U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
GTC TELECOM CORP.
(Name of small business issuer in its charter)
NEVADA 88-0318246
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization Identification Number)
3151 AIRWAY AVE., SUITE P-3
COSTA MESA, CALIFORNIA 92626
(Address of Principal Executive Offices) (Zip Code)
(714) 549-7700
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
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TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of
Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners
and Management.
Item 5 Directors, Executive Officers, Promoters and
Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder
Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
GTC Telecom Corp. (the "Company" or "GTC") is a single source
provider of various Telecommunication and Internet related services.
GTC Telecom Corp. was organized as a Nevada Corporation on May 17,
1994 and is currently based in Costa Mesa, California.
On August 31, 1998, GTC Telecom Corp. (which at the time was
designated Bobernco, Inc., a Nevada corporation ("Bobernco")
acquired all of the outstanding common stock of Gentel
Communications, Inc., a Colorado corporation ("GenTel") in a
business combination described as a "reverse acquisition." For
accounting purposes, the acquisition has been treated as the
acquisition of Bobernco (the Registrant) by GenTel. Immediately
prior to the acquisition, Bobernco had 1,800,000 shares of Common
Stock outstanding.
On February 3, 1998, prior to its acquisition by Bobernco, GenTel,
had acquired all of the assets and assumed all of the liabilities of
GenX, LLC, a Delaware limited liability company ("GenX") pursuant to
a tax-free asset purchase agreement whereby GenTel issued 8,786,950
shares of its common stock in exchange for all GenX's net assets.
As part of Bobernco's reorganization with GenTel, Bobernco
issued 8,986,950 shares of its Common Stock to the shareholders of
GenTel in exchange for 8,986,950 shares of GenTel Common Stock.
Immediately following the merger, Bobernco changed its name to GTC.
Bobernco had no significant operations prior to the merger. The
Company's common stock currently trades on the NASD OTC Bulletin
Board under the symbol "GTCC."
TELECOMMUNICATIONS INDUSTRY BACKGROUND
The $97.5 billion U.S. long distance industry is dominated by the
nation's three largest long distance providers, AT&T, MCI/WorldCom
and Sprint, which together generated approximately 72% of the
aggregate revenue of all U.S long distance interexchange carriers in
1997. Other long distance companies, some with national
capabilities, accounted for the remainder of the market.
Based on published FCC estimates, toll service revenues of U.S. long
distance interexchange carriers have grown from $38.8 billion in
1984 to $97.5 billion in 1997. While industry revenues have grown
at a compounded annual rate of 7.4% since 1984, the revenues of
carriers other than AT&T, MCI/WorldCom and Sprint have grown at a
compounded rate of 32.7% during the same period. As a result, the
aggregate market share of all interexchange carriers other than
AT&T, MCI/WorldCom and Sprint has grown from 2.6% in 1984 to 23.4%
in 1997. During the same period, the market share of AT&T declined
from 90.1% to 46.5%.
Prior to the Telecommunications Act, signed by President Clinton on
February 8, 1996, the long distance telecommunications industry had
been principally shaped by a court decree between AT&T and the
United States Department of Justice, known as the Modification of
Final Judgment (the "Consent Decree") that in 1984 required the
divestiture by AT&T of its 22 Bell operating companies and divided
the country into some 200 Local Access and Transport Areas, or
"LATAs." The 22 operating companies, which were combined into seven
Regional Bell Operating Companies, or "RBOCs", were given the right
to provide local telephone service, local access service to long
distance carriers and intraLATA toll service (service within LATAs),
but were prohibited from providing interLATA service (service
between LATAs). The right to provide interLATA service was
maintained by AT&T and the other carriers.
To encourage the development of competition in the long distance
market, the Consent Decree and the FCC require most LECs to provide
all carriers with access to local exchange services that is equal in
type, quality and price to that provided to AT&T and with the
opportunity to be selected by customers as their preferred long
distance carrier. These so-called equal access and related
provisions are intended to prevent preferential treatment of AT&T.
Regulatory, judicial and technological factors have helped to create
the foundation for smaller companies to emerge as competitive
alternatives to AT&T, MCI/WorldCom and Sprint for long distance
telecommunications services. The FCC requires that AT&T not
restrict the resale of its services, and the Consent Decree and
regulatory proceedings have ensured that access to LEC networks is,
in most cases, available to all long distance carriers.
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BUSINESS OF THE ISSUER
The Company currently offers a variety of services designed to meet
its customers' telecommunications and Internet related needs. The
Company's services consists of the following:
TELECOMMUNICATIONS RELATED SERVICES
The Company is currently licensed in 26 states and the District of
Columbia to provide long distance telecommunications services. The
Company primarily services small and medium sized businesses and
residential customers throughout the United States. The Company has
positioned itself to be a low-cost provider in the marketplace. By
offering low rates, the Company expects to add customers at an
accelerated pace. To date, the Company has operated as a
switchless, nonfacilities-based reseller of long distance services.
By committing to purchase large usage volumes from the carrier
pursuant to contract tariffs, the Company has been able to procure
substanital discounts and offer low-cost, high-quality long distance
services to its customers at rates below the current standard
industry levels. However, there can be no assurances that the
Company can continue to provide its Telecommunications Services in
the current states provided or that the Company can continue to
offer its Telecommunications Services at the rates currently in effect.
The Company provides long distance telephone service under a variety
of plans. These include outbound service, inbound toll-free 800
service and dedicated private line services for data. These
services are billed on a monthly basis either directly by the
Company or by the Local Exchange Carrier ("LEC") through the
services of Billing Concepts, Inc. dba U.S. Billing ("USBI"). If
these services are billed directly by the Company, the customer has
a choice of paying by credit card or sending payment to the Company.
If these services are billed by the LEC, the LEC is responsible for
collecting the amount billed and remitting the proceeds to the
Company. The Company also plans to set up a voice-over-IP
technology network to complement its long distance
telecommunications services. In addition, the Company is also
exploring the possibility of providing local telephone service.
However, there can be no assurances that the Company will be able to
offer such services.
INTERNET RELATED SERVICES
The Company also recently began providing a variety of Internet
related services. These services include prepaid calling cards at
the Company's ecallingcards.com web site; Internet Services Provider
access through dial-up, Digital Subscriber Line ("DSL"), and
Wireless T-1 methods; and Internet Web Page development and hosting
services. The Company's Internet related services are billed using
the same methods as those used for billing its Telecommunication
services. The Company's Internet related services, with the
exception of its prepaid calling cards, are provided pursuant to
contracts with third-party providers.
The Company's Internet Service Provider Access service is currently
provided on a nationwide basis. However, there can be no assurances
that the Company will be able to provide such services on a
nationwide basis in the future. Currently, the Company's Wireless
T-1 services are only available in the Southern California region.
The Company plans on expanding this service to include other
regions. However, there can be no assurances that the Company will
expand or be able to expand its Wireless T-1 service to other
regions. The Company's Internet Web Page Hosting services are
currently available on a nationwide basis. However, there can be no
assurances that the Company will be able to continue to provide this
service on a nationwide basis.
DEVELOPMENT AND STRATEGY OF THE COMPANY
The Company's telecommunication services are currently licensed in
the states of Arizona, Arkansas, California, Colorado, Georgia,
Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts,
Michigan, Montana, New Hampshire, New Jersey, North Carolina, Ohio,
Oregon, Pennsylvania, Texas, Utah, Virginia, Washington, Washington
D.C., Wisconsin, and Wyoming. The Company is in the process of
obtaining licences to provide its services in the remaining states.
However, there can be no assurances that the Company will be
successful in obtaining such licences.
The Company plans to market its products and services using four
methods. The first of those methods is to do an aggressive
concentrated media campaign that utilizes a professional advertising
agency. The Company launched
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its first media campaign on March 1,
1999 utilizing television and radio advertisement and print media
targeting Southern California as well as nationwide audiences using
cable television advertisement. The Company intends to continue to
utilize both broadcasting and print media campaigns in the future.
However, there can be no assurances that it will be able to continue
to utilize such media campaigns in the future.
The second method of marketing the Company's products and services is through
outside telemarketing agencies. The Company
estimates that it will cost an average of thirty-five dollars
($35.00) to obtain each customer, while the average customer
generates two hundred and forty dollars ($240.00) in revenue per year.
However, there can be no assurances that the Company will be able to continue to
utilize telemarketing agencies in the future or at the costs described.
The third method of marketing the Company's products and services
utilizes its own sales force and independent sales agents working on
its behalf. The sales force will consist of properly trained
professionals within the industry that are currently looking for an
opportunity to sell at rates that are lower than the industry
standard. Many of these professionals will come from companies such
as WorldCom, LCI International, TelCo and Frontier Communications
where the average sell-through rate is 10-12 cents per minute. The
Company has recently hired a V.P. of Sales from MCI/WorldCom and a
National Accounts Manager from Cable & Wireless Communications PLC,
both with extensive sales and marketing backgrounds in the
telecommunications industry. In addition, the Company has already
engaged in discussions with many potential representatives to work
for the Company based on commission-only compensation packages.
However, there can be no assurances that the Company will be
successful in retaining its in-house sales force or in acquiring
independent sales agents to work on its behalf at the
commission-only compensation packages described.
The fourth method of marketing the Company's products and services
utilizes the Internet. The Company currently markets and
distributes its Telecommunication and Internet related services
through the Internet utilizing its gtctelecom.com and
ecallingcards.com web pages. The Company also plans to market
international calling plans as well as co-brand calling cards and
advertise domestic long distance rates on the Internet through joint
agreements such as its agreement with Community Connect Inc.'s
online community for Asian Americans, AsianAvenue.com. There can be
no assurances that such joint agreements will continue or that the
Company will be able to develop such joint agreements in the future.
