all Proprietary Information, currently possessed by,
or in the future obtained by the Executive as a result of the Executive's
association with the Company shall be considered confidential.
In recognition of the foregoing, the Executive agrees that he
will not use or disclose any of such Proprietary Information for the Executive's
own purposes or for the benefit of any person or other entity or organization
(except the Company) under any circumstances unless such Proprietary Information
has been publicly disclosed generally or, upon at least 10 days' prior notice to
the Company (or on such shorter notice as is available to the Executive if the
subpoena is returnable within less than ten (10) days), the Executive is legally
required to disclose such Proprietary Information. Documents (as defined below)
relating to the Business, the Company or the General Partner prepared by the
Executive or that come into the Executive's possession during the Executive's
association with the Company are and remain the property of the Company, and
when this agreement terminates, such Documents shall be returned to the Company
at the Company's principal place of business, as provided in Section 10, below,
and the Executive represents that he will not copy, or cause to be copied,
printed, summarized or compiled any software, Documents or other materials or
other Proprietary Information owned by the Company. The Executive further
represents that he will not retain in his possession any such software,
Documents, or other materials in machine or human readable forms.
7
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(c) PATENTS. Any patents, trademarks, inventions, discoveries,
applications or processes, software and computer programs devised, planned,
applied, created, discovered or invented by the Executive in the course of his
employment with the Company, or which pertain to any aspect of the Business of
the Company, shall be the sole and absolute property of the Company, and the
Executive shall make a prompt report thereof to the Company and promptly execute
and deliver, for no additional consideration, any and all documents reasonably
requested by the Company to assure the Company the full and complete ownership
thereof.
(d) DOCUMENTS. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies thereof,
including, but not limited to: papers, books, records, tangible things,
correspondence, communications, telex messages, memoranda, work papers, reports,
affidavits, statements, summaries, analyses, evaluations, client records and
information, agreements, agendas, advertisements, instructions, charges,
manuals, brochures, publications, directories, industry lists, schedules, price
lists, client lists, statistical records, training manuals, computer printouts,
books of account, records and invoices reflecting business operations, all
things similar to any of the foregoing, however denominated. In all cases where
originals are not available, the term "Documents" shall also mean identical
copies of original documents or non-identical copies thereof.
(e) COMPANY'S CLIENTS. The "Company's Clients" shall mean any
persons, partnerships, corporations, professional associations or other
organization for which the Company has performed services which are part of the
Business, as defined below.
(f) RESTRICTED PERIOD. The "Restricted Period" shall mean (A)
the Term (and renewals of the Term) of this Agreement and (B) a period of two
years following the termination (or nonrenewal) of the Term (or of any renewal
of the Term). Notwithstanding the foregoing, the Restricted Period shall
terminate upon the Company's election to terminate the Term or to fail to offer
to renew the Term upon its scheduled expiration, in each case without "Cause".
(g) RESTRICTED AREA. The "Restricted Area" shall mean the
United States of America, and its possessions and territories.
(h) BUSINESS. "Business" shall mean the business of providing
attorney referrals and related services to provide affordable access to the US
legal system to persons and organizations, all as currently provided by the
Company, and any additional business or lines of business which the Company or
any of its subsidiaries may engage in during the term of this Agreement and any
activities with respect to such Business.
(i) COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT. It is
understood by and between the parties hereto that the foregoing covenants
contained in Section 6(a), (b) and (c) are: (i) reasonable in scope and duration
in light of the nature of the Business and the area in which the Company or its
Subsidiaries engage in the Business; and (ii) are essential elements of
8
<PAGE>
this Agreement, and that, but for the agreement by the Executive to comply with
such covenants, the Company would not have agreed to enter into this Agreement.
Such covenants by the Executive shall be construed to be agreements independent
of any other provisions of this Agreement. Except as otherwise expressly
provided herein, the existence of any other claim or cause of action, whether
predicated on any other provision in this Agreement, or otherwise, as a result
of the relationship between the parties shall not constitute a defense to the
enforcement of such covenants against the Executive.
(j) SURVIVAL AFTER TERMINATION OF AGREEMENT. Notwithstanding
anything to the contrary contained in this Agreement, the covenants in Sections
6(a), (b) and (c) shall, to the extent provided for herein, survive the
termination of this Agreement and the Executive's employment with the Company.
(k) REMEDIES
(i) The Executive acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Section 6(a), (b) or (c) herein would be inadequate and
such breach shall cause irreparable harm to the Company. In recognition
of this fact, in the event of a breach by the Executive of any of the
provisions of Section 6(a) or (c) the Executive agrees that, in
addition to any remedy at law available to the Company, including, but
not limited to monetary damages, all rights of the Executive to payment
of severance payments, as provided for herein, may be suspended and
paid into escrow subject to forfeiture and payment to the Company if
the Executive is determined by arbitration or judicial ruling to have
violated any such provision; and if the Executive breaches any
provision of Sections 6(a), (b) or (c), then the Company, without
posting any bond, shall be entitled to obtain, and the Executive agrees
not to oppose on the basis of the adequacy of a remedy at law the
Company's request for, equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to
the Company.
(ii) The Executive acknowledges that the granting of
a temporary injunction, temporary restraining order or permanent
injunction merely prohibiting the use of Proprietary Information would
not be an adequate remedy upon breach or threatened breach of Section
6(a), (b) or (c) and consequently agrees, upon proof of any such
breach, to the granting or injunctive relief prohibiting any form of
competition with the Company that is prohibited by this Agreement.
Nothing herein contained shall be construed as prohibiting the Company
from pursuing all other remedies available to it for such breach or
threatened breach, and no injunction shall prevent or impair
enforcement of remedies for damages.
9
<PAGE>
(l) SEVERABILITY. If a court of competent jurisdiction
determines that any of the covenants, or provisions thereof, contained in this
Section 6 are unreasonable as to their duration or geographic scope, or are
otherwise unenforceable, the parties hereto desire such court to reform such
provisions so that they cover the maximum period of time and geographic scope as
to which they can be enforced, and to enforce such covenant, or portion thereof,
to the fullest extent permissible by the laws of the State of Florida.
7. WITHHOLDING. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the Executive's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation.
8. NOTICES. All notices, requests, demands or other communications by
the terms hereof required or permitted to be given by one party to another shall
be given in writing by personal delivery, by telecopier or by regular mail,
postage prepaid, addressed to such other party or delivered to such other party
as follows:
If to the Company: 1500 N.W. 62nd Street, #404
Fort Lauderdale, Florida 33309
If to the Executive: 10213 Vestal Court
Coral Springs, Florida 33071
or at such other address or telecopy number as may be given by any of them to
the others in writing from time to time and such notices, requests, demands or
other communication shall be deemed to have been received when hand delivered,
on the Business Day after the date telecopied (with receipt confirmed) or, if
mailed, the fourth Business Day following the day of the mailing thereof,
provided that if any such notice, request, demand or other communication shall
have been mailed and if regular mail service shall be interrupted by strikes or
other irregularities, such notice, request, demand or other communication shall
be deemed to have been received on the fourth Business Day following the
resumption of normal mail service.
10
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9. ENTIRE AGREEMENT. This Agreement, sets forth the entire agreement
and understanding between the parties, and merge and supersede all prior
discussions, agreements and understandings of every kind and nature among them
as to the subject matter hereof.
10. AMENDMENTS TO AGREEMENT. This Agreement shall not be amended except
by a writing signed by each party to the Agreement, and this Agreement may not
be discharged except by performance in accordance with its terms or by a writing
signed by each party to the Agreement.
11. US DOLLARS. All dollar amounts in this Agreement are stated in
United States Dollars.
12. GOVERNING LAW. THIS AGREEMENT AND ITS VALIDITY, CONSTRUCTION AND
PERFORMANCE SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF FLORIDA, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by the Executive
without the prior written consent of the Company. This Agreement may be assigned
by the Company in connection with the sale, transfer or other disposition of all
or substantially all of the Company's assets or business, and the provisions
hereof, including the non-compete and confidentiality provisions of this
Agreement, shall inure to the benefit of such successor or assign of the
Company.
14. PRONOUNS. Whenever the context requires, the use in this Agreement
of a pronoun of any gender shall be deemed to refer also to any other gender,
and the use of the singular shall be deemed to refer also to the plural.
15. HEADINGS. The headings of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
16. ATTORNEYS' FEES. If any action or proceeding is brought in any
court by any party to enforce any provisions of this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all of its
reasonable costs and expenses incurred in connection with such action, including
attorneys' fees.
17. CALCULATION OF TIME PERIODS. When calculating the period of time
within which or following which any act is to be done or step taken pursuant to
this Agreement, the date which is the reference date in calculating such period
shall be excluded. If the last day of such period is not a Business Day, the
period in question shall end on the immediately following Business Day.
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18. REFERENCES TO LAW. All references in this Agreement to any law,
by-law, rule, regulation, order or act of any government, governmental body or
other regulatory body or authority shall be construed as a reference thereto as
amended or re-enacted from time to time or as a reference to any successor
thereto.
19. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, by original or facsimile signature, each of which so
executed shall be deemed to be an original and such counterparts together shall
be deemed to be one and the same instrument, which shall be deemed to be
executed as of the date first above written.
20. FURTHER ASSURANCES. The parties hereto shall sign such further
documents and do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part thereof.
21. SURVIVAL. Any termination of this Agreement shall not affect the
ongoing provisions of this Agreement which shall survive such termination in
accordance with their terms.
22. SEVERABILITY. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
23. CONSTRUCTION. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE EXECUTIVE AND THE COMPANY EACH ACKNOWLEDGES THAT HE OR IT HAS READ ALL OF
THE TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY
ITS TERMS AND CONDITIONS.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth in first paragraph of this Agreement.
THE COMPANY:
AND JUSTICE FOR ALL, INC.
a Florida corporation
By: /s/ M. J. COHEN
----------------------------
Its: TREASURER AND CFO
THE EXECUTIVE:
/s/ BRETT MERL
----------------------------------
13
EXHIBIT 10.f
EMPLOYMENT AGREEMENT
AGREEMENT made effective as of the 18th day of October, 1999, by and
between Legal Club of America Corporation, with its principal offices in
Sunrise, Florida, (the "Company") and Rich Campanaro, an individual residing at
1 Ocean Ridge Court, Ponte Vedra Bch., Florida (the "Executive").
PRELIMINARY STATEMENT
The Company has agreed to employ the Executive and the Executive has
agreed to accept such employment, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable considerations, the receipt and adequacy of
which are hereby conclusively acknowledged, the parties, intending to be legally
bound, agree as follows:
1. TERM. The Company hereby employs the Executive as the President and Chief
Operating Officer of the Company (as used herein, reference to the Company
includes its subsidiaries), and the Executive agrees to serve the Company as
such, upon the terms and conditions hereof. The term of employment hereunder
shall commence on the date hereof and continue for an initial term (the "Initial
Term") ending on the first anniversary of the date hereof. The Initial Term
shall renew for a period (the "Renewal Term") commencing at the end of the
Initial Term and continuing until the third anniversary of the date hereof,
unless either party gives notice to the other of an intention not to renew the
Initial Term. Such notice of non-renewal of the Initial Term may be given for
any reason or no reason, and shall be given at least 90 days before the end of
the Initial Term. The Initial Term and, if applicable, the Renewal Term are
collectively called the "Term". In any event, the Term is subject to early
termination in accordance with the provisions hereof.