The Company believes these four marketing methods will be adequate
to sustain the Company now and for the foreseeable future.
COMPETITION
Telecommunication Services
The long distance telecommunications industry is highly competitive
and affected by the introduction of new services by, and the market
activities of, major industry participants. Competition in the long
distance business is based upon pricing, customer service, billing
services and perceived quality. The Company competes against
various national and regional long distance carriers that are
composed of both facilities-based providers and switchless resellers
offering essentially the same services as the Company. Several of
the Company's competitors are substantially larger and have greater
financial, technical and marketing resources. Although the Company
believes it has human and technical resources to pursue its strategy
and compete effectively in this competitive environment, its success
will depend upon its continued ability to profitably provide high
quality, high value services at prices generally competitive with,
or lower than, those charged by its competitors. There can be no
assurances that the Company will be able to compete successfully in
these markets.
The Company will link its switching equipment with transmission
facilities and services purchased or leased from MCI/WorldCom and
will continue to resell services obtained from MCI/WorldCom, which
will remain a competitor of the Company for the provision of
telecommunications services. However, there can be no assurances
that the Company will be able to continue to provide its
Telecommunication Services through MCI/WorldCom.
The Telecommunications Act is intended to introduce more competition
to U.S. telecommunications markets. The legislation opens the local
services market by requiring LECs to permit interconnection to their
networks and establishing, among other things, LEC obligations with
respect to access, resale, number portability, dialing parity,
access to rights-of-way and mutual compensation. The legislation
also codifies the LECs' equal access and nondiscrimination
obligations and preempts most inconsistent state regulation. The
legislation also contains special provisions that eliminate
restrictions on the RBOCs providing long distance services, which
means that the Company
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will face competition for providing long
distance services from well capitalized, well known companies that
prior to this time could not compete in long distance service.
The RBOCs have been prohibited from providing interLATA
interexchange telecommunications services under the terms of the
AT&T decree. The Telecommunications Act authorizes the RBOCs to
provide certain interLATA interexchange telecommunications services
immediately and others upon the satisfaction of certain conditions.
Such legislation includes certain safeguards against anticompetitive
conduct by the RBOCs in the provision of interLATA service.
Anticompetitive conduct could result from, among other things, a
RBOC's access to all subscribers on its existing network as well as
its potentially lower costs related to the termination and
origination of calls within its territory. It is impossible to
predict whether such safeguards will be adequate to protect against
anticompetitive conduct by the RBOCs and the impact that any
anticompetitive conduct would have on the Company's business and
prospects. Because of the name recognition that the RBOCs have in
their existing markets and the established relationships that they
have with their existing local service customers, and their ability
to take advantage of those relationships, as well as the possibility
of favorable interpretations of the Telecommunications Act by the
RBOCs, it may be more difficult for other providers of long distance
services, such as the Company, to compete to provide long distance
services to RBOC customers. At the same time, as a result of the
Telecommunications Act, RBOCs have become potential customers for
the Company's long distance services.
Internet Related Services
The market for Internet-based online services is relatively new,
intensely competitive and rapidly changing. Since the advent of
commercial services on the Internet, the number of Internet Service
Providers and online services competing for users' attention and
spending has proliferated because of, among other reasons, the
absence of substantial barriers to entry, and the Company expects
that competition will continue to intensify. Many of the Company's
current and potential competitors such as Earthlink, PsiNet, AOL,
UUNET, Microsoft Network, and Prodigy have longer operating
histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources.
These competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements and to
devote greater resources to the development, promotion and sale of
their products and services than the Company. There can be no
assurance that the Company will be able to compete successfully
against its current or future competitors.
CUSTOMER ATTRITION
The Company believes that a high level of customer attrition is a
characteristic of the domestic residential long distance and
Internet related industries. Attrition is attributable to a variety
of factors, including the termination of customers by the Company
for non-payment and the initiatives of existing and new competitors
as they engage in, among other things, national advertising
campaigns, telemarketing programs and the issuance of cash or other
forms of incentives. Such attrition could have a material adverse
effect upon the Company's future results of operations and financial
conditions.
DEPENDENCE ON KEY CUSTOMERS
The Company is not dependent on any single customer for a
significant portion of its annual sales. The Company's customer
base changes on a continuous basis as new customers are added or
removed.
MAJOR SUPPLIERS
The Company does not own its own long distance network, and pursuant
to the Company's contract with MCI/WorldCom, the Company currently
depends primarily upon MCI/WorldCom to provide for the transmission
of phone calls by its customers and to provide the call detail
records upon which the Company bases its customers billings. Under
the terms of the three-year contract entered into with MCI/WorldCom
on August 10, 1998 the Company is obligated to a minimum monthly
revenue commitment of $10,000 commencing March 1999. The contract
expires on September 30, 2001. Pursuant to the terms of the
contract with MCI/WorldCom, the Company must pay liquidated damages
in an amount equal to the aggregate minimum revenue requirement for
the remaining term of the contract if the Company terminates the
contract prior to the expiration date. Although the Company
believes that its relations with MCI/WorldCom are strong and should
remain so with continued contract compliance,
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the termination of the
Company's contract with MCI/WorldCom, the loss of telecommunications
services provided by MCI/WorldCom, or a reduction in the quality of
service the Company receives from MCI/WorldCom could have a
material adverse effect on the Company's results of operations. In
addition, the accurate and prompt billing of the Company's customers
is dependent upon the timeliness and accuracy of call detail records
provided to the Company by MCI/WorldCom. There can be no assurance
that accurate information will be provided by MCI/WorldCom on a
timely basis, the failure of which would have a material adverse
effect on the Company's results of operations.
The Company does not currently have its own Internet Network.
Currently, the Company provides its Internet Service Provider Access
services pursuant to a contract with Epoch Networks, Inc. dba Epoch
Internet ("Epoch"). Under the terms of the three year contract with
Epoch dated February 3, 1999, the Company is obligated to an
initial monthly minimum revenue commitment of $0.00 increasing to
$25,000 per month over a seven month ramp up period. The loss of
Internet Service Provider access, or a reduction of service quality
by Epoch, could have a material adverse effect on the Company's
results of Operations. The Company is currently in the process of
locating alternative or additional Internet Service Providers to
supplement or replace its current provider. However, there can be
no assurances that the Company will be able to locate such
alternative or additional providers.
The Company's Wireless T-1 services are currently provided pursuant
to a contract with Global Pacific Internet ("Global"). Currently,
the Company's T-1 services are available only in the Southern
California region. Under the terms of its contract with Global, the
Company is not subject to a monthly minimum revenue commitment.
Although the Company believes that its relations with Global are
strong and should remain so with continued contract compliance, the
loss of Wireless T-1 services provided by Global, or a reduction in
the quality of service the Company receives from Global could have a
material adverse effect on the Company's results of operations.
The Company currently plans to expand its Wireless T-1 services to
other regions. However, there can be no assurances that the Company
will or will be able to expand this service to other regions.
The Company's Internet Web Development and Hosting service is
currently provided pursuant to contracts with Service One
Communications, Inc. ("Service One") and OhGolly.com, Inc.
("OhGolly"). Under the terms of its contracts with Service One and
OhGolly, the Company is not subject to a monthly minimum revenue
commitment. Although the Company believes that its relations with
Service One and OhGolly are strong and should remain so with
continued contract compliance, the loss of its Web Development and
Hosting services from Service and OhGolly, or a reduction in the
quality of service provided by Service One and / or OhGolly could
have a material adverse effect on the Company's results of operations.
REGULATION
The Company's provision of communications services is subject to
government regulation. Federal law regulates interstate and
international telecommunications, while states have jurisdiction
over telecommunications that originate and terminate within the same
state. Changes in existing policies or regulations in any state or
by the FCC could materially adversely affect the Company's financial
condition or results of operations, particularly if those policies
make it more difficult for the Company to obtain service from
MCI/WorldCom or other long distance companies at competitive rates,
or otherwise increase the cost and regulatory burdens of marketing
and providing service. There can be no assurance that the
regulatory authorities in one or more states or the FCC will not
take action having an adverse effect on the business or financial
condition or results of operations of the Company.
Federal
The Company is classified by the FCC as a nondominant carrier.
After the recent reclassification of AT&T as nondominant, only the
LECs are classified as dominant carriers among domestic carriers.
Because AT&T is no longer classified as a dominant carrier, certain
pricing restrictions that formerly applied to AT&T have been
eliminated, which could make it easier for AT&T to compete with the
Company for low volume long distance subscribers. The FCC generally
does not exercise direct oversight over charges for service of
nondominant carriers, although it has the statutory power to do so.
Nondominant carriers are required by statute to offer interstate
services under rates, terms, and conditions that are just,
reasonable and not unreasonably discriminatory. The FCC has the
jurisdiction to act upon complaints filed by third parties, or
brought on the FCC's own motion, against any common carrier,
including nondominant carriers, for failure to comply with its
statutory obligations. Nondominant carriers are
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required to file
tariffs listing the rates, terms and conditions of service, which
are filed pursuant to streamlined tariffing procedures. The FCC
also has the authority to impose more stringent regulatory
requirements on the Company and change its regulatory classification
from nondominant to dominant. In the current regulatory atmosphere,
the Company believes, however, that the FCC is unlikely to do so.
The FCC imposes only minimal reporting requirements on nondominant
resellers, although the Company is subject to certain reporting,
accounting and record-keeping obligations. Both domestic and
international nondominant carriers, including the Company, must
maintain tariffs on file with the FCC.