2. DUTIES. (a) Executive shall serve as the Company's President and Chief
Operating Officer, and shall be responsible for the formulation, direction,
management and implementation of the Company's operations, subject only to the
direction and control of the Company's Chief Executive Officer ("CEO") and Board
of Directors. The Executive shall also discharge such duties and authority as
are generally incident to such position, or in such other senior management
position as the Company shall determine, provided that such other position shall
be comparable in authority and responsibility to the position specified above.
The Executive will report to the Company's CEO and its Board of Directors. The
Executive will hold such senior offices and/or such directorships in the Company
and/or any subsidiaries or affiliates of the Company to which, from time to
time, he may be elected or appointed, as agreed to by the Company and the
Executive.
(b) The Executive agrees that he will devote substantially all of his
business time and attention to the affairs of the Company and use his best
efforts to promote the business and interests of the Company and that he will
not engage, directly or indirectly, in any other occupation during the term of
employment. It is understood, however, that the foregoing will not
<PAGE>
prohibit the Executive from engaging in personal investment activities for
himself and his family which do not interfere with the performance of his duties
hereunder.
3. COMPENSATION. The Company will pay the Executive for all services to be
rendered by the Executive hereunder (including, without limitation, all services
to be rendered by him as an officer and/or director of the Company and its
subsidiaries and affiliates):
(a) A salary ("Base Annual Pay") of $180,000, payable in installments
in accordance with customary payroll practices for senior executives of the
Company. Such installments, however, shall not exceed (4) four weeks between
payments.
(b) Bonus compensation for each fiscal year of the Company, based on
Executive's performance and the overall performance of the Company, either on an
"ad hoc" basis or pursuant to a bonus plan or arrangement as may be established
at the Company's discretion for senior executives of the Company.
Notwithstanding any conflicting or inconsistent provisions of this Agreement,
bonus compensation shall be payable in such amounts, if any, and at such times,
if any, as determined by the Company's Board of Directors or the Compensation
Committee thereof, in its sole and absolute discretion.
(c) Subject to the approval of the Company's Board of Directors, grants
of stock options to buy shares the Company's common stock at the per share price
provided in the Company's next sale of at least $1 million of its common stock
(the "Capital Raise") in accordance with the following schedule:
(1) 166,667 shares upon the consummation of the Capital Raise,
(2) 166,666 shares on the first anniversary of this Agreement,
and
(3) 166,666 shares on the second anniversary of this
Agreement.
The Executive will receive the stock option grants described in 2) and 3) above
only if the Company has consummated a Capital Raise, as stated above, the
Renewal Term comes into effect, and he remains employed by the Company on the
first and second anniversaries of the date of this Agreement, respectively.
These stock options will be subject to the terms of the Company's stock option
plan, and to stockholder approval to amend this plan to increase the number of
shares of the Company's common stock covered thereby. The Executive has
determined to enter into this Agreement and accept the foregoing share grants
based on his own independent investigation, and not in reliance upon any
representation, warranty or statement of the Company or any of its affiliates.
The Executive will enter into underwriter's hold back agreements on the same
terms as applicable to the Company's CEO. If the Company shall consummate any
stock splits, reverse splits or stock dividends before the first or second
anniversaries of the date of this Agreement, as the case may be, then the number
of stock options issued thereafter shall be appropriately and proportionally
adjusted. It is agreed that the Company shall seek its Board of Directors'
approval of the foregoing stock option grants within
<PAGE>
one month of the execution of this Agreement, and any necessary stockholder
approval not later than the next annual meeting of the Company's stockholders.
It is further agreed that the terms of this Agreement are subject to the
approval of the Company's Board of Directors, which the Company shall also seek
within one month from the date hereof.
Nothing contained herein shall prohibit the Board of Directors of the Company,
in its sole discretion, from increasing the compensation payable to the
Executive pursuant to this Agreement. The Base Annual Pay shall be increased by
20% on the date that is six (6) months after the date of this Agreement, and on
the same date in each year thereafter during the Renewal Term, if applicable.
4. EXPENSES. The Executive shall be entitled to reimbursement by the Company, in
accordance with the Company's policies then applicable to senior executives at
the Executive's level, against appropriate vouchers or other receipts for
authorized travel, entertainment and other business expenses reasonably incurred
by him in the performance of his duties hereunder. Without limiting the
generality of the foregoing, the Company will pay or reimburse the Executive for
the use of a pager and for his business use of a cellular telephone.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to participate in, and
receive benefits under, any pension, profit sharing, insurance, hospitalization,
medical, disability, stock purchase, stock option (as set forth in paragraph 3
(c)), stock ownership, vacation or other employee benefit plan, program or
policy of the Company which may be in effect at any time during the course of
his employment by the Company and which shall be generally available to senior
executives of the Company occupying positions of comparable status or
responsibility, subject to the terms of such plans, programs or policies.
Notwithstanding the foregoing, the Company may, in its discretion, at any time
and from time to time, change or revoke any of its employee benefits plans,
programs or policies and Executive shall not be deemed, by virtue of this
Agreement, to have any vested interest in any such plans, programs or policies.
The Executive shall also be entitled to three (3) weeks' paid vacation per year.
Without limiting the generality of the foregoing, upon the inception of this
agreement the Executive shall be entitled to receive Group Health and Dental
Insurance coverages for himself and his family at no charge to Executive.
6. WITHHOLDING. All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other governmental assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
7. DEATH; PERMANENT DISABILITY. Upon the death of the Executive during the term
of this Agreement, the term of this Agreement shall terminate. If during the
term of this Agreement the Executive fails because of illness or other
incapacity to perform the services required to be performed by him hereunder for
any consecutive period of more than 60 days, or for shorter periods aggregating
more than 60 days in any consecutive twelve-month period (any such illness or
incapacity being hereinafter referred to as "permanent disability"), then the
Company,
<PAGE>
in its discretion, may at any time thereafter terminate the Term upon not less
than 10 days' written notice thereof to the Executive, and this Agreement shall
terminate and come to an end upon the date set forth in said notice as if said
date were the termination date of this Agreement; provided, however, that no
such termination shall be effective if prior to the date when such notice is
given, the Executive's illness or incapacity shall have terminated and he shall
be physically and mentally able to perform the services required hereunder and
shall have taken up and be performing such duties.
If the Executive's employment shall be terminated by reason of his death or
permanent disability, the Executive or his estate, as the case may be, shall be
entitled to receive (i) any earned and unpaid salary accrued through the date of
termination, (ii) a pro rata portion of any annual bonus which the Executive
would otherwise have been entitled to receive pursuant to any bonus plan or
arrangement for senior executives of the Company (such pro rata portion to be
payable at the time such annual bonus would otherwise have been payable to the
Executive) and (iii) subject to the terms thereof, any benefits which may be due
to the Executive on the date of termination under the provisions of any employee
benefit plan, program or policy.
8. TERMINATION
(a) FOR CAUSE. The Company may at any time during the term of this
Agreement, by written notice, terminate the employment of the Executive for
cause, the cause to be specified in the notice. For purposes of this Agreement,
"cause" shall mean (i) any gross negligence, self dealing or material willful
misconduct of the Executive in connection with the performance of any of his
duties hereunder, including without limitation misappropriation of funds or
property of the Company, securing or attempting to secure personally any profit
in connection with any transaction entered into on behalf of the Company or any
material willful and intentional act having the effect of injuring the
reputation, business or business relationships of the Company (ii) material
breach of any covenants contained in this Agreement; (iii) engaging in any
criminal enterprise involving moral turpitude, (iv) persistent failure of the
Executive to perform his responsibilities as contemplated hereby, or (v)
indictment or being held for trial in connection with misdemeanor involving
moral turpitude or any felony, provided, however, that (1) if the Executive is
defending against the charge in good faith and by appropriate proceedings, then
the Company shall suspend the Executive from office without compensation of any
type, pending the resolution of the matter; and (2) unless the Executive is
exonerated from the charges, he shall be terminated for cause effective upon the
date he was indicted or held for trial. Termination for cause shall be effective
upon the giving of such notice and the Executive shall be entitled to receive
(i) any earned and unpaid salary accrued through the date of termination and
(ii) subject to the terms thereof, any benefits which may be due to the
Executive on such date under the provisions of any employee benefit plan,
program or policy plus six months health, dental and disability benefits. The
Executive hereby disclaims any right to receive a pro rata portion of any annual
bonus with respect to the fiscal year in which such termination occurs, and any
stock option grants under Section 3 c that would have been issuable after such a
termination.
<PAGE>
(b) WITHOUT CAUSE. A. The Company may terminate the Initial Term at any
time, upon at least 90 days' notice to Executive, without Cause, provided that
in such event that the Company shall pay the Executive One Hundred Thousand
Dollars ($100,000) as severance, in addition to (i) any additional earned and
unpaid compensation accrued hereunder through the date of termination, (ii)
subject to the terms thereof, any benefits which may be due to the Executive on
such date under the provisions of any employee benefit plan, program or policy.
B. The Company may terminate the Renewal Term, if applicable at any
time, upon at least 90 days' notice to the Executive, without Cause, provided
that in such event that the Company shall pay the Executive twelve months'
continuation of Base Annual Salary, as severance, in addition to (i) any
additional earned and unpaid compensation accrued hereunder through the date of
termination, (ii) subject to the terms thereof, any benefits which may be due to
the Executive on such date under the provisions of any employee benefit plan,
program or policy, (iii) continuation of health, dental and disability coverage
for 12 months following such termination, and (iv) a pro rata portion of any
annual bonus with respect to the fiscal year in which such termination occurs.
The Executive may also terminate the Term at any time, upon at least 90 days'
notice to the Company, with the same effects as if the Company terminated the
Term for Cause, as set forth above.
C. In the event of a Change in Control, as defined below, or any
material breach of this Agreement by the Company that remains uncured for 20
days after the Executive notifies the Company thereof, the Executive may, within
60 days of the effective date of such Change in Control or the uncured breach,
terminate the Term of this Agreement by giving 30 days' notice to the Company,
with the effects as provided herein for a termination of the Renewal Term by the
Company without Cause. As used herein, a "Change in Control" means the
occurrence of a change in the beneficial ownership of voting securities of the
Company (other than pursuant to transfers among present stockholders of the
Company, public offerings or debt or equity funding of the Company in which the
Company receives the proceeds of such sale; each, an "Exempt Share Purchase")
representing 50% or more of the combined voting power of the Company's
securities, or if a shareholder(s) of the Company (who does not presently have
such power and other than shareholders acquiring stock by an Exempt Share
Purchase) acquires the power to elect a majority of the Company's Board of
Directors.
9. INSURANCE. The Executive agrees that the Company may procure insurance on the
life of the Executive, in such amounts as the Company may in its discretion
determine, and with the Company named as the beneficiary under the policy or
policies. The Executive agrees that upon request from the Company he will submit
to a physical examination and will execute such applications and other documents
as may be required for the procurement of such insurance. The Company agrees
that such information will be held in the strictest confidence and will not be
disseminated without the Executive's written approval.
10. NON-COMPETITION; SOLICITATION.(a) The Executive acknowledges and recognizes
that the highly competitive nature of the Company's business and that the
goodwill and patronage of the Company's customers and network of attorneys
constitute a substantial asset of the
<PAGE>
Company, having been acquired through considerable time, effort and money.
Accordingly, the Executive agrees that during his employment with the Company
and for a period of 12 months after Executive leaves the Company's employ for
any reason, he shall not, without the written consent of the Company, directly
or indirectly, either individually or as an employee, agent, partner,
shareholder, consultant, option holder, lender of money, guarantor or in any
other capacity other than passive investor of less than 5% of the equity,
participate in, engage in or have an active financial interest or management
position in any business, firm, company or other entity if it competes with any
material business operation conducted by the Company or its subsidiaries or
affiliates or any successor or assign thereof, nor will he solicit any other
person to engage in any of the foregoing activities, in each case within the
United States of America, its possessions and territories. The Executive
acknowledges that the Company's business includes a nationwide network of
attorneys and a national customer base, and therefore agrees that such the scope
of this restriction is appropriate and necessary to protect the Company's
legitimate business interests. Participation in the management of any business
operation other than in connection with the management of a business operation
which is in direct competition with the Company or its subsidiaries or
affiliates or any successor or assign thereof shall not be deemed to be a breach
of this Section 10(a). The foregoing provisions of this Section 10(a) shall not
prohibit the ownership by the Executive (as the result of open market purchase)
of 2% or less of any class of capital stock of a company which is regularly
traded on a national securities exchange or over-the-counter on the NASDAQ
System.
(b) The Executive will not at any time during his employment with the
Company and for a period of 12 months thereafter, solicit or assist or encourage
the solicitation of any employee of the Company or any of its subsidiaries or
affiliates to work for Executive or for any business, firm, Company or other
entity in which the Executive, directly or indirectly, in any capacity described
in Section 10(a) hereof, participates or engages (or expects to participate or
engage) or has (or expects to have) a financial interest or management position.
(c) The Executive shall not at any time during his employment and for a
period of 12 months thereafter, directly or indirectly compete with the Company
by soliciting, inducing or influencing any of the customers or attorneys of the
Company or its attorney network to discontinue or reduce the extent of such
relationship with the Company, or commence or expand any such relationship with
any competitor of the Company.
(d) If any of the covenants contained in this Section 10 or any part
thereof, is held by a court of competent jurisdiction to be unenforceable
because of the duration of such provision, the activity limited by or the
subject of such provision and/or the area covered thereby, then the court making
such determination shall construe such restriction so as to thereafter be
limited or reduced to be enforceable to the greatest extent permissible by
applicable law.
11. INVENTIONS, ETC. The Executive agrees that any and all systems,
work-in-progress, inventions, discoveries, improvements, processes, compounds,
formulae, patents, copyrights and trademarks, made, discovered or developed by
him, solely or jointly with others, or otherwise, during the term of his
employment by the Company, and which may be useful in or
<PAGE>
relate to any business of the Company and/or any subsidiary or affiliate of the
Company shall be fully disclosed by the Executive to the Chief Executive Officer
of the Company, and shall be the sole and absolute property of the Company, and
the Company will be the sole and absolute owner thereof. The Executive agrees
that at all times, both during his employment and after the termination of his
employment, he will keep all of the same secret from everyone except the Company
and its duly authorized employees and will disclose the same to no one except as
required in good faith in the course of his employment with the Company, or by
law, or unless otherwise authorized in writing by the Chief Executive Officer of
the Company.
12. PATENTS. The Executive agrees, at the request of the Company, to make
application in due form for United States Letters Patent and foreign Letters
Patent on any of such systems, inventions, discoveries, improvements, processes,
compounds and formulae referred to in Section 11 hereof, and to assign to the
Company all of his right, title and interest in and to said inventions,
discoveries, improvements, processes, compounds, formulae and patent
applications therefor or patents thereon, and to execute at any and all times
any and all instruments, and to do any and all acts necessary, or which the
Company may deem desirable, in connection with such applications for Letters
Patent, in order to establish and perfect in the Company the entire right, title
and interest in and to said systems, inventions, discoveries, improvements,
processes, compounds, formulae and patent applications therefor, or in the
conduct of any proceedings or litigation in regard thereto. It is understood and
agreed that all costs and expenses, including but not limited to reasonable
attorneys' fees, incurred at the request of the Company in connection with any
action taken by an Executive pursuant to this Section 12, shall be borne by the
Company.
13. CONFIDENTIAL INFORMATION, ETC. The Executive agrees that he shall not,
during or after the termination of this Agreement for a period of at least 5
years after any such termination, divulge, furnish or make accessible to any
person, firm, Company or other business entity, any information, trade secrets,
technical data or know-how relating to the business, business practices,
methods, products, processes, equipment, clients' prices, lists of customers or
marketing agents of the Company, terms of marketing arrangements or the attorney
network list, or other confidential or secret aspect of the business of the
Company and/or any subsidiary or affiliate, except as may be required in good
faith in the course of his employment with the Company or (upon prior notice to
the Company) by law, without the prior written consent of the Company, unless
such information shall become public knowledge or becomes available from
independent sources, in each case other than by reason of Executive's breach of
the provisions hereof.
14. ACCEPTANCE BY PARTIES. Each of the Executive and the Company accepts all of
the terms and provisions of this Agreement and agrees to perform all of the
covenants on his or its part to be performed hereunder.
15. EQUITABLE REMEDIES. The Executive acknowledges that he has been employed for
his unique talents and that his leaving the employ of the Company would
seriously hamper the business of the Company and that the Company will suffer
irreparable damage if any provisions
<PAGE>
of Sections 10, 11, 12, or 13 hereof are not performed strictly in accordance
with their terms or are otherwise breached. The Executive hereby expressly
agrees that the Company shall be entitled as a matter of right to injunctive or
other equitable relief, in addition to all other remedies permitted by law, to
prevent a breach or violation by the Executive and to secure enforcement of the
provisions of Sections 10,11, 12 or 13 hereof. Resort to such equitable relief,
however, shall not constitute a waiver or any other rights or remedies which the
Company may have.
16. INDEMNIFICATION. Company further agrees to maintain Directors and Officers
liability insurance in amounts commensurate with the business risk, and will
reimburse all legal and related expenses not so covered. Such indemnification
shall continue after the Executive leaves the Company for actions and duties
discharged while in the employ of the Company.
17. ENTIRE AGREEMENT. This Agreement memorializes, encompasses and supersedes
the parties understandings and agreement relative to the Executive's acceptance
of employment hereunder, and constitutes the entire agreement between the
parties hereto and there are no other terms other than those contained herein.
No variation or modification hereof shall be deemed valid unless in writing and
signed by the parties hereto and no discharge of the terms hereof shall be
deemed valid unless by full performance of the parties hereto or by writing
signed by the parties hereto. No waiver by the Company or any breach by the
Executive of any provision or condition of this Agreement by him to be performed
shall be deemed a waiver of a breach of a similar or dissimilar provision or
condition at the same time or any prior or subsequent time.
18. SEVERABILITY. In case any provision in this Agreement shall be declared
invalid, illegal or unenforceable by any court of competent jurisdiction, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
19. NOTICES. All notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be deemed to have been given
at the time when mailed in the United States enclosed in a registered or
certified post-paid envelope, return receipt requested, and addressed to the
addresses of the respective parties stated below or to such changed addresses as
such parties may fix by notice:
To the Company: Legal Club of America Corporation
1601 N. Harrison Parkway
Suite 200, Building A
Sunrise, FL 33322
To the Executive:
1 Ocean Ridge Court
Ponte Vedra Bch., Florida 32082
provided, however, that any notice of change of address shall be effective only
upon receipt.
<PAGE>
20. SUCCESSORS AND ASSIGNS. This Agreement is personal in its nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder (except for an
assignment or transfer by the Company to a successor as contemplated by the
following proviso); PROVIDED, HOWEVER, that the provisions hereof (including but
not limited to the non-compete and confidentiality provisions hereof) shall
inure to the benefit of, and be binding upon, any successor of the Company,
whether by merger, consolidation, transfer of all or substantially all of the
assets of the Company, or otherwise, and upon the Executive, his heirs,
executors, administrators and legal representatives.
21. GOVERNING LAW. This Agreement and its validity, construction and performance
shall be governed in all respects by the internal laws of the State of Florida,
without giving effect to any principles of conflict of laws.
22. HEADINGS. The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of this
Agreement.
23. ARBITRATION. Except as otherwise provided in this Agreement, any dispute
arising out of or in connection with this Agreement or the employment of the
Executive by the Company shall be resolved by binding arbitration in Miami,
Florida, in accordance with the American Arbitration Association's rules and
procedures then in effect and applicable to employment disputes. In any such
arbitration proceedings, the arbitrators shall have the right to order such
document production, exchange of exhibits, interviews of witnesses and other
discovery matters as they determine to be appropriate. The fees and expenses of
the arbitration, including but not limited to legal fees and arbitrator's fees,
shall be borne as the arbitrators may determine to be appropriate. A judgment on
the arbitration award may be entered in any court of competent subject matter
jurisdiction in Miami-Dade County. In the event that a party hereto seeks an
injunctive or equitable remedy, then a proceeding therefor may be commenced and
maintained in such a Court in Miami-Dade County. The parties consent and waive
all objections to such jurisdiction and venue.
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals
the day and year first above written.