At present, the FCC exercises its regulatory authority to set rates
primarily with respect to the rates of dominant carriers, and it has
increasingly relaxed its control in this area. Even when AT&T was
classified as a dominant carrier, the FCC most recently employed a
"price cap" system, which essentially exempted most of AT&T's
services, including virtually all of its commercial and 800
services, from traditional rate of return regulation because the FCC
believes that these services were subject to adequate competition.
State
The Company is subject to varying levels of regulation in the states
in which it currently anticipates providing intrastate
telecommunications services. The vast majority of the states
require the Company to apply for certification to provide intrastate
telecommunications services, or at least to register or to be found
exempt from regulation, before commencing intrastate service. The
vast majority of states also require the Company to file and
maintain detailed tariffs listing its rates for intrastate service.
Many states also impose various reporting requirements and/or
require prior approval for transfers of control of certified
carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignments of carrier assets,
including subscriber bases, carrier stock offerings and incurrence
by carriers of significant debt obligations. Certificates of
authority can generally be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to
comply with state law and the rules, regulations and policies of the
state regulatory authorities. Fines and other penalties, including
the return of all monies received for intrastate traffic from
residents of a state, may be imposed for such violations. In
certain states, prior regulatory approval may be required for
acquisitions of telecommunications operations.
As the Company expands its efforts to resell long distance services,
the Company will have to remain attentive to relevant federal and
state regulations. FCC rules prohibit switching a customer from one
long distance carrier to another without the customer's consent and
specify how that consent can be obtained. Most states have consumer
protection laws that further define the framework within which the
Company's marketing activities must be conducted. The Company
intends to comply fully with all laws and regulations, and the
constraints of federal and state restrictions could impact the
success of direct marketing efforts.
The Company is not currently subject to any State or Federal
regulation with respect to its Internet related services. However,
there can be no assurances that the Company will not be subject to
such regulations in the future.
PATENTS, TRADEMARKS, LICENSES
The Company does not depend upon any patents or trademarks to
conduct its business; nor does the Company hold any such patents or
trademarks. The Company is required to hold licenses with the
Federal Communication Commission for the operation of its
telecommunication services. Currently, the Company is licensed in
26 states and the District of Columbia. The Company is currently in
the process of securing licenses for operation of its
telecommunication services in the remainder of the United States.
However, there can be no assurances that the Company will be
successful in obtaining such licenses.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company currently has no costs associated with compliance with
environmental regulations. However, there can be no assurances that
the Company will not incur such costs in the future.
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YEAR 2000 DISCLOSURE
The Company has completed a comprehensive review of its computer
systems to identify all software applications that could be affected
by the inability of many existing computer systems to process
time-sensitive data accurately beyond the year 1999, referred to as
the Year 2000 or Y2K issue. The Company is also continuing to
monitor its computer systems and monitoring the adequacy of the
processes and progress of third-party vendors of systems that may be
affected by the Year 2000 issue. The Company is dependent on
third-party computer systems and applications, particularly with
respect to such critical tasks as accounting, billing and the
underlying carrier (MCI/WordCom) of its long distance telephone
service. The Company also relies on its own computer systems.
After completing this review, the Company believes that it is Year
2000 compliant. While the Company believes that its procedures are
designed to be successful, because of the complexity of the Year
2000 issue and the interdependence of organizations using computer
systems, the Company's efforts, or those of third parties with whom
the Company interacts, may not be satisfactorily completed in a
timely fashion or may cost substantially more to remedy than the
amount anticipated. Failure to satisfactorily address the Year 2000
issue could have a material adverse effect on the Company.
NUMBER OF EMPLOYEES
As of March 31, 1999, the Company employed approximately 20 people
on a full time basis.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties,
and the Company's actual results could differ materially from those
forward-looking statements. The following discussion regarding the
financial statements of the Company should be read in conjunction
with the financial statements and notes thereto.
GENERAL OVERVIEW
The Company's principal line of business is to provide long distance
and value-added services for small and medium-sized businesses and
residential customers throughout the United States. The Company's
strategy has been to do build a subscriber base without committing
capital or management resources to construct its own network and
transmission facilities. This strategy has allowed the Company to
add customers without being limited by capacity, geographic
coverage, or configuration of any particular network that the
Company might have developed. The Company believes that in order to
stay competitive in the future, it will need to construct its own
network. Therefore, the Company has initiated plans to either
purchase or construct its own network. However, there can be no
assurances that the Company will be able to purchase or construct
its own network, or that if it does purchase or construct its own
network, that it will remain competitive.
Recently, the Company has begun providing a number of Internet
related services such as the sale of electronic calling cards on its
ecallingcards.com web site; Internet access via Dial-Up, Wireless
T-1, and DSL; and Internet Web Page Hosting services.
The Company's services are marketed nationwide, through broadcasting
and print media, telemarketing, independent sales agents and its
own sales force.
The Company's revenues consists of sales revenues from
telecommunication and Internet related services. These revenues are
generated when customers make long distance telephone calls from
their business or residential telephones or by using the Company's
telephone calling cards. Proceeds from prepaid telephone calling
cards are recorded as deferred revenues when the cash is received
and recognized as revenue as the telephone service is utilized. The
reserve for deferred revenues is carried on the balance sheet as an
accrued liability. Internet related services are typically billed
at a flat rate and are billed in advance. Revenues are recognized
in the period earned.
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Cost of sales include telecommunications service costs and
commissions paid for customer acquisition. Telecommunications
service costs paid by the Company are based on the Company's
customers' long distance usage. The Company pays its carriers based
on the type of call, time of call, duration of call, the terminating
telephone number, and terms of the Company's contract in effect at
the time of the call. General and administrative expenses consist of
the cost of customer service, billing, cost of information systems
and personnel required to support the Company's operations and growth.
The Company, depending on the extent of its future growth, may
experience significant strain on its management, personnel, and
information systems. The Company will need to implement and improve
operational, financial, and management information systems. In
addition, the Company is implementing new information systems that
will provide better record-keeping, customer service and billing.
However, there can be no assurance that the Company's management
resources or information systems will be sufficient to manage any
future growth in the Company's business, and the failure to do so
could have a material adverse effect on the Company's business,
results of operations and financial condition.
In 1998, the Company determined to change its fiscal year to June 30.
As previously discussed, the Company acquired all of the outstanding
common stock of GenTel on August 31, 1998. Following the
acquisition, the Company adopted the business plan of GenTel and
changed its name to GTC.
RESULTS OF OPERATIONS OF THE COMPANY
Revenues
Prior to the acquisition of GenTel by the Company on August 31,
1998, the Company had no revenues for the fiscal years ended
December 31, 1996, December 31, 1997, or the six month period ended
June 30, 1998.
Pursuant to the Company's newly adopted business plan, the Company
began to acquire customers, primarily through the use of
telemarketing. For the six months ended December 31, 1998, the
Company had approximately 554 customers, with usage of long distance
services of approximately 130,000 minutes. Revenues generated from
these customers were $17,962 for the six month period ended June 30,
1998.
Cost of Sales
Cost of Sales of $8,331 for the six months ended December 31, 1998
was comprised primarily of carrier costs associated with the cost of
long distance service provided by MCI/WorldCom and commissions paid
for customer acquisition. As a percentage of revenue, cost of sales
was 46.4% for the six-months ended December 31, 1998 resulting in a
gross margin of 53.6%.
Operating Expenses
Operating Expenses of $687,880 for the six months ended December 31,
1998 were comprised primarily of options valued at $150,000 issued
to a marketing company in exchange for services; shares valued at
approximately $189,000 issued to vendors in exchange for services
and rent; options valued at approximately $21,000 issued to
supplement compensation to certain key employees; $73,000 in
salaries paid to employees; and $254,880 of other operating
expenses, primarily rent, legal services, and investor relations.
Net loss was $678,601 for the six months ended December 31, 1998.
Assets and Liabilities
Assets were $151,449 for the period ended December 31, 1998. Assets
consisted primarily of subscription receivables of $100,000, computer
equipment with a net book value of $18,700 and other long term assets of
$30,000. Liabilities were $146,585 for the period ended December 31, 1998.
Liabilities consisted primarily of deferred salaries of $60,000,
accounts payable of $90,108 and other liabilities of $5,433.
Stockholder's Equity
<PAGE>
Stockholder's equity was ($95,136) for the period ended December 31,
1998. Stockholder's equity consisted primarily of $1,599,731
raised in the GenX and the Company's recent private offering of its
Common Stock, offset by the accumulated deficit at December 31, 1998
of $1,120,110.
RESULTS OF OPERATIONS FOR GENTEL FROM INCEPTION TO JUNE 30, 1998.
Revenues
For the period from inception to June 30, 1998, revenues for GenTel
totaled $497,312. This amount was from the bulk sale of long
distance calling cards.
Cost of Sales
Cost of Sales for the period from inception to June 30, 1998 was
comprised of the cost of acquiring the long distance calling cards.
Operating Expenses
For the period from inception to June 30, 1998, operating expenses
totaled $500,665 comprised of salaries of approximately $200,000;
shares valued at approximately $95,000 issued to the CEO and
Vice-President of GenTel, options valued at approximately $71,000
issued to certain key employees to supplement compensation,
professional fees of approximately $57,000 and rent of approximately
$22,000. Net loss for the period of inception to June 30, 1998 was
$451,465.