LEGAL CLUB OF AMERICA CORPORATION
By: /S/ BRETT MERL
-----------------------------
Executive
/S/ RICHARD CAMPANARO
-----------------------------
EXHIBIT 10.g
EMPLOYMENT AGREEMENT
AGREEMENT made effective as of the 17th day of September, 1999, by and
between Legal Club of America Corporation with its principal offices in Sunrise,
Florida, (the "Company") and Michael S. Samach, an individual residing at 315
Palm Blvd, Weston, Florida (the "Executive").
PRELIMINARY STATEMENT
The Company has agreed to employ the Executive and the Executive has
agreed to accept such employment, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable considerations, the receipt and adequacy of
which are hereby conclusively acknowledged, the parties, intending to be legally
bound, agree as follows:
1. TERM. the Company hereby employs the Executive as Chief Financial Officer of
the Company (as used herein, reference to the Company includes its
subsidiaries), and the Executive agrees to serve the Company as such, upon the
terms and conditions hereof. The term of employment hereunder (the "Term") shall
commence on the date hereof and continue until September I 8th, 2002, unless the
Term is otherwise terminated in accordance with the provisions hereof.
2. DUTIES. (a) Executive shall serve as the Company's Chief Financial Officer,
and shall be responsible for the Company's financial operations, financial
reporting, treasury matters, and information systems. the Executive shall also
discharge such duties and authority as are generally incident to such position,
or in such other senior management position as the Company shall determine,
provided that such other position shall be comparable in authority and
responsibility to the position specified above. The Executive will report to the
Company's CEO and its Board of Directors. The Executive will hold such senior
offices and/or such directorships in the Company and/or any subsidiaries or
affiliates of the Company to which, from time to time, he may he elected or
appointed, as agreed to by the Company and the Executive. The Company shall not
require the Executive, directly or indirectly, to violate any applicable laws,
regulations or ethical standards governing the conduct of a Certified Public
Accountant. (b) The Executive agrees that he will devote substantially all of
his employment time and attention to the affairs of the Company and use his best
efforts to promote the business and interests of the Company and that he will
not engage, directly or indirectly, in any other occupation during the term of
employment. It is understood, however, that the foregoing will not prohibit the
Executive from engaging in personal investment activities for himself and his
family which do not interfere with the performance of his duties hereunder.
3. COMPENSATION. The Company will pay the Executive for all services to be
rendered by the Executive-hereunder (including, without limitation, all services
to be rendered by him as an officer and/or director of the Company and its
subsidiaries and affiliates):
(a) A salary ("Base Annual Pay") of $ 135,000, payable in installments in
accordance with customary payroll practices for senior executives of the
Company. Such installments, however, shall not exceed (4) four weeks between
payments.
(b) Bonus compensation for each fiscal year of the Company, based on
Executive's performance and the overall performance of the Company, either on an
"ad hoc" basis or pursuant to a bonus plan or arrangement as may be established
at the Company's discretion for senior executives of the Company.
Notwithstanding any conflicting or inconsistent provisions of this Agreement,
bonus compensation shall be payable in such amounts, if any, and at such times,
if any, as determined by the Company's Board of Directors or the Compensation
Committee thereof, in its sole and absolute discretion.
(c) Subject to the approval of the Company's Board of Directors, grants of
stock options to buy shares the Company's common stock at the per share price
provided in the Company's next sale of at least $1 million of its common stock
(the "Capital Raise") in accordance with the following schedule:
(1) 100,000 shares upon the consummation of the Capital
Raise,
(2) 100,000 shares on September 18, 2000, and
<PAGE>
(3) 100,000 shares on September 18, 2001.
The Executive will receive the stock option grants described in 2) and 3) above
only if he remains employed by the Company on September 15, 2000 and 2001,
respectively. The Executive has determined to enter into this Agreement and
accept the foregoing share grants based on his own independent investigation,
and not in reliance upon any representation, warranty or statement of the
Company or any of its affiliates. The Executive will enter into underwriter's
hold back agreements on the same terms as applicable to the Company's CEO. The
Company and the Employee agree that if the Company shall consummate any stock
splits, reverse splits or stock dividends before September 18, 2000 or 2001, as
the case may be, then the number of stock options issued thereafter shall be
appropriately and proportionally adjusted. It is agreed that the Company's Board
of Directors' shall approve the foregoing stock option grants within one month
of the execution of this Agreement.
(1)
Nothing contained herein shall prohibit the Board of Directors of the Company,
in its sole discretion, from increasing the compensation payable to the
Executive pursuant to this Agreement. The Base Annual Pay shall be reviewed for
potential increase on an annual basis.
4. EXPENSES. The Executive shall be entitled to reimbursement by the Company, in
accordance with the Company's policies then applicable to senior executives at
the Executive's level, against appropriate vouchers or other receipts for
authorized travel, entertainment and other business expenses reasonably incurred
by him in the performance of his duties hereunder. Without limiting the
generality of the foregoing, the Company will pay or reimburse the Executive for
the use of a pager and for his business use of a cellular telephone.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to participate in, and
receive benefits under, any pension, profit sharing, insurance, hospitalization,
medical, disability, stock purchase, stock option (as set forth in paragraph
3(c), stock ownership, vacation or other employee benefit plan, program or
policy of the Company which may be in effect at any time during the course of
his employment by the Company and which shall be generally available to senior
executives of the Company occupying positions of comparable status or
responsibility, subject to the terms of such plans, programs or policies.
Notwithstanding the foregoing, the Company may, in its discretion, at any time
and from time to time, change or revoke any of its employee benefits plans,
programs or policies and Executive shall not be deemed, by virtue of this
Agreement, to have any vested interest in any such plans, programs or policies.
The Executive shall also be entitled to two (2) weeks' paid vacation per year.
Without limiting the generality of the foregoing, (a) upon the inception of this
agreement the Executive shall be entitled to receive Group Health and Dental
Insurance for himself and his family at no charge to Executive, and at the
Executive's option, the Company will pay the amount of the Company's premium for
these coverages to the Executive, in lieu of providing such coverage, (b) the
Executive will be entitled to long term disability insurance coverage at the
same time as such coverage is made available to the Company's Chief Executive
Officer, and (c) the Company will pay the costs and expenses required to keep
the Executive in good standing as a certified public accountant (including dues,
licensure, and continuing professional education costs).
6. WITHHOLDING. All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other governmental assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
7. DEATH; PERMANENT DISABILITY. Upon the death of the Executive during the term
of this Agreement, this Agreement shall terminate. If during the term of this
Agreement the Executive fails because of illness or other incapacity to perform
the services required to be performed by him hereunder for any consecutive
period of more than 60 days, or for shorter periods aggregating more than 60
days in any consecutive twelve-month period (any such illness or incapacity
being hereinafter referred to as "permanent disability"), then the Company, in
its discretion, may at any time thereafter terminate this Agreement upon not
less than 10 days' written notice thereof to the Executive, and this Agreement
shall terminate and come to an end upon the date set forth in said notice as if
said date were the termination date of this Agreement; provided, however, that
no such termination shall be effective if prior to the date when such notice is
given, the Executive's illness or incapacity shall have terminated and he shall
be physically and mentally able to perform the services required hereunder and
shall have taken up and be performing such duties.
If the Executive's employment shall be terminated by reason of his
death or permanent disability, the Executive or his estate, as the case may be,
shall be entitled to receive (i) any earned and unpaid salary accrued through
the date of termination, (ii) a pro rata portion of any annual bonus which the
Executive would otherwise have been entitled to receive pursuant to any
<PAGE>
bonus plan or arrangement for senior executives of the Company (such pro rata
portion to be payable at the time such annual bonus would otherwise have been
payable to the Executive) and (iii) subject to the terms thereof, any benefits
which may be due to the Executive on the date of termination under the
provisions of any employee benefit plan, program or policy.
8. VENUE. The Executive and the Company agree that the Executive's duties are to
be discharged principally from the Sunrise Florida location or some location in
Dade, Broward, or Palm Beach Counties. It is further agreed to that the
Executive will not he required to travel more than 25% of his time worked.
9. TERMINATION.
(a) FOR CAUSE. The Company may at any time during the term of this
Agreement, by written notice, terminate the employment of the Executive for
cause, the cause to be specified in the notice. For purposes of this Agreement,
"cause" shall mean (i) any gross negligence, self dealing or material willful
misconduct of the Executive in connection with the performance of any of his
duties hereunder, including without limitation misappropriation of finds or
property of the Company, securing or attempting to secure personally any profit
in connection with any transaction entered into on behalf of the Company or any
material willful and intentional act having the effect of injuring the
reputation, business or business relationships of the Company (ii) material
breach of any covenants contained in this Agreement; (iii) engaging in any
criminal enterprise involving moral turpitude, or (iv) indictment or being held
for trial in connection with misdemeanor involving moral turpitude or any
felony, provided, however, that (I) if the Executive is defending against the
charge in good faith and by appropriate proceedings, then the Company shall
suspend the Executive from office without compensation-of any type, pending the
resolution of the matter; and (2) unless the Executive is exonerated from the
charges, he shall be terminated for cause effective upon the date he was
indicted or held for trial. Termination for cause shall be effective upon the
giving of such notice and the Executive shall be entitled to receive (i) any
earned and unpaid salary accrued-through-the date of termination plus six (6)
month's base salary ("Payout Period") and (ii) subject to the terms thereof, any
benefits which may he due to the Executive on such date tinder the provisions of
any employee benefit plan, program or policy plus six months health, dental and
disability benefits. The Executive hereby disclaims any right to receive a pro
rata portion of any annual bonus with respect to the fiscal year in which such
termination occurs. In addition, if the cause for termination involves a
criminal conduct, then the Executive shall not be entitled to the six months
continuation of Base Annual Salary (Payout Period).
(b) WITHOUT CAUSE. A. The Company may terminate the Term at any time, upon
at least 30 days' notice to Executive, without Cause, provided that in such
event that the Company shall pay the Executive Base Annual Pay (as then in
effect) for the greater of 12 months salary, or the amount due under the
remaining term of the agreement as severance (payout period), in addition to (i)
any additional earned and unpaid compensation accrued hereunder through the date
of termination, (ii) subject to the terms thereof, any benefits which may be due
to the Executive on such date under the provisions of any employee benefit plan,
program or policy; (iii) continuation of health, dental and disability coverage
for (he greater of 12 months or the period remaining under the term of the
agreement following such termination, (iv) a pro rata portion of any annual
bonus with respect to the fiscal year in which such termination occurs and, (v)
immediate vesting of all past present and future stock grants contemplated under
this agreement. B. The Executive - In the event of a Change in Control, as
defined below, or any breach of this agreement by the company, the Executive
may, within 60 days of the effective date of such Change in Control or the
breach, terminate the term of this Agreement, with the effects as provided
herein for a termination by the Company without Cause. As used herein, a "Change
in Control" means the occurrence of a change in the beneficial ownership of
voting securities of the Company (other than pursuant to transfers among present
stockholders of the Company, public offerings or debt or equity finding of the
Company in which the Company receives the proceeds of such sale) representing
50% or more of the combined voting power of the Company's securities, or if a
shareholder(s) of the Company (who does not presently have the power) acquires
the power to elect a majority of the Company's Board of Directors.
10. INSURANCE. The Executive agrees that the Company may procure insurance on
the life of the Executive, in such amounts as the Company may in its discretion
determine, and with the Company named as the beneficiary under the policy or
policies. The Executive agrees that upon request from (he Company he will submit
to a physical examination and will execute such applications and other documents
as may be required for the procurement of such. insurance. The Company agrees
that such information will be held in the strictest confidence and will not be
disseminated without the Executive's written approval.
11. SECOND HIGHEST LEVEL. Notwithstanding any other provisions herein, any
benefits made available to Executive shall be at the highest level made
available to the Company's other executives, second only to the Company's CEO.
12. NON-COMPETITION; SOLICITATION. (a) The Executive acknowledges and recognizes
that the highly competitive nature of the Company's business and that the
goodwill and patronage of the Company's customers and network of attorneys
constitute a
<PAGE>
substantial asset of(he Company, having been acquired through considerable time,
effort and money. Accordingly, the Executive agrees that during his employment
with the Company and for a period to run concurrent with the Payout Period (as
previously referred to) after Executive leaves the Company's employ for any
reason, he shall not, without the written consent of the Company, directly or
indirectly, either individually or as an employee, agent, partner, shareholder,
consultant, option holder, lender of money, guarantor or in any other capacity
other than passive investor, participate in, engage in or have an active
financial interest or management position in any business, firm, company or
other entity if it competes with any material business operation conducted by
the Company or its subsidiaries or affiliates or any successor or assign
thereof, nor will he solicit any other person to engage in any of the foregoing
activities, in each case within the United States of America, its possessions
and territories. The Executive acknowledges that the Company's business includes
a nationwide network of attorneys and a national customer base, and therefore
agrees that such the scope of this restriction is appropriate and necessary to
protect the Company's legitimate business interests. Participation in the
management of any business operation other than in connection with the
management of a business operation which is in direct competition with the
Company or its subsidiaries or affiliates or any successor or assign thereof
shall not be deemed to be a breach of this Section 10(a). The foregoing
provisions of this Section 10(a) shall not prohibit the ownership by the
Executive (as the result of open market purchase) of 1% or less of any class of
capital stock of a Company which is regularly traded on a national securities
exchange or over-the-counter on the NASDAQ System.
(b) The Executive will not at any time during his employment with
the Company and-for a period to run concurrent with the Payout Period, solicit
or assist or encourage the solicitation of any employee of the Company or any of
its subsidiaries or affiliates to work for Executive or for any business, firm,
Company or other entity in which the Executive, directly or indirectly, in any
capacity described in Section 10(a) hereof, participates or engages (or expects
to participate or engage) or has (or expects to have) a financial interest or
management position.
(c) The Executive shall not at any time during his employment and
for a period to run concurrent with the payout period, directly or indirectly
compete with the Company by soliciting, inducing or influencing any of the
customers or attorneys of the Company or its attorney network to discontinue or
reduce the extent of such relationship with the Company, or commence or expand
any such relationship with any competitor of the Company.
(d) If any of the covenants contained in this Section 10 or any
part thereof, is held by a court of competent jurisdiction to he unenforceable
because of the duration of such provision, the activity limited by or the
subject of such provision and/or the area covered thereby, then the court making
such determination shall construe such restriction so as to thereafter be
limited or reduced to be enforceable to the greatest extent permissible by
applicable law.
13. INVENTIONS, ETC. The Executive agrees that any and all systems,
work-in-progress, inventions, discoveries, improvements, processes, compounds,
formulae, patents, copyrights and trademarks, made, discovered or developed by
him, solely or jointly with others, or otherwise, during the term of his
employment by the Company, and which may be useful in or relate to any business
of the Company and/or any subsidiary or affiliate of the Company shall be filly
disclosed by the Executive to the Chief Executive Officer of the Company, and
shall be the sole and absolute property of the Company, and the Company will he
the sole and absolute owner thereof. The Executive agrees that at all times,
both during his employment and after the termination of his employment, he will
keep all of the same secret from everyone except the Company and its duly
authorized employees and will disclose the same to no one except as required in
good faith in the course of his employment with the Company, or by law, or
unless otherwise authorized in writing by the Chief Executive Officer of the
Company.
14. PATENTS. The Executive agrees, at the request of the Company, to make
application in due firm for United States Letters Patent and foreign Letters
Patent on any of such systems, inventions, discoveries, improvements,
processes., compounds and formulae referred to in Section 12 hereof, and to
assign to the Company all of his right, title and interest in and to said
inventions, discoveries, improvements, processes, compounds, formulae and patent
applications therefor or patents thereon, and to execute at any and all times
any and all instruments, and to do any and all acts necessary, or which the
Company may deem desirable, in connection with such applications for Letters
Patent, in order to establish and perfect in the Company the entire right, title
and interest in and to said systems, inventions, discoveries, improvements,
processes, compounds, formulae and patent applications therefor, or in the
conduct of any proceedings or litigation in regard thereto. It is understood and
agreed that all costs and expenses, including but not limited to reasonable
attorneys' fees, incurred at the request of the Company in connection with any
action taken by an Executive pursuant to this Section 12, shall be borne by the
Company.
15. CONFIDENTIAL INFORMATION, ETC. The Executive agrees that he shall not,
during or after the termination of this Agreement for a period to run concurrent
with the Payout Period, divulge, furnish or make accessible to any person, firm,
Company or other business entity, any information, trade secrets, technical data
or know-how relating to the business, business practices, methods, products,
processes, equipment, clients' prices, lists of customers or marketing agents of
the Company, terms of marketing
<PAGE>
arrangements or the attorney network list, or other confidential or secret
aspect of the business of the Company and/or any subsidiary or affiliate, except
as maybe required in good faith in the course of his employment with the Company
or by law, without the prior written consent of the Company, unless such
information shall become public knowledge or becomes available from independent
sources, in each case other than by reason of Executive's breach of the
provisions hereof.
16. ACCEPTANCE BY PARTIES. Each of the Executive and the Company accepts all of
the terms and provisions of this Agreement and agrees to perform all of the
covenants on his or its part to be performed hereunder.
17. EQUITABLE REMEDIES. The Executive acknowledges that he has been employed for
his unique talents and that his leaving the employ of the Company would
seriously hamper the business of the Company and that the Company will suffer
irreparable damage if any provisions of Sections 10, 11, 12 or 13 hereof are not
performed strictly in accordance with their terms or are otherwise breached. The
Executive hereby expressly agrees that the Company shall be entitled as a matter
of right to injunctive or other equitable relief, in addition to all other
remedies permitted by law, to prevent a breach or violation by the Executive and
to secure enforcement of the provisions of Sections 10, 11, 12 or 13 hereof.
Resort to such equitable relief, however, shall not constitute a waiver or any
other rights or remedies which the Company may have.
18. INDEMNIFICATION. Company further agrees to maintain Directors and Officers
liability insurance in amounts commensurate with the business risk, and will
reimburse all legal and related expenses not so covered. Such indemnification
shall continue after the Executive leaves the Company for actions and duties
discharged while in the employ of-the Company.
19. ENTIRE AGREEMENT. This Agreement memorializes, encompasses and supersedes
the parties understandings and agreement relative to the Executive's acceptance
of employment hereunder, and constitutes the entire agreement between the
parties hereto and there are no other terms other than those contained herein.
No variation or modification hereof shall be deemed valid unless in writing and
signed by the parties hereto and no discharge of the terms hereof shall be
deemed valid unless by full performance of the parties hereto or by a writing
signed by the parties hereto. No waiver by the Company or any breach by the
Executive of any provision or condition of this Agreement by him to be performed
shall be deemed a waiver of a breach of a similar or dissimilar provision or
condition at the same time or any prior or subsequent time.
20. SEVERABILITY. In case any provision in this Agreement shall be declared
invalid, illegal or unenforceable by any court of competent jurisdiction, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
21. NOTICES. All notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be deemed to have been given
at the time when mailed in the United States enclosed in a registered or
certified post-paid envelope, return receipt requested, and addressed to the
addresses of the respective parties stated below or to such changed addresses as
such parties may fix by notice:
To the Company: Legal Club of America Corporation
1601 N. Harrison Parkway, Suite 200 Bldg. A
Sunrise, FL 33322
To the Executive: Michael S. Samach
315 Palm Blvd.
Weston, FL. 33326
provided, however, that any notice of change of address shall be effective only
upon receipt.
22. SUCCESSORS AND ASSIGNS. This Agreement is personal in its nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder (except for an
assignment or transfer by the Company to a successor as contemplated by the
following proviso); PROVIDED, HOWEVER, that the provisions hereof (including but
not limited to the non-compete and confidentiality provisions hereof)
shall-inure-to the-benefit of, and be binding upon, any successor of the
Company, whether by merger, consolidation, transfer of all or substantially all
of the assets of the Company, or otherwise, and upon the Executive, his heirs,
executors, administrators and legal representatives.
<PAGE>
23. GOVERNING LAW. This Agreement and its validity, construction and performance
shall be governed in all respects by the internal laws of the State of Florida,
without giving effect to any principles of conflict of laws.
24. HEADINGS. The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of this
Agreement.
25. ARBITRATION. Except as otherwise provided in this Agreement, any dispute
arising out of or in connection with this Agreement or the employment of the
Executive by the Company shall be resolved by binding arbitration in Miami,
Florida, in accordance with the American Arbitration Association's rules and
procedures then in effect and applicable to employment disputes. In any such
arbitration proceedings, the arbitrators shall have the right to order such
document production, exchange of exhibits, interviews of witnesses and other
discovery matters as they determine to be appropriate. The fees and expenses of
the arbitration, including but not limited to legal fees and arbitrator's fees,
shall be borne as the arbitrators may determine to be appropriate. A judgment on
the arbitration award may be entered in any court of competent subject matter
jurisdiction in Miami-Dade County. In the event that a party hereto seeks an
injunctive or equitable remedy, then a proceeding therefor may be commenced and
maintained in such a Court in Miami-Dade County. The parties consent and waive
all objection to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals
the day and year first above written.