Assets and Liabilities
GenTel's assets for the period ended June 30, 1998
were $162,085. Assets consisted primarily of subscriptions
receivable of $142,500, computer equipment of $17,394 and cash of
$3,892. Liabilities for the period from inception to June 30, 1998
were $157,550. Liabilities consisted primarily of Notes payable to
shareholder of $80,000; deferred salaries of $70,000; and accounts
payable of $7,550.
Stockholders' Equity
Stockholders' equity for the period ended June 30, 1998 was $4,535.
Stockholders' equity consisted primarily of $289,750 raised in the sale
of GenX member interests through a private placement, options valued at
$71,250 issued to key employees to supplement compensation, stock valued
at $95,000 issued to GenTel's CEO and Vice-President to supplement
compensation and offset primarily by a net loss of $451,465 for the period
of inception to June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the acquisition of GenTel by the Company, GenTel achieved
positive cash flows of $3,892 resulting from $227,250 of cash
provided from the Company's financing activities, offset by $205,964
of cash used in operating activities and $17,394 of cash used in
investing activities.
Net cash used in operating activities of $205,964 was primarily due
to a net loss of $451,465 offset partially by increases in operating
liabilities, principally accounts payable ($7,550) and accrued
expenses ($70,000).
Net cash used in investing activities of $17,394 funded purchases of
computer equipment. Net cash provided by financing activities of
$227,250 was due to the proceeds from sales of shares of GenTel's
predecessor, GenX, of $147,250 and borrowings on notes payable to a
shareholder of $80,000.
The Company has no material commitments for capital expenditures and
the Company expects to continue purchasing additional equipment in
connection with expansion of its business.
<PAGE>
On February 12, 1999, the Company completed a private placement
offering of 1,535,000 shares of the Company's restricted (as that
term is defined by Rule 144 of the Securities Act of 1933) Common
Stock at a price of $1.00 per share, resulting in $1,330,000 raised,
net of issuance costs paid for brokers and finder's fees from the
offering.
In connection with the Company's private placement, the Company
entered into an Investment Banking Agreement with Transglobal
Capital Corporation ("TCC"), a licensed NASD broker on November 19,
1998. As part of this Agreement, TCC agreed to provide the Company
with consulting services and to assist the Company in raising
capital. In return, the Company agreed to compensate TCC with an
initial fee of 50,000 shares of the Company's restricted Common
Stock and to pay TCC a 13% commission on gross proceeds on financing
received by the Company as a result of TCC's efforts. In addition,
the Company agreed to issue TCC options to purchase 100,000 shares
of the Company's Common Stock at an exercise price of $0.01 upon
receipt of the first tranche of $100,000 in financing; an option to
purchase an additional 100,000 shares of the Company's Common Stock
at an exercise price of $0.01 upon receipt of $250,000 in financing;
an option to purchase an additional 100,000 shares of the Company's
Common Stock at an exercise price of $0.01 upon receipt of $500,000
in financing; and options to purchase an additional 300,000 shares
of the Company's Common Stock at an exercise price of $0.01 upon the
receipt of $1,000,000 in financing. As of March 31, 1999, all
600,000 options have vested. The difference between the exercise
price and the fair market value of the underlying restricted stock
will be charged against additional paid in capital.
In late March 1999, the Company initiated a private placement
offering of 1,000,000 shares of the Company's restricted (as that
term is defined by Rule 144 of the Securities Act of 1933) Common
Stock at a price of $5.00 per share. As of March 31, 1999, the Company has
not received any offers for subscriptions to the Company's Private
Offering.
The Company believes that its anticipated funds from operations,
funds from the prior sale of shares of GenTel's predecessor, GenX,
and funds from the sale of its recent and ongoing private offerings of
the Company's common stock, will be sufficient to fund its capital
expenditures, working capital, and other cash requirements for the
fiscal year ended 1999.
INFLATION
Management believes that inflation has not had a material effect on
the Company's results of operations.
ITEM 3 - DESCRIPTION OF PROPERTY
Effective June 1, 1998, the Company began leasing approximately
2,712 square feet of administrative office space in Costa Mesa,
California at a monthly rental rate of $5,017 per month. This
facility serves as the Company's headquarters and primary place of
business. The monthly rental rate is scheduled to increase to
$5,560 on June 1, 1999, through the end of the lease. The lease
expires on May 31, 2001.
In addition, on February 8, 1999, the Company entered into a
month-to-month lease for approximately 1,987 square feet of office
space for its customer service operation, at a monthly rental rate
of $3,676 per month, at its headquarters building in Costa Mesa.
The lease obligates the Company to pay the first three months of
rent and will automatically expire on February 7, 2000, unless
previously terminated either by the Company or by Lessor given
thirty (30) days written notice.
Due to anticipated growth, the Company is in the process of looking
for new space for its headquarters and customer service operations.
The Company believes that it will be able to locate such space on
reasonable rates and terms.
<PAGE>
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 1999, certain
information with respect to the Company's equity securities owned of
record or beneficially by (i) each Director of the Company; (ii)
each person who owns beneficially more than 5% of each class of the
Company's outstanding equity securities; and (iii) all Directors and
Executive Officers as a group.
<TABLE>
Title Common Stock Percent
of Class Name and Address of Beneficial Owner Outstanding Outstanding
<S> <C> <C> <C>
Common Stock Paul Sandhu(1) 5,069,088 35.42%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Eric Clemons(2) 1,819,522 12.71%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Mark Fleming(3) 10,000 0.07%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Gerald A. DeCiccio(4) 25,000 0.17%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Frank Naccarelli(5) 0 0.00%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Clay T. Whitehead 0 0.00%
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626.
Common Stock Reet Trust(6) 2,000,000 13.97%
21520 Yorba Linda
Suite 6227
Yorba Linda, CA 92887
Common Stock Michelson Group(7) 1,416,042 9.90%
5000 Birch Street
Suite 9600
Newport Beach, CA 92660
All Directors and 6,923,610 48.37%
Officers as a Group (6)
</TABLE>
(1) Includes an aggregate of 200,000 options to acquire shares of
Company common stock in accordance with Mr. Sandhu's
employment agreement.
(2) Includes an aggregate of 100,000 options to acquire shares of
Company common stock in accordance with Mr. Clemons'
employment agreement.
(3) Does not include an aggregate of an additional 90,000 options
to acquire shares of Company common stock which vest in 1/3
increments each year beginning October 14, 1999 in accordance
with Mr. Fleming's employment agreement.
(4) Does not include an aggregate of an additional 125,000
options to acquire shares of Company common stock which vest
in 1/3 increments each year beginning December 1, 1999 in
accordance with Mr. DeCiccio's employment agreement.
(5) Does not include an aggregate of an additional 45,000 options
to acquire shares of the Company common stock which vest in 1/3
increments each year beginning March 15, 1999 in accordance
with Mr. Naccarelli's employment agreement.
<PAGE>
(6) The trustee of the Reet Trust is Teg Sandhu, father of Paul
Sandhu. However, Paul Sandhu disclaims any beneficial
ownership to the shares held by the Reet Trust.
(7) Consists of options to acquire 9.9% of the issued and
outstanding Company common stock calculated after the
Offering. The options shall vest according to the following
schedule: (i) one-fourth vest immediately, (ii) one-fourth
when the Company breaks escrow on this Offering, (iii)
one-fourth when the Company's market capitalization reaches
$40 million, and (iv) one-fourth when the Company breaks
escrow on a round of debt or equity financing of $3 million
or more. Pursuant to an amendment to the agreement in
November 3, 1998, the Company agreed to waive the
requirements for the vesting of the fourth tranche of options
provided under this Agreement. As of March 31, 1999,
1,135,000 out of a total of 1,416,042 vested options have
been exercised, resulting in $11,350 charged to the Company for
consulting fees rendered.
The Company believes that the beneficial owners of securities listed
above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
<PAGE>
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal
offices and positions with the Company held by each person and the
date such person became a director or executive officer of the
Company. The executive officers of the Company are elected annually
by the Board of Directors. The directors serve one year terms
until their successors are elected. The executive officers serve
terms of one year or until their death, resignation or removal by
the Board of Directors. There are no family relationships between
any of the directors and executive officers. In addition, there was
no arrangement or understanding between any executive officer and
any other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of the Company are as follows:
Name Age Positions
Paul Sandhu 37 Chief Executive Officer, President,
and Chairman of the Board
Eric Clemons 27 Director, Chief Operating Officer,
Secretary and Treasurer
Gerald A. DeCiccio 41 Chief Financial Officer
Mark Fleming 40 Executive Vice President
Frank Naccarelli 44 Vice President of Sales
Clay T. Whitehead 57 Director
PAUL SANDHU is currently the Company's President and Chief
Executive Officer. Mr. Sandhu has been with GenTel since its
inception. Mr. Sandhu has over ten (10) years experience with
start-up and emerging growth companies. Mr. Sandhu was Co-Founder,
President and Co-Owner of Maximum Security ("Maximum"), a Security
and surveillance company he started in 1992. While at Maximum, Mr.
Sandhu actively managed a staff of over 200 employees. Mr. Sandhu
grew Maximum to $15 million in revenue and was ranked 31st out of
22,000 security companies. In 1997 Mr. Sandhu sold the business to
his partner. Mr. Sandhu graduated from the University of Punjab in
India with a degree in Engineering.
ERIC CLEMONS is currently the Company's Chief Operating
Officer. Mr. Clemons has been with GenTel since its inception. Mr.
Clemons has over eight (8) years experience with sales and marketing
organizations. Mr. Clemons most recently was Vice President of
Marketing for Intelligent Electronic Communications managing a staff
of 50 employees. In his first twelve months their productivity
increased 100% and sales increased 120%. Mr. Clemons has attended
The Wharton School of Business executive management programs.