LEGAL CLUB OF AMERICA CORPORATION
By: /s/ BRETT MERL
- ---------------------------
Title: CEO
EXECUTIVE:
/s/ MICHAEL SAMACH
- ---------------------------
Michael S. Samach
EXHIBIT 10.h
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
12TH DAY, 1997, between And Justice for All Inc., a Florida corporation (the
"company"), with a principal place of business at 1500 N.W. 62ND STREET, FORT
LAUDERDALE, FLORIDA, and Jason Krouse, an individual (the "Executive").
PRELIMINARY STATEMENT:
The Company is engaged in the "Business" (as defined in Section 6(h),
below); the Executive has experience and expertise in the Business, the Company
wishes to employ the Executive and the Executive wishes to be employed by the
Company, all subject to the terms, conditions and covenants contained herein.
The Company has established a valuable reputation of expertise and goodwill in
the Business; the Executive, has and will become familiar with, and currently
possesses, the manner, methods, trade secrets and other confidential information
pertaining to the Business, including the Company's customers and referral base.
NOW, THEREFORE, in consideration of the mutual covenants and premises
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby conclusively acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, all upon the terms and conditions set
forth herein. The above Preliminary Statement is true and correct, and is
incorporated herein by reference.
2. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD.
(a) The Executive shall serve as the VICE PRESIDENT OF SALES
for the Company, with such duties, authority, and responsibilities as are
commensurate with such position. By his execution hereof, the Executive accepts
such duties, authority, and responsibilities. In exercising his duties and
responsibilities hereunder, the Executive shall have all the power and authority
necessary to fill and discharge his duties and responsibilities hereunder and
shall abide by any lawful directions given by the Board of Directors of the
Company or its Chief Executive Officer or President. Notwithstanding the
foregoing, the Executive shall not, in connection with his employment hereunder,
cause or permit the Company or any of its subsidiaries to enter into any
agreement, commitment or arrangement with, or pay any fees or other amounts to
any person not dealing at arm's length with the Executive without first
disclosing the nature of such relationship to the President or Chief Executive
Officer of the Company and obtaining the prior written approval of the President
or Chief Executive Officer to any such agreement, commitment, arrangement or
payment. The Executive shall be responsible for such additional duties
commensurate with his Position may be reasonably determined by the President or
Chief Executive Officer of the Company from time to time.
<PAGE>
(b) During the term of his employment hereunder, the Executive
shall devote substantially all of his working time and attention to such duties
as set forth in Section 3(a), and the Executive shall faithfully and diligently
serve and endeavor to further the interests of the Company and otherwise to
discharge his obligations under this Agreement.
3. TERM. The Term of employment hereunder will commence on the
date hereof (the "Start Date") and end five (5) years after
the Start Date or two weeks after the Company gives the
Executive notice of termination, unless terminated pursuant to
Section 5 of this Agreement (the "Term"). The term shall
automatically renew for a period of 5 years, unless terminated
pursuant to Section 5 of this Agreement. All provisions of the
Agreement shall remain in effect during renewals of the Term,
and references to the "Term" herein shall be deemed to refer
to renewals of the Term.
4. COMPENSATION AND BENEFITS.
(a) SALARY. The Executive shall be paid a base salary (the
"Base Salary"), payable in accordance with the Company's customary payroll
policies or at such other intervals as may from time to time be used by the
Company for paying its employees generally, at an annual rate of Fifty Five
Thousand Dollars ($55,000.00) for the first year of the Term subject to
semi-annual review for increases of no less than 15% per year, but not
decreases, in such compensation at the discretion of the Board of Directors.
(b) PERFORMANCE-BASED BONUS. As additional compensation, the
Executive may be entitled to receive a performance-based bonus (the "Bonus"),
payable annually, in an amount, if any, determined by the Board of Directors in
its sole discretion.
(c) EXECUTIVE BENEFITS. The Executive shall be entitled to
participate in any benefit programs of the Company.
(d) VACATION. During each Fiscal Year, the Executive shall be
entitled to ONE WEEK vacation time and the Executive shall utilize such vacation
time as the Executive from time to time may determine as appropriate with regard
to the operations of the Company. The executive shall be entitled to two weeks
vacation at the completion of his/her second year of employment and three weeks
vacation at the end of his/her fifth year of employment.
(e) BUSINESS EXPENSE REIMBURSEMENT. The Executive shall
be entitled to receive reimbursement for all
reasonable out-of-pocket expenses incurred by him
during the Term of his employment (in accordance with
any policies and procedures reasonably established by
the Company) in connection with the proper and
efficient discharge of his duties hereunder, provided
the Executive properly accounts therefor by providing
the Company with statements and vouchers in form
reasonably satisfactory to the Company.
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<PAGE>
(f) COMMISSIONS. The employee shall be paid a 2% commission on
all business written by the company on an ongoing basis unless terminated as per
Section 5 of this Agreement. In the event the business is as a result of an
infomercial, employee will be entitled to 2% of the net revenues earned by the
company.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE.
(a) The Company shall be entitled to terminate Executive's
employment at any time:
(i) for "Cause" without severance pay or benefits,
(b) DEATH, In the event of the Executive's death, the
Executive's designated beneficiary, or, in the absence of such designation, the
estate or other legal representative of the Executive, shall be entitled to all
accrued Base Salary through the date of Death.
(c) DISABILITY, In the event of the Executive's "Disability,"
as defined below, the Company may terminate employment of the Executive
hereunder without any further obligations, except as expressly set forth in this
Section 6. In the event of termination due to the executive's Disability, the
Executive shall be entitled to receive the Executive's salary, at the annual
rate in effect immediately prior to the commencement of Disability, for a period
of not less than (180 days] from the date on which the Disability has commenced
as provided below. Any amounts provided for in this Section 5(c) shall be offset
by other long-term disability benefits provided to the Executive by the Company,
if any. "Disability," for the purposes of this Agreement, shall be deemed to
have occurred, at the Board of Directors' option, in the event the Executive, by
reason of mental or physical disability or illness, is unable to perform his
duties as described in Section 2 for a period (the "Period of Disability") of
more than [150 days in any one employment year, upon the Board of Directors
giving the Executive at least [30 days') written notice of its intention to so
terminate. Termination due to Disability shall be deemed to have occurred upon
the first day of the month following the determination of Disability as defined
in the preceding sentence. Anything herein to the contrary notwithstanding, it
following a termination of employment hereunder due to Disability, the Executive
becomes re-employed, whether as an employee or a consultant, any salary, annual
incentive payments or other benefits earned by the Executive from such
employment shall offset any salary continuation due to the Executive hereunder
commencing with the date of re-employment.
(d) TERMINATION BY THE COMPANY FOR CAUSE OR BY THE EXECUTIVE
FOR GOOD REASON.
(i) Nothing herein shall prevent the Company from
terminating the Executive's employment for "CAUSE," as defined below. In the
event of termination for Cause, the Executive shall continue to receive salary
only for the period ending with the date of such termination as provided in this
Section 6(d), Any rights and benefits the Executive may have in
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<PAGE>
respect of any other compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or programs.
(ii) "Cause" shall mean: (A) committing or
participating in an injurious act of fraud,
gross neglect, willful misconduct,
recklessness, embezzlement or dishonesty
against the Company; (B) engaging in a
criminal enterprise involving moral
turpitude; (C) indictment or being held for
trial for an act or acts (1) constituting a
felony under the laws of the United States
or any state thereof, or (2) if applicable,
loss of any state or federal license
required for the Executive to perform the
Executive's material duties or
responsibilities for the Company; provided
however that this Subsection 5(D)(II)(C)(2)
shall not be applicable if such loss of
license shall be a result of any actions or
inactions outside the Executive's control;
(D) habitual neglect of duty, gross
incompetence, or willful disobedience of
the reasonable and lawful orders of the
Company or the President or Chief Executive
Officer in a matter of substance which are
not inconsistent with the provisions of
this Agreement; (E) breach of or failure to
observe any of the material terms or
conditions of this Agreement; or (F) any
assignment of this Agreement by the
Executive in violation of this Agreement.
If an event constituting "Cause" under
Sections (A) (with respect to gross neglect
only), (D) or (E) is curable, then the
Executive shall have the opportunity to
cure the Same within fifteen (15) days
after receipt of written notice from the
Company setting forth the conduct committed
and that the Company intends to terminate
the Executive for "Cause."
(iii) The Executive may also terminate the Term
for "Good Reason" which shall mean the
Company's breach of or failure to observe
any of the material terms or conditions of
this Agreement, or any assignment of this
Agreement by the Company in violation of
this Agreement, and the Company's failure
to cure the same within fifteen (15) days
from its receipt of written notice from the
Executive, such notice to specify the
nature of the breach in reasonable detail
and that the Executive will terminate the
Term for Good Reason if the breach is not
cured. Upon termination of the Term for
Good Reason, the parties shall have the
same rights and obligations as are provided
in the Agreement for termination of the
Term by the Company without Cause,
(iv) In the event there is a breach or other
event giving the Executive or the Company
the right to terminate this Agreement after
the lapse of a cure period in (ii) or
(iii), which is capable of being cured and
cannot be cured by payment of money and
cannot be
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<PAGE>
reasonably cured within the fifteen (15)
day period applicable under either
subsection (ii) or (iii) above, then the
cure period shall be extended for up to
ninety (90) days after the expiration of
the applicable fifteen (15) day period, so
long as the Executive or the Company has
commenced the cure within the applicable
fifteen (15) day period and thereafter
diligently prosecutes it to completion.
(e) PARACHUTE PAYMENT. If the Executive's employment is
terminated due to (i) the occurrence of a Change of Control of the Company; or
(ii) the termination by the Executive of his employment with the Company as a
result of the Company's material breach hereof, then in any such event (an
"Event of Termination"), then (A) the Company shall pay to the Executive in a
lump sum payment (a "Parachute Payment") on the effective date of the
termination of the Executive's Employment (the "Termination Date") an amount
equal to the sum of three times the Executive's annualized includible
compensation for the base period, as such may be defined in ss. 280G of the
Internal Revenue code of 1986, as amended (or the regulations promulgated
thereunder) (the "Code") minus one dollar (it being the intent of this provision
that the Executive receive the maximum compensation payable under the Code in
such circumstances that is deductible to the Company and which does not trigger
the excise tax contemplated by the Code for excess parachute payments) ; and (B)
the Company shall maintain in full force and effect, at the Company's sole
expense (pursuant to waiver of COBRA premiums or otherwise) and for the
Executive's continued benefit until one year after the Termination Date all life
insurance, medical, health and accident, and disability plans and similar
arrangements in which the Executive was entitled to participate immediately
prior to the Event of Termination. In the event that the Executive's
participation in any such plan or program is barred by the plans or programs,
the Company shall arrange to provide the Executive with benefits, at the
Company's sole expense, substantially similar to those to which the Executive is
entitled under such plans and programs. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
this Section be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Termination Date or
otherwise; however, the Executive shall have the right (but not the obligation)
to voluntarily reduce the consideration payable to him upon a Change in Control,
in any manner the Executive may elect by written notice to the Company.
6. COVENANT NOT TO COMPETE AND CONFIDENTIALITY.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business and that the
goodwill and patronage of the Company's Clients (as defined below) constitute a
substantial asset of the Company having been acquired through considerable time,
money and effort. Accordingly, in consideration of the execution of this
Agreement, the Executive agrees that:
(i) during the Restricted Period (as defined below) and
within the Restricted Area (as defined below), the
Executive will not, individually or in conjunction
with others, directly or indirectly, engage in any
part of the Business (as defined below), whether as
an officer, director, proprietor, employer, partner,
independent contractor, investor (other than as a
holder solely as an investment of less than 2% of
the outstanding capital
5
<PAGE>
stock of a publicly traded corporation), consultant,
advisor, agent or otherwise.
(ii) during the Restricted Period and within the
Restricted Area, the Executive will not (A) directly
or indirectly recruit, solicit or otherwise
influence any employee or agent of the Company to
discontinue such employment or agency relationship
with the Company, or (B) employ or seek to employ,
or cause or permit (insofar as it is in his control
to do so) any business which competes directly or
indirectly with the Business of the Company (the
"Competitive Business") to employ or seek to employ
for any Competitive Business any person who is then
(or was at any time within six (6) months prior to
the date Executive or the Competitive Business
employs or seeks to employ such person) employed by
the Company.
(iii) during the Restricted Period and within the
Restricted Area, the Executive will not, directly or
indirectly, compete with the Company by soliciting,
inducing or influencing any of the Company's Clients
which have a business relationship with the Company
at the time during the Restricted period to
discontinue or reduce the extent of such
relationship with the Company.
(iv) during the Restricted Period, the Executive will not
interfere with, or disrupt or attempt to disrupt any
present or prospective relationship, contractual or
otherwise, between the Company and any customer,
employee or agent of the Company, or anyone who was
such within the one year period before the time of
termination of the Executive's employment.
(b) CONFIDENTIALITY. In accordance with the Florida Statutes,
among others Chapter 542 and Chapter 688, the Executive acknowledges that the
Company has "trade secrets" (as that term is defined in the Florida Statutes)
and a legitimate business interest in protecting them. Further, the Executive
acknowledges that the Company's trade secrets, including but not limited to,
private or secret processes, methods and ideas (as they exist from time to
time), customer lists and information concerning the Company's products,
services, training methods, development, technical information, marketing
activities and procedures, credit and financial data concerning the Company
and/or the Company's Clients (the "Proprietary Information"), are valuable,
special and unique assets of the Company, access to and knowledge of which are
essential to the performance of the Executive hereunder. In light of tile highly
competitive nature of the industry in which the Company's business is conducted,
the Executive agrees that all Proprietary Information, currently possessed by,
or in the future obtained by the Executive as a result of the Executive's
association with the Company shall be considered confidential.
In recognition of the foregoing, the Executive agrees that he
will not use or disclose any of such Proprietary Information for the Executive's
own purposes or for the benefit of any person or other entity or organization
(except the Company) under any circumstances
6
<PAGE>
unless such Proprietary Information has been publicly disclosed generally or,
upon at least 10 days' prior notice to the Company (or on such shorter notice as
is available to the Executive if the subpoena is returnable within less than ten
(10) days), the Executive is legally required to disclose such Proprietary
Information. Documents (as defined below) relating to the Business, the Company
or the General Partner prepared by the Executive or that come into the
Executive's possession during the executive's association with the Company are
and remain the property of the Company, and when this Agreement terminates, such
Documents shall be returned to the Company at the Company's principal place of
business, as provided in Section 10, below, and the Executive represents that he
will not copy, or cause to be copied, printed, summarized or compiled any
software, Documents or other materials or other Proprietary Information owned by
the Company. The Executive further represents that he will not retain in his
possession any such software, Documents, or other materials in machine or human
readable forms.
(c) PATENTS, Any patents, trademarks, inventions, discoveries,
applications or processes, software and computer programs devised, planned,
applied, created, discovered or invented by the Executive in the course of his
employment with the Company, or which pertain to any aspect of the Business of
the Company, shall be the sole and absolute property of the Company, and the
Executive shall make a prompt report thereof to the Company and promptly execute
and deliver, for no additional consideration, any and all documents reasonably
requested by the Company to assure the Company the full and complete ownership
thereof.
(d) DOCUMENTS. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies thereof,
including, but not limited to: papers, books, records, tangible things,
correspondence, communications, telex messages, memoranda, work papers, reports,
affidavits, statements, summaries, analyses, evaluations, client records and
information, agreements, agendas, advertisements, instructions, charges,
manuals, brochures, publications, directories, industry lists, schedules, price
lists, client lists, statistical records, training manuals, computer printouts,
books of account, records and invoices reflecting business operations, all
things similar to any of the foregoing, however denominated. In all cases where
originals are not available, the term 9'Documents" shall also mean identical
copies of original documents or non-identical copies thereof,
(e) COMPANY'S CLIENTS. The "Company's Clients" shall mean any
persons, partnerships, corporations, professional associations or other
organization for which the Company has performed services which are part of the
Business, as defined below.
(f) RESTRICTED PERIOD. The "Restricted Period" shall mean (A)
the Term (and renewals of the Term) of this Agreement and
(B) a period of three (3) years following the termination
(or non-renewal) of the Term (or of any renewal of the
Term).
(g) RESTRICTED AREA. The "Restricted Area" shall mean the
continental United States of America.
7
<PAGE>
(h) BUSINESS. "Business" shall mean the business of providing
attorney referrals and related services to provide
affordable access to the U.S. legal system to persons and
organizations, all as currently provided by the Company,
and any additional business or lines of business which
the Company or any of its subsidiaries may engage in
during the term of this Agreement and any activities with
respect to such Business.
(i) COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT. It is
understood by and between the parties hereto that the
foregoing covenants contained in Sections 6(a), (b) and
(c) are: (i) reasonable in scope and duration in light of
the nature of the Business and the area in which the
Company or its Subsidiaries engage in the Business; and
(ii) are essential elements of this Agreement, and that,
but for the agreement by the Executive to comply with
such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the
Executive shall be construed to be agreements independent
of any other provisions of this Agreement. Except as
otherwise expressly provided herein, the existence of any
other claim or cause of action, whether predicated on any
other provision in this Agreement, or otherwise, as a
result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants
against the Executive.
(j) SURVIVAL AFTER TERMINATION OF AGREEMENT. Notwithstanding
anything to the contrary contained in this Agreement, the covenants in Sections
6(a), (b) and (c) shall, to the extent provided for herein, survive the
termination of this Agreement and the Executive's employment with the Company.
(k) REMEDIES.
(i) The Executive acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of
the provisions of Section 6(a), (b) or (c) herein would
be inadequate and such breach shall cause irreparable
harm to the Company. In recognition of this fact, in the
event of a breach by the Executive of any of the
provisions of Section 6(a) or (c) the Executive agrees
that, in addition to any remedy at law available to the
Company, including, but not limited to monetary damages,
all rights of the Executive to payment of severance or
non-compete payments, as provided for herein, may be
suspended and paid into escrow subject to forfeiture and
payment to the Company if the Executive is determined by
arbitration or judicial ruling to have violated any such
provision; and if the Executive breaches any provision of
Sections 6(a), (b) or (c), then the Company, without
posting any bond, shall be entitled to obtain, and the
Executive agrees not to oppose on the basis of the
adequacy of a remedy at law the
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<PAGE>
Company's request for, equitable relief in the form of
specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable
remedy which may then be available to the Company.
(ii) The Executive acknowledges that the granting of a
temporary injunction, temporary restraining order or
permanent injunction merely prohibiting the use of
Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 6(a), (b) or
(c) and consequently agrees, upon proof of any such
breach, to the granting or injunctive relief prohibiting
any form of competition with the Company that is
prohibited by this Agreement. Nothing herein contained
shall be construed as prohibiting the Company from
pursing all other remedies available to it for such
breach or threatened breach, and no injunction shall
prevent or impair enforcement of remedies for damages.
(l) SEVERABILITY, If a court of competent jurisdiction
determines that any of the covenants, or provisions thereof, contained in this
Section 6 are unreasonable as to their duration or geographic scope, or are
otherwise unenforceable, the parties hereto desire such court to reform such
provisions so that they cover the maximum period of time and geographic scope as
to which they can be enforced, and to enforce such covenant, or portion thereof,
to the fullest extent permissible by the laws of the State of Florida.
7. WITHHOLDING. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the
Executive or the Executive's estate or beneficiaries shall be
subject to the withholding of such amounts, if any) relating
to tax and other payroll deductions as the Company may
reasonably determine it should withhold pursuant to any
applicable law or regulation. In lieu of withholding such
amounts, the Company at the Executive's request, may, in its
sole discretion, accept other arrangements, provided that: (a)
the Company is satisfied that such other arrangements will
satisfy such tax and other payroll obligations in a manner
complying with applicable law or regulation; and (b) the
Executive shall indemnify the Company against all fines,
penalties and costs (including attorneys' fees) in the amount
that such other arrangements do not so comply.
8. NOTICES. All notices, requests, demands or other
communications by the terms hereof required or permitted to be
given by one party to another shall be given in writing by
personal delivery , by telecopier or by regular mail, postage
prepaid, addressed to such other party or delivered to such
other party as follows:
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If to the Company: ________________________________
________________________________
________________________________
________________________________
If to Executive: ________________________________
________________________________
________________________________
________________________________
or at such other address or telecopy number as may be given by any of them to
the others in writing from time to time and such notices, requests, demands or
other communication shall be deemed to have been received when hand delivered,
on the Business Day after the date telecopied (with receipt confirmed) or, if
mailed, the fourth Business Day following the day of the mailing thereof,
provided that if any such notice, request, demand or other communication shall
have been mailed and if regular mail service shall be interrupted by strikes or
other irregularities, such notice, request, demand or other communication shall
be deemed to have been received on the fourth Business Day following the
resumption of normal mail service.
9. ENTIRE AGREEMENT. This Agreement, sets forth the entire
agreement and understanding between the parties, and merge and
supersede all prior discussions, agreements and understandings
of every kind and nature among them as to the subject matter
hereof
10. AMENDMENTS TO AGREEMENT. This Agreement shall not be amended
except by a writing signed by each party to the Agreement, and
this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by each party
to the Agreement.
11. U.S. DOLLARS. All dollar amounts in this Agreement are stated
in United States Dollars.