GERALD A. DECICCIO joined the Company in January, 1999 as
Chief Financial Officer. Mr. DeCiccio has over eighteen years
experience in the financial and accounting field. Prior to joining
GTC, Mr. DeCiccio was the Vice President of Finance and
Administration for National Telephone & Communications, Inc.,
("NT&C") a $150 million inter-exchange carrier and provider of
communications products and services. While at NT&C, Mr. DeCiccio
managed NT&C's finance, accounting, human resources and legal
departments. Between 1995 and 1997, Mr. DeCiccio was the Corporate
Controller for Newport Corporation, a $140 million multi-national
manufacturer / distributor of laser and optics products. Prior to
that, Mr. DeCiccio was the Director of Audit and Quality Systems for
Sunrise Medical, Inc., a $750 million multi-national manufacturer /
distributor of health care products. From 1980 to 1984, Mr.
DeCiccio was a Supervising Senior Accountant for Ernst and Young.
Mr. DeCiccio received his Bachelor of Science in Accounting from
Loma Linda University, and his Masters of Science in Finance and
Systems Technology from the University of Southern California. Mr.
DeCiccio is a Certified Public Accountant in the State of California.
<PAGE>
MARK FLEMING joined the Company in October 1998 as
Executive Vice President. Mr. Fleming has sixteen years of business
strategy, planning, and analysis experience within the competitive
consumer products / services industries. For the past seven years,
Mr. Fleming worked in the telecommunications industry, holding
several finance and marketing management positions at MCI. Some of
the key business / operational issues that Mr. Fleming managed while
at MCI included pricing strategy, market positioning, new product
development, sales channel and customer service performance reviews,
capital investment decisions and overall business planning /
analysis for Residential Markets and Local Services divisions. Mr.
Fleming received his Bachelor of Arts degree in Business
Administration from Principia College in 1980, and attained his
Masters in Business Administration, with honors from the University
of Southern California in 1986.
FRANK NACCARELLI joined GTC in March 1999 as its Vice
President of Sales. In this role, he will be responsible for
leading the Company's national sales efforts with large corporate
accounts as well as the Company's Commercial Sales Agent Programs.
Prior to joining the Company, Mr. Naccarelli worked with
MCI/WorldCom. During his 20 year term with MCI/WorldCom, Mr.
Naccarelli's duties involved responsibility for P & L management,
and regional and national sales. Mr. Naccarelli received his
Associates of Arts degree in Business Administration from the
University of Pittsburgh in 1978.
CLAY T. WHITEHEAD is currently president of Clay Whitehead
Associates, a strategic consulting and business development company
which concentrates on the telecommunications and media industries.
Clay Whitehead Associates primarily works with large companies to
develop business projects in the areas of telecommunications and
television. Mr. Whitehead has participated in the formation,
strategy development, regulatory posture, and financing of a number
of telecommunications businesses in the United States and
internationally. Mr. Whitehead has also served as a special
assistant to President Nixon, with policy responsibility for NASA,
the Atomic Energy Commission, and the National Science Foundation.
From 1971 to 1974, he was director of the U.S. Office of
Telecommunications Policy. From 1979 to 1983, Mr Whitehead founded
and was president of Hughes Communications, Inc., a subsidiary of
Hughes Aircraft Company. Mr. Whitehead also currently serves on the
board of directors for Prudential Funds.
<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION
On December 1, 1998, the Company entered into an Employment
Agreement with Paul Sandhu, the Company's President and CEO, whereby
the Company will pay Mr. Sandhu an annual salary of $84,000.
Pursuant to the Agreement, Mr. Sandhu's salary shall increase to
$168,000 should the Company either maintain a positive cash flow for
two consecutive months, or the Company successfully completes a Form
SB-2 registered offering of its securities. In addition to his
annual salary, the Agreement confirmed the prior issuance of options
to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $0.2375 previously granted to Mr. Sandhu pursuant
to an employment agreement between Mr. Sandhu and GenTel dated
January 5, 1998. These options vested upon execution of the
Agreement. The Agreement may be canceled at any time by either the
Company or Mr. Sandhu. However, if the Company terminates the
Agreement without cause, as defined in the Agreement, the Company
shall be obligated to pay Mr. Sandhu 25% of his annual salary as
severance.
On December 1, 1998, the Company entered into an Employment
Agreement with Eric Clemons, the Company's Chief Operating Officer
("COO"), whereby the Company will pay Mr. Clemons an annual salary
of $76,000. Pursuant to the Agreement, Mr. Clemons' salary shall
increase to $152,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement confirmed the prior
issuance of options to purchase 100,000 shares of the Company's
Common Stock at an exercise price of $0.2375 previously granted to
Mr. Clemons pursuant to an employment agreement between Mr. Clemons
and GenTel dated January 5, 1998. These options vested upon
execution of the Agreement. The Agreement may be canceled at any
time by either the Company or Mr. Clemons. However, if the Company
terminates the Agreement without cause, as defined in the Agreement,
the Company shall be obligated to pay Mr. Clemons 25% of his annual
salary as severance.
On December 1, 1998, the Company entered into an Employment
Agreement with Gerald DeCiccio, the Company's Chief Financial
Officer, whereby the Company will pay Mr. DeCiccio an annual salary
of $105,000. Pursuant to the Agreement, Mr. DeCiccio's salary shall
increase to $144,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement grants Mr. DeCiccio
options to purchase 150,000 shares of the Company's Common Stock.
Twenty-five thousand (25,000) of the options are set to vest six (6)
months from the execution of the Agreement at an exercise price of
$.01, expiring three years from the date of vesting if not
exercised. The remaining 125,000 options are scheduled to vest in
1/3 increments each following year provided that Mr. DeCiccio is
employed with the Company. The Agreement may be canceled at any
time by either the Company or Mr. DeCiccio. However, if the Company
terminates the Agreement without cause, as defined in the Agreement,
the Company shall be obligated to pay Mr. DeCiccio 25% of his annual
salary as severance.
On October 14, 1998, the Company entered into an Employment
Agreement with Mark Fleming, the Company's Executive Vice-President,
whereby the Company will pay Mr. Fleming an annual salary of
$70,000. Pursuant to the Agreement, Mr. Fleming's salary shall
increase to $107,000 should the Company either maintain a positive
cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. In
addition to his annual salary, the Agreement grants Mr. Fleming
options to purchase 100,000 shares of the Company's Common Stock.
Ten thousand (10,000) of the options are set to vest six (6) months
from the execution of the Agreement at an exercise price of $.01,
expiring three years from the date of vesting if not exercised. The
remaining 90,000 options are scheduled to vest in 1/3 increments
each following year provided that Mr. Fleming is employed with the
Company. The Agreement may be canceled at any time by either the
Company or Mr. Fleming. However, if the Company terminates the
Agreement without cause, as defined in the Agreement, the Company
shall be obligated to pay Mr. Fleming 25% of his annual salary as
severance.
On March 15, 1999, the Company entered into an Employment Agreement
with Frank Naccarelli, the Company's Vice-President of Sales,
whereby the Company will pay Mr. Naccarelli an annual salary of
$85,000. In addition to his annual salary, the Agreement grants Mr.
Naccarelli options to purchase 45,000 shares of the Company's Common
Stock at $5.50 per share. Fifteen Thousand (15,000) options are
scheduled to vest in 1/3 increments each following year provided
that Mr. Naccarelli is employed with the Company. The Agreement may
be canceled at any time by either the Company or Mr. Naccarell.
However, if the Company terminates the Agreement without cause,
<PAGE>
as defined in the Agreement, the Company shall be obligated to pay Mr.
Naccarell 25% of his annual salary as severance.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation
information for services rendered in all capacities for the six
months ending December 31, 1998, the period ended June 30, 1998, and
the fiscal year ended December 31, 1997. Other than as set forth
herein, no executive officer's salary and bonus exceeded $100,000 in
any of the applicable years. The following information includes the
dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid
or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long Term Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards Options Payouts Compensation
Principal Year ($) ($) ($) ($) SARs(#) ($) ($)
Position
Paul Sandhu 1998 0 -0- -0- -0- -0- -0- -0-
(President,
CEO) (12/31)
1998 40,000 -0- -0- 76,000 200,000 -0- -0-
(6/30)
1997 n/a -0- -0- -0- -0- -0- -0-
Eric Clemons 1998 11,500 -0- -0- -0- -0- -0- -0-
(COO) (12/31)
1998 40,500 -0- -0- 19,000 100,000 -0- -0-
(6/30)
1997 n/a -0- -0- -0- -0- -0- -0-
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EMPLOYEES EXERCISE OF BASE PRICE
NAME GRANTED (#) IN FISCAL YEAR ($/SH) EXPIRATION DATE
Paul Sandhu 200,000 67% 0.2375 January, 2003
Eric Clemons 100,000 33% 0.2375 January, 2003
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FY-END THE-MONEY OPTION/SARS
SHARES ACQUIRED ON (#) AT FY-END ($)
NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Paul Sandhu -0- -0- 200,000 47,500
Eric Clemons -0- -0- 100,000 23,750
</TABLE>
COMPENSATION OF DIRECTORS
For the fiscal years ended 1996, 1997 and 1998, and the six months
ended December 31, 1998, Directors of the Company received no
compensation. Beginning with the third quarter of fiscal year 1999,
Directors will receive $1,500 and 2,500 shares of the Company's
"restricted" (as that term is defined by Rule 144 of the Securities
Act of 1933) Common Stock per quarter.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 17, 1998, the Company entered into a Corporate Development
Agreement with the Michelson Group. As part of the Agreement,
Michelson has agreed to provide consultation and corporate
development services on behalf of the Company. In return, the
Company has agreed to compensate the Michelson Group in the amount
of $6,500 per month in addition to warrants to purchase up to 9.9%
of the outstanding shares of the Common Stock of the Company (as
calculated following the completion of the July 21, 1998 private
placement) at an exercise price of $0.01. Pursuant to the
Agreement, the Michelson Group has agreed that the exercise of the
warrants adhere to the following schedule: one fourth of the
warrants can be exercised upon execution of the Agreement; an
additional one fourth when the Company breaks escrow on the
Offering; an additional one fourth once the Company's market
capitalization reaches $40,000,000; and the remaining one fourth
upon the Company breaking escrow on a debt or equity financing of
$3,000,000 or more. Pursuant to an amendment to the agreement in
November 3, 1998, the Company agreed to waive the requirements for
the vesting of the fourth tranche of options provided under this
Agreement. As of March 31, 1999, 1,135,000 out of a total of
1,416,042 vested options have been exercised, resulting in $11,350
charged to the Company for consulting fees rendered.