12. GOVERNING LAW. THIS AGREEMENT AND ITS VALIDITY, CONSTRUCTION
AND PERFORMANC SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS
OF FLORIDA, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement
may not be assigned by the Executive without the prior written
consent of the Company. This Agreement may be assigned by the
Company in connection with the sale, transfer or other
disposition of all or substantially all of the Company's
assets or business.
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14. PRONOUNS. Whenever the context requires, the use in this
Agreement of a pronoun of any gender shall be deemed to refer
also to any other gender, and the use of the singular shall be
deemed to refer also to the plural.
15. HEADINGS. The headings of this Agreement are inserted for
convenience of reference only and shall not constitute a part
hereof.
16. ATTORNEYS' FEES. If any action or proceeding is brought in any
court by any party to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover from the
non-prevailing party all of its reasonable costs and expenses
incurred in connection with such action, including attorneys'
fees.
17. CALCULATION OF TIME PERIODS. When calculating the period of
time within which or following which any act is to be done or
step taken pursuant to this Agreement, the date which is the
reference date in calculating such period shall be excluded.
If the last day of such period is not a Business Day, the
period in question shall end on the immediately following
Business Day.
18. REFERENCES TO LAW. All references in this Agreement to any
law, by-law, rule, regulation, order or act of any government,
governmental body or other regulatory body or authority shall
be construed as a referene thereto as amended or re-enacted
from time to time or as a reference to any successor thereto.
19. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, by original or facsimile signature, each
of which so executed shall be deemed to be an original and
such counterparts together shall be deemed to be one and the
same instrument, which shall be deemed to be executed as of
the date first above written.
20. FURTHER ASSURANCES. The parties hereto shall sign such further
documents and do and perform and cause to be done and
performed such further and other acts and things as may be
necessary or desirable in order to give full effect to this
Agreement and every part thereof.
21. SURVIVAL. Any termination of this Agreement shall not affect
the ongoing provisions of this Agreement which shall survive
such termination in accordance with their terms.
22. SEVERABILITY. The invalidity or unenforceability, in whole or
in part, of any covenant, promise or undertaking, or any
section, subsection, paragraph, sentence, clause, phrase or
word or of any provision of this Agreement shall not affect
the validity or enforceability of the remaining portions
thereof
23. CONSTRUCTION. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party
drafting the document.
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THE EXECUTIVE AND THE COMPANY EACH ACKNOWLEDGES THAT HE OR IT HAS READ ALL OF
THE TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY
ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date set
forth in the first paragraph of this Agreement.
THE COMPANY
AND JUSTICE FOR ALL INC.,
a Florida corporation
By: /S/ BRETT MERL
----------------------------------
Its: CEO
THE EXECUTIVE:
/S/ JASON B. KROUSE
--------------------------------------
Jason B. Krouse
12
EXHIBIT 10.i
AGREEMENT
This Agreement, dated September __, 1999, is among Legal Club of
America Corporation (the "Company"), Matt Cohen ("Cohen") and Brett Merl
("Merl").
PRELIMINARY STATEMENT
The parties have reached certain agreements regarding Cohen's
termination of his employment by the Company and the transfer of certain of his
shares in the Company's stock, all as set forth below
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and other good and valuable considerations, the receipt and adequacy of
which are hereby acknowledged, the parties, intending to be legally bound, agree
as follows:
1. Cohen shall and does hereby sell and deliver to Merl a total of 700,000
shares (the "Sold Shares") of his common stock in the Company, consisting of all
400,000 shares encumbered by a stock pledge agreement (the "Pledge") dated
December 16, 1997 and an additional 300,000 that are subject to the Pledge.
Further, Cohen shall sell and deliver to Merl an additional 100,000 shares of
the Company's stock (the "Additional Shares")if and when the "Condition" (as
defined below) is satisfied. In consideration thereof, Merl shall and does
hereby (a) assume and agree to pay Cohen's outstanding obligations to the
Company evidenced by his promissory note dated December 16, 1997 in the original
principal amount of $133,000 (the "Note", which Note is secured by the Pledge),
and (b) generally release Cohen from any and all claims that Merl may have
against Cohen, as set forth in paragraph 5, below.
2. As used herein, "Condition" means the payment of $ 15,000 by the Company to
Cohen by January 31, 2000. The Company shall pay Cohen 15,000 subject to its
consummation of a capital raise of $1 Million or more, by private placement or
public offering on or before January 31, 2000. In the event that the Condition
is fulfilled by January 31 2000, then Cohen shall complete his transfer of the
Additional Shares to Merl. In the event that the Condition is not satisfied by
January 31 2000, then Cohen shall not be obligated to sell or deliver the
Additional Shares to Merl.
3. Cohen represents and warrants that he owns the Sold Shares absolutely free
and clear of all liens, encumbrances, voting trusts, proxies and adverse claims
whatsoever, except that 400,000 of the Sold Shares are encumbered by the Pledge.
Cohen represent, warrants and covenants that he owns and will maintain ownership
of the 100,000 Additional Shares, absolutely free and clear of all liens,
encumbrances, voting trusts, proxies and adverse claims whatsoever, until
February 1, 2000.
4. Merl represents and warrants that (a) he is an accredited investor, as such
term is defined under applicable securities laws and regulations, (b) he is
acquiring the Sold Shares and the Additional Shares as restricted securities,
and (c) he shall not transfer or sell any of the Sold Shares or the Additional
Shares except in compliance with all applicable securities laws and
<PAGE>
regulations. Each party has determined to execute, deliver, perform and
consummate this Agreement and the transactions contemplated hereby based solely
on their own independent investigation regarding the same, and not in reliance
upon any statement, representation or warranty of any party except as expressly
set forth in this Agreement.
5. Cohen agrees to execute and perform all documents (including without
limitation stock powers and letters of authorization) to effect the transfer of
the Sold Shares promptly after the execution of this Agreement, and the transfer
of the Additional Shares promptly after the timely satisfaction of the
Condition.
6. In consideration of the foregoing, the Company and Cohen hereby generally
release each other from all, and all manner of, claims and demands whatsoever,
arising from the beginning of the world to the date of this Agreement, including
all claims and demands relating to the Company, its securities and affairs on to
Cohen's employment by the Company or the termination thereof. Without limiting
the generality of the foregoing, the Company specifically releases Cohen from
all claims and liabilities under the Note and the Pledge.
7. In consideration of the foregoing, Merl and Cohen hereby generally release
each other from all, and all manner of, claims and demands whatsoever, arising
from the beginning of the world to the date of this Agreement, including all
claims and demands relating to the Company, its securities and affairs or to
Cohen's employment by the Company or the termination thereof. Without limiting
the generality of the foregoing, Merl (and the Company) specifically release
Cohen from all claims as to (a) Cohen's shares in the Company (other than the
Sold Shares and the Additional Shares) and (b) the sales of such other shares by
Cohen and the proceeds of such sales.
8. Notwithstanding the foregoing provisions of 6 and 7, above, or any other
provisions of this Agreement, the releases provided for in this Agreement shall
not affect or impair (a) the right of any party to enforce this Agreement
against any other party, (b) Cohen's rights to indemnification from the Company
for the acts and omissions of Cohen performed in his capacity as an officer or
director of the Company, to the extent provided in its organizational documents,
on (c) the Company's right to enforce against Cohen the provisions of the
Subscription Agreement dated December 16, 1997, to the extent of its provisions
concerning (i) Cohen's representations concerning his status as an Accredited
Investor, and (ii) Cohen's agreement to hold back from sales of his stock in the
Company in connection with certain public offerings.
9. Cohen agrees to continue to serve on the Board of Directors of the Company,
subject to his election by the Company's stockholders. So long as he serves in
that capacity, the Company agrees that his stock options shall continue to vest
as scheduled, including the options to buy 67,164 shares of the Company's common
stock granted to Cohen as of June 30,1999.
10. The Company will maintain and health and dental insurance coverage for
Cohen, as in effect prior to the termination of his employment, through December
31. 1999, subject to the terms and conditions of the applicable plans and
policies therefor.
2
<PAGE>
11. The Company will pay to its counsel's trust account, Berger, Davis &
Singerman, PA, the sum of $3000. This amount will be held as security for the
payment of American Express Card charges on credit cards issued on Cohen's
account and held by Merl and Jason Krouse. pending joint authorization from the
Company and Cohen to disburse the same in payment of such charges, or to return
such sum to the Company if all charges are paid and the credit cards are
returned to Cohen.
12. Each party hereto represents and warrants that the execution and performance
of this Amendment has been duly and validly authorized, does not conflict with
or result in a default under any agreement, understanding, order, judgment or
writ applicable to the representing party or its assets, and that this Amendment
is the representing party's' valid and binding agreement, and is enforceable
against the representing party in accordance with its terms. This Amendment may
be executed in counterparts, and facsimile signatures shall be effective as an
original. This Agreement sets forth the parties' complete understanding of
regarding the subject matter hereof, and shall be governed by and construed in
accordance with Florida law. The parties specifically agree to the provisions
below regarding the Escrow Agent.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
LEGAL CLUB OF AMERICA CORPORATION
By: /s/ BRETT MERL
-----------------------------
Authorized Signatory
/s/ BRETT MERL
---------------------------------
Brett Merl
/s/ MATT COHEN
---------------------------------
Matt Cohen
JOINDER OF ESCROW AGENT
Berger, Davis & Singerman, P.A. ("Agent") joins this Agreement and
agrees to accept arid hold $3000 (the "Escrow Funds") in its trust account,
subject to the following conditions:
3
<PAGE>
Re: Amendment to Agreement re Shares of Legal Club
Dear Matt:
As discussed, this will amend our above agreement regarding your transfer of
stock in Legal Club of America Corporation to me (the "Agreement"). The
Agreement is amended to delete all references to the Additional Shares
therefrom. Therefore, your transfers of stock to me are completed with the
transfer of the 700,000 Sold Shares, and you shall not be obligated in any way,
shape or form to transfer an additional 100,000 shares to me, regardless of
whether the "Condition" (as defined in the Agreement") is satisfied. This
amendment does not affect your rights to the payment contemplated by the
Condition, it merely relieves you of any obligation to transfer shares to me
when and if the Condition is satisfied. Since this amendment only adversely
affects me, it is effective upon my execution. Nevertheless, I would appreciate
it if you would sign below and return a signed copy to me.
Very Truly Yours
/s/ Brett Merl
- ------------------------
Brett Merl
Acknowledged and Agreed:
- ------------------------
Matt Cohen
EXHIBIT 21
SUBSIDIARIES
1. LegalClub.com, Inc. (f/k/a And Justice For All), a Florida corporation
2. National Association of Networked Attorneys, Inc., a Florida
corporation
3. Legal Club Financial Corp., a Florida corporation