On August 31, 1998, the Company (which at the time was designated
Bobernco, Inc., a Nevada corporation), acquired all of the
outstanding common stock of GenTel Communications, Inc., a Colorado
corporation in a business combination described as a "reverse
acquisition." As part of the reorganization, the Company issued
8,986,250 shares of its Common Stock to the shareholders of GenTel
in exchange for all of the outstanding shares of Common Stock of
GenTel. Such shares include the shares owned by officers and
directors of the Company as set forth in the Section "Security
Ownership of Certain Beneficial Owners and Management" hereunder.
<PAGE>
Between 1989 and 1994, Mr. Clemons was a licensed NASD broker. As a
broker, Mr. Clemons was subject to three claims related to such
engagement and subsequently an administrative action by the NASD
related to his work as a licensed broker. Mr. Clemons was found
liable for an award of $4,000 on one of the actions and subsequently
was fined $65,000 and suspended for a period of two years by the NASD.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of Common Stock, $0.001 par value per share, of
which 14,313,156 were outstanding as of March 15, 1999. Pursuant to
the Agreement and Plan of Reorganization dated August 31, 1998, the
Company approved a 2-for-1 reverse stock split.
All references to the numbers of shares of the Company's Common
Stock are adjusted to reflect the 2-for-1 reverse split of the
Company's Common Stock. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by
the stockholders. Holders of Common Stock have no cumulative voting
rights. Holders of shares of Common Stock are entitled to share
ratably in dividends, if any, as may be declared, from time to time
by the Board of Directors in its discretion, from funds legally
available therefor. In the event of a liquidation, dissolution or
winding up of the Company, the holders of shares of Common Stock are
entitled to share pro rata all assets remaining after payment in
full of all liabilities. Holders of Common Stock have no preemptive
rights to purchase the Company's common stock. There are no
conversion rights or redemption or sinking fund provisions with
respect to the common stock. All of the outstanding shares of
Common Stock are fully paid and non-assessable.
TRANSFER AGENT
The transfer agent for the Common Stock is Alpha Tech Stock
Transfer, 4505 South Wasatch Blvd., Suite 205, Salt Lake City, UT
84124.
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The following table sets forth the high and low bid prices for
shares of the Company Common Stock for the periods noted, as
reported by the National Daily Quotation Service and the NASDAQ
Bulletin Board. Quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. The Company's Common Stock was not listed on the NASDAQ
Bulletin Board during 1997. On April 21, 1998, the Company's Common Stock
began listing on the NASDAQ exchange under the trading symbol BBRI. However,
the Company's Common Stock did not begin trading until after the Company
merged with GenTel on August 31, 1998 wherein the trading symbol for the
Company's Common Stock changed to GTCC.
BID PRICES
YEAR PERIOD HIGH LOW
1998 First Quarter. . . . . . . . . . . . . . . . n/a n/a
Second Quarter . . . . . . . . . . . . . . . .n/a n/a
Third Quarter. . . . . . . . . . . . . . . . n/a n/a
Fourth Quarter. . . . . . . . . . . . . . . 4.41 3.33
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the Common Stock of
the Company as of the close of business on March 31, 1999 was
approximately 153. Many of the shares of the Company's Common Stock
are held in "street name" and consequently reflect numerous
additional beneficial owners.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its Common
Stock, and does not expect to pay cash dividends in the next term.
The Company intends to retain future earnings, if any, to provide
funds for operation of its business.
ITEM 2 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims,
lawsuits, disputes with third parties, actions involving allegations
of discrimination, or breach of contract actions incidental to the
operation of its business. The Company is not currently involved in
any such litigation which it believes could have a materially
adverse effect on its financial condition or results of operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Prior to the acquisition of GenTel by Bobernco as previously
described, the Company engaged Barry L. Friedman, P.C., Certified
Public Accountants, to audit the Company' s financial statements for
the fiscal years ended December 31, 1996, December 31, 1997, and
June 30, 1998. GenTel's Certified Public Accountants were Corbin &
Wertz.
Subsequent to the acquisition of GenTel by Bobernco, Corbin & Wertz,
was retained by the Company as their principal accountant to audit
the Company's financial statements effective March 23, 1999. There
have been no disagreements between Barry L. Friedman and Corbin &
Wertz of the type required to be reported under this Item 3 since
their date of engagement.
<PAGE>
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On August 31, 1998, the Company (which at the time was designated
Bobernco, Inc., a Delaware corporation ("Bobernco")) acquired all of
the outstanding common stock of GenTel Communications, Inc., a
Colorado corporation ("GenTel") in a business combination described
as a "reverse acquisition". As part of the reorganization, the
Company issued 8,986,950 shares of its Common Stock to the
shareholders of GenTel in exchange for all of the outstanding shares
of Common Stock of GenTel. Such shares include the shares owned by
officers and directors of the Company as set forth in the Section
"Security Ownership of Certain Beneficial Owners and Management"
hereunder. This issuance was conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
In August, 1998, the Company issued an aggregate of 11,000 shares of
"restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock to Elizabeth Hartado and Azad
Rob, two (2) employees of the Company, in lieu of salary. This
issuance was conducted under an exemption under Section 4(2) of the
Securities Act of 1933.
In September and November, 1998, the Company issued 1,135,000 shares
of "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock to the Michelson Group,
pursuant to a Corporate Development Agreement entered into between
the Company and the Michelson Group. This issuance was conducted
under an exemption under Section 4(2) of the Securities Act of 1933.
In November, 1998, the Company issued 7,300 shares of its Common
Stock to MRC Legal Services Corp., the Company's securities counsel,
under Rule 504 of Regulation D promulgated under the Securities Act
of 1933, in consideration for legal services rendered.
In November, 1998, the Company issued 50,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Dan W. Baer in consideration for deferment of
rent owed by the Company for its headquarters in Costa Mesa, CA.
This issuance was conducted under an exemption under Section 4(2) of
the Securities Act of 1933.
In November, 1998, the Company issued 40,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Benjamin Abelson pursuant to a convertible
note entered into between the Company and Mr. Abelson in the amount
of $80,000. This issuance was conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
In December, 1998, the Company issued 30,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) common stock to Lance Stienhart, Esq., the Company's Federal
Communication Commission regulatory counsel in consideration
for legal services rendered. The issuance was
exempt under Section 4(2) of the Securities Act of 1933.
In January, 1999, the Company issued 8,750 shares of its Common
Stock to MRC Legal Services Corp., the Company's securities counsel,
under Rule 504 of Regulation D promulgated under the Securities Act
of 1933, in consideration for legal services rendered.
In February, 1999, the Company issued 7,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to MRC Legal Services Corp., the Company's
securities counsel, in consideration for legal services rendered.
The issuance was exempt under Rule 506 of
Section 4(2) of the Securities Act of 1933.
In February, 1999, the Company completed a private placement
offering of 1,535,000 "restricted" (as that term is defined under
Rule 144 of the Securities Act of 1933) shares of the Company's
Common Stock under Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933 to "accredited" investors at a price of $1.00
per share, resulting in net proceeds to the Company of approximately
$1,330,000.
<PAGE>
In February, 1999, the Company issued 46,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to Elwood Sprenger in accordance with a
consulting Agreement entered into between the Company and Mr.
Sprenger whereby the Company agreed to grant Mr. Sprenger 150,000
options to purchase the Company's Common Stock at an exercise price
of $1.00. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
In March, 1999, the Company issued 25,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to the Zomaya Group in exchange for advertising
services. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
In March, 1999, the Company issued 50,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to TransGlobal Capital Corporation ("TransGlobal"),
pursuant to an Investment Banking Agreement entered into between the
Company and TransGlobal. The issuance was exempt under Section 4(2)
of the Securities Act of 1933.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Nevada and the Company's Bylaws
provide for indemnification of the Company's Directors for
liabilities and expenses that they may incur in such capacities. In
general, Directors and Officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company, and with
respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
Furthermore, the personal liability of the Directors is limited as
provided in the Company's Articles of Incorporation.
Beginning in March, 1999, the Company maintains a policy of
Directors and Officers Liability Insurance with an aggregate
coverage limit of $2,000,000.
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the
end of this report beginning on Page F-1.
PART III
ITEM 1 - INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
(2) Agreement and Plan of Reorganization dated August 1998 between
Bobernco, Inc. and GenTel Communications, Inc.
(3.1) Articles of Incorporation
(3.2) Certificate of Amendment of Articles of Incorporation, filed
with the
Nevada Secretary of State on March 30, 1998
(3.3) Certificate of Amendment of Articles of Incorporation
filed with the
Nevada Secretary of State on September 3, 1998
(3.4) Bylaws of Bobernco, Inc. (The "Corporation")
(10.1) Michelson Group Corporate Development Agreement, dated
June 17, 1998, including amendment
(10.2) One Plus Billing and Information Management, Service
Agreement, dated September 8, 1998, including addendum
(10.3) MCI/WorldCom Telecommunication Resale Contracts
(10.3.1) Program Enrollment
(10.3.2) Rate and Discount Schedule
(10.3.3) Service Schedule
(10.3.4) Telecommunications
(10.4) Investment Banking Agreement, dated November 19, 1998
(10.5) Employment Agreement by and between GTC Telecom, Inc., a
Nevada corporation and Mark Fleming, dated October 14, 1998
(10.6) Employment Agreement by and between GTC Telecom, Inc., a
Nevada corporation and Eric Clemons, dated December 1, 1998
(10.7) Employment Agreement by and between GTC Telecom, Inc., a
Nevada corporation and Jerry DeCiccio, dated December 1, 1998
(10.8) Employment Agreement by and between GTC Telecom, Inc., a
Nevada corporation and Paul Sandhu, dated December 1, 1998
<PAGE>
(10.9) Employment Agreement by and between GTC Telecom, Inc., a
Nevada corporation and Frank Naccarelli, dated March 3, 1999
(10.10) Lease dated February 5, 1999 between Southern California
Sunbelt Developers, Inc., and GTC Telecom, a Nevada corporation;
Eric Clemons; and Paul Sandhu Jointly and Severally as Tenant
("Tenant") relating to premises at Suite K-104 The John Wayne
Executive Guild Center, 3151 Airway Avenue, Costa Mesa,
California 92626
(10.11) Global Pacific Internet Reseller Agreement between Global Pacific
Internet and GTC Telecom, dated January 25, 1999
(10.12) Telecommunications Service Agreement by and between International
Telephone and Electronics, LLC and GTC Telecom
(10.13) Sales Representative Agreement between GTC Telecom, Inc. and
OhGolly.com, Inc., dated March 9, 1999
(10.14) Purchase and Services Agreement between GTC Telecom, Inc. and
Service One Communications, Inc., dated March 9, 1999
(10.15) Branded Services Agreement between Epoch Networks, Inc. dba Epoch
Internet and GTC Telecom, Inc., dated February, 1999
(10.16) Lease dated May 22, 1998 between Southern California Sunbelt
Developers, Inc., and GenTel Communications, Inc., a Colorado
Corporation; Eric Clemons; and Paul Sandhu Jointly and Severally as
Tenant ("Tenant") relating to premises at Suite P-3 The John Wayne
Executive Guild Center, 3151 Airway Avenue, Costa Mesa, CA 92626
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
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.
GTC TELECOM CORP.
Date: March 31, 1999 By:/s/
Paul Sandhu
President & Chief Executive Officer
BOBERNCO, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
June 30, 1998
December 31, 1997
December 31, 1996
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT 1
ASSETS 2
LIABILITIES AND STOCKHOLDERS' EQUITY 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-10
<PAGE>
BARRY L. FRIEDMAN, PC.
CERTIFIED PUBLIC ACCOUNTANT
1582 TULITA DRIVE
OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors March 22, 1999
Bobernco, Inc.
Costa Mesa, California
I have audited the accompanying Balance Sheets of Bobernco, Inc.,(A
Development Stage Company), as of June 30, 1998, December 31, 1997, and
December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for period January 1, 1998, to June 30, 1998, and the
two years ended December 31, 1997, and December 31, 1996. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bobernco, Inc., (A
Development Stage Company), as of June 30, 1998, December 31, 1997, and
December 31, 1996, and the results of its operations and cash flows for the
period January 1, 1998, to June 30, 1998, and the two years ended December
31, 1997, and December 31, 1996, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has suffered recurring losses from
operations and has no established source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's plan
in regard to these matters are also described in Note #3. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Barry L. Friedman
Barry L Friedman
Certified Public Accountant
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
June December December
30, 1998 31, 1997 31, 1996
<S> <C> <C> <C>
CURRENT ASSETS: $ 0 $ 0 $ 0
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
OTHER ASSETS:
Organization Costs (Net) $ 44 $ 68 $ 116
TOTAL OTHER ASSETS $ 44 $ 68 $ 116
TOTAL ASSETS $ 44 $ 68 $ 116
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
June December December
30, 1998 31, 1997 31, 1996
<S> <C> <C> <C>
CURRENT LIABILITIES:
Officers Advances (Note#6) $ 1,250 $ 0 $ 0
TOTAL CURRENT LIABILITIES $ 1,250 $ 0 $ 0
STOCKHOLDERS' EQUITY: (Note 1)
Common stock par value, $.001
authorized 50,000,000 shares
issued and outstanding at
December 31, 1996-3,000,000 shs $ 3,000
December 31, 1997-3,000,000 shs $ 3,000
June 30, 1998-6,000,000 shares $ 6,000
Additional paid in Capital -3,000 0 0
Accumulated loss -4,206 -2,932 - 2,884
TOTAL STOCKHOLDERS' EQUITY $ -1,206 $ 68 $ 116
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44 $ 68 $ 116
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
Jan. 1, Year Year May 17, 1994
1998 to Ended Ended (inception)
Jun. 30, Dec. 31, Dec. 31, to Jun. 30,
1998 1997 1996 1998
<S> <C> <C> <C> <C>
INCOME:
Revenue $ 0 $ 0 $ 0 $ 0
EXPENSES:
General, Selling
and Administrative $ 450 $ 0 $ 0 $ 3,210
Accounting 800 0 0 800
Amortization 24 48 48 196
Total Expenses $ 1,274 $ 48 $ 48 $ 4,206
Net Profit/Loss(-) $-1,274 $ - 48 $ - 48 $- 4,206
Net Profit/Loss(-)
per weighted
share (Note 1) $ -.0002 $ NIL $ NIL $ -.0007
Weighted average
number of common
shares outstanding 6,000,00 6,000,000 6,000,000 6,000,000
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
Additional Accumu-
Common Stock paid-in lated
Shares Amount capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 3,000,000 $ 3,000 $ 0 $- 2,836
Net loss year ended
December 31, 1996 - 48
Balance,
December 31, 1996 3,000,000 $ 3,000 $ 0 $- 2,884
Net loss year ended
December 31, 1997 - 48
Balance,
December 31, 1997 3,000,000 $ 3,000 $ 0 $- 2,932
March 30, 1998
Forward stock
split 2:1 3,000,000 +3,000 - 3,000
Net loss,
January 1, 1998
to June 30, 1998 - 1,274
Balance,
June 30, 1998 6,000,000 $ 6,000 $- 3,000 $- 4,206
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
Jan. 1, Year Year May 17, 1995
1998, to Ended Ended (inception)
Jun. 30, Dec. 31, Dec. 31, to Jun. 30,
1998 1997 1996 1998
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities:
Net Loss $ - 1,274 $ - 48 $ - 48 $- 4,206
Adjustment to
reconcile net loss
to net cash
provided by operating
activities
Amortization +24 +48 +48 +196
Changes in assets and
liabilities:
Organization Costs -240
Increase in current
liabilities: +1,250 0 0 +1,250
Net cash used in
operating activities $ 0 $ 0 $ 0 - 3,000
Cash Flows from
investing activities 0 0 0 0
Cash Flows from
Financing Activities:
Issuance of common
Stock for cash 0 0 0 +3,000
Net increase (decrease)
in cash $ 0 $ 0 $ 0 $ 0
Cash,
beginning of period 0 0 0 0
Cash,
end of period $ 0 $ 0 $ 0 $ 0
</TABLE>
See accompanying notes to financial statements & audit report
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998, December 31, 1997, and December 31, 1996
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 17, 1994, under the laws of the State of
Nevada, as Bobernco, Inc. The Company currently has no operations and, in
accordance with SFAS #7, is considered a development stage company.
On May 24, 1994, the company issued 3,000,000 shares of $.001 par value
common stock for $ 3,000. in cash.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of
common shares outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
4. Organization costs of $ 240.00 are being amortized over a 60 month period
commencing may 17, 1994, to May 16, 1999.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek additional
capital through a merger with an existing operating company.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
NOTE 5 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. Office
services are provided without charge by a director. Such costs are
immaterial to the financial statements and, accordingly, have not been
reflected therein. The officers and directors of the Company are involved in
other business activities and may, in the future, in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the
resolution of such conflicts.
NOTE 6 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds are
interest free.
NOTE 7 - SUBSEQUENT EVENTS (UNAUDITED)
MERGER
Pursuant to an Agreement and Plan of Reorganization dated August 31, 1998,
the Company completed a merger with Gentel Communications ("Gentel"). Under
the terms of the tax-free reorganization and merger, the Company issued
8,986,950 of its shares to the shareholders of Gentel. As a result, the
separate corporate existence of Gentel ceased and the Company continued as
the surviving corporation. The directors and officers of Gentel immediately
prior to the merger became the directors and officers of the Company, which
subsequently changed its corporate name to GTC Telecom Corp.
STOCK ISSUANCES
On July 21, 1998, Gentel issued a confidential private placement memorandum
offering of 500,000 shares of common stock at $1.00 per share. After the
merger (described above), this offering was amended to become an offering of
the Company. Per an amendment dated January 29, 1999, the maximum offering
was increased to 1,500,000 shares.The Company was able to raise
approximately $1,397,000, net of issuance costs paid for brokers and
finder's fees, from the offering.
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
STOCK FOR SERVICES
In August 1998, the Company issued 11,000 restricted shares of common stock,
with a fair market value of $0.475 per share, to two employees of the
Company in lieu of salary.
Pursuant to various agreements subsequent to June 30, 1998, the Company
agreed to issue a total of 12,300 shares of common stock and 7,000 shares of
restricted common stock at $1.00 per share and 3,750 restricted shares of
common stock at one-third of the issue date's bid price per share for legal
services rendered.
On November 19, 1998, the Company entered into an Investment Banking
Agreement with Transglobal Capital Corporation ("TCC"), a licensed NASD
broker. Pursuant to the agreement, TCC will provide consulting services and
assist the Company with raising capital. The agreement, provides for the
Company to compensate TCC with an initial fee of 50,000 shares of the
Company's restricted common stock and a 13% commission on gross proceeds
received. In addition, the Company agreed to issue TCC options to purchase a
total of 600,000 shares of the Company's restricted common stock, at an
exercise price of $0.01 per share, when certain financing benchmarks are
obtained, as defined , with each option having a five-year life. As of the
date of our report, all 600,000 options have been granted pursuant to the
agreement. The difference between the exercise price and the fair market
value of the restricted common stock will be charged against additional
paid-in capital.
Pursuant to an agreement dated November 30, 1998, the Company issued 50,000
restricted shares of common stock, with a fair market value of $1.00 per
share, for rent.
Pursuant to an agreement dated January 13, 1999, the Company issued 30,000
restricted shares of common stock, with a fair market value of $1.00 per
share, for legal services rendered.
In March 1999, the Company issued options to purchase 25,000 shares of
restricted stock, at a price of $1.00 per share, for advertising.
STOCK OPTIONS AND WARRANTS
Subsequent to June 30, 1998, the Company entered into various employment
agreements wherein the Company has agreed to supplement compensation to
certain key employees in the form of stock options. Pursuant to the
agreements, the Company issued options to purchase 91,000 shares of
restricted common stock at a price of $.01 per share and vesting over a
period of one year from the date of grant. In addition, the Company issued
options to purchase 254,000 shares of restricted common stock at a price
ranging from $1.00 to $5.00 per share and vesting over a period of six
months from the date of grant.
<PAGE>
BOBERNCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
June 30, 1998, December 31, 1997, and December 31, 1996
OPERATING AGREEMENTS
On June 17, 1998, Gentel entered into an agreement with The Michelson Group,
Inc., ("Michelson"), whereby Michelson will perform corporate development
services such as, but not limited to, selecting key employees, attracting
capital investors, providing advice on stock option plans and maintaining an
ongoing stock market support system. Pursuant to the agreement, the Company
will pay Michelson a monthly fee in of $ 6,500. In addition, the company
agrees to issue Michelson warrants to purchase that number of shares of
common stock of the Company which would, upon exercise, result in Michelson
holding 9.9% of the outstanding shares of the Company upon the completion of
a proposed bridge financing. The agreement is effective through June 2000.
Subsequent to June 30, 1998, in accordance with the tax-free reorganization
and merger, all of the warrants were exercised into 1,135,000 restricted
shares of common stock.
In August 1998, the Company entered into a three-year carrier contract with
WorldCom, Inc. covering a potential volume purchase of $300,000 of long
distance telephone time. The contract provides for a minimum monthly revenue
commitment of $10,000 commencing March 1999.
On September 8, 1998, the Company entered into a agreement with a billing
company who will provide processing services for customer billing and
collections. In addition the billing company will provide financing
opportunities through a third-party lender for amounts up to 70% of eligible
accounts receivable, as defined.
On October 26, 1998, the Company entered into a agreement to become a
licensed user of a telecommunications management and accounting software
program. The agreement, which expires in October 2003, unless terminated by
the Company, has a five-year renewal feature and provides for the Company to
pay $1,425 per month.
On February 3, 1999, the Company entered into an agreement with an Internet
Access Provider ("IAP") whereby the IAP will provide internet services for
the Company. The agreement provides for a minimum monthly revenue commitment
of $25,000 beginning September 1999. The Agreement shall continue for a
period of three years and is automatically renewed for additional,
successive one-year periods unless terminated by the Company.
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
WITH
INDEPENDENT AUDITORS' REPORT THEREON
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . 1
Balance Sheet as of June 30, 1998. . . .
. . . . . . . . . . . . . . . . . . . .
. . . . 2
Statement of Operations for the period
from May 29, 1997 (Inception) through
June 30, 1998. . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . 3
Statement of Stockholders' Equity for
the period from May 29, 1997 (Inception)
through June 30, 1998 . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . .4
Statement of Cash Flows for the period
from May 29, 1997 (Inception) through
June 30, 1998 . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . .5
Notes to the Financial Statements. . . .
. . . . . . . . . . . . . . . . . . . .
. . . . 6 -10
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Gentel Communications
We have audited the accompanying balance
sheet of Gentel Communications (a
development stage company) (the
"Company") as of June 30, 1998, and the
related statements of operations,
stockholders' equity and cash flows for
the period from May 29, 1997 (date of
inception) through June 30, 1998. These
financial statements are the
responsibility of the Company's
management. Our responsibility is to
express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance
with generally accepted auditing
standards. Those standards require that
we plan and perform the audit to obtain
reasonable assurance about whether the
financial statements are free of
material misstatement. An audit
includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements.
An audit also includes assessing the
accounting principles used and
significant estimates made by
management, as well as evaluating the
overall financial statement
presentation. We believe that our audit
provides a reasonable basis for our
opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial
position of the Company as of June 30,
1998, and the results of its operations
and its cash flows for the period from
May 29, 1997 (date of inception) through
June 30, 1998 in conformity with
generally accepted accounting principles.
As discussed in Note 1, the Company has
been in the development stage since its
inception on May 29, 1997. Realization
of a major portion of the assets is
dependent upon the Company's ability to
raise funds through debt or equity
offerings, and the success of future
operations. These factors raise
substantial doubt about the Company's
ability to continue as a going concern.
/s/ Corbin & Wertz
CORBIN & WERTZ
Irvine, California
March 4, 1999
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 1998
ASSETS
Current assets:
Cash $3,892
Stock subscription receivable 142,500
Total current assets 146,392
Computer equipment, net of accumulated
depreciation of $1,701 15,693
$162,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,550
Accrued expenses 70,000
Total current liabilities 77,550
Convertible notes payable to stockholder 80,000
Total liabilities 157,550
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value; 100,000,000
shares authorized; 8,986,950 shares issued and
outstanding (including 313,010 shares
subscribed) 899
Additional paid-in capital 455,101
Deficit accumulated during the development stage (451,465)
Total stockholders' equity 4,535
$162,085
See independent auditors' report and accompanying notes to financial statements
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
Net revenues $ 497,312
Cost of sales 447,312
Gross profit 50,000
Selling, general and administrative expenses 500,665
Loss before provision for taxes (450,665)
Provision for taxes 800
Net loss $ (451,465)
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
<TABLE>
Deficit
Additional Accumulated Total
Common Stock Paid-in During the Stockholders'
Shares Amount Capital Development Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, May 29, 1997 - $ - $ - $ - $ -
Estimated Fair market value
of options issued to employees
on January 5, 1998 - - 71,250 - 71,250
Purchase of GenX, LLC
(conversion rate of
10,983 shares to 1 unit)
on February 3, 1998 8,786,950 879 288,871 - 289,750
Estimated Fair market value
of restricted common stock
issued to the CEO and Vice
President for compensation
in June 1998 200,000 20 94,980 - 95,000
Net loss - - - (451,465) (451,465)
Balances, June 30, 1998 8,986,950 $899 $455,101 (451,465) $4,535
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 29, 1997 (DATE
OF INCEPTION)
THROUGH JUNE 30, 1998
Cash flows from operating activities:
Net loss $(451,465)
Fair market value of options issued for compensation 71,250
Fair market value of stock issued for compensation 95,000
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,701
Changes in operating assets and liabilities:
Accounts payable 7,550
Accrued expenses 70,000
Net cash used in operating activities (205,964)
Cash flows used in investing activities:
Purchases of computer equipment (17,394)
Cash flows from financing activities:
Proceeds from sale of GenX units and
related conversion into Gentel
common shares, net of offering costs of $27,750 147,250
Notes payable to stockholder 80,000
Net cash provided by financing activities 227,250
Net increase in cash 3,892
Cash at beginning of period -
Cash at end of period $3,892
Supplemental disclosure of cash flow information -
Cash paid during period for:
Interest $ -
Income and franchise taxes $ -
Supplemental disclosure on non-cash investing and
financing activities:
During the current period ended June 30, 1998, the Company issued 313,010
shares of common stock in the amount of $142,500 for a stock subscription
receivable. All amounts were collected subsequent to the period ended
June 30, 1998.
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and Operations
Gentel Communications (a development stage
company) (the "Company"), a Colorado
corporation, was incorporated on December 9,
1997. Effective February 3, 1998, under the
terms of a tax-free asset purchase
agreement, the Company acquired all assets
and assumed all liabilities of GenX, LLC, a
Delaware limited liability company ("GenX")
which was formed on May 29, 1997. These
financial statements include the activity
of GenX from the date of GenX's inception. The Company
issued to GenX, 8,786,950 shares of its common
stock representing not less than 79.9% of
all authorized, issued and outstanding stock
in the Company at the date of closing. The
Company has been in the development stage
since its formation on May 29, 1997. During
the development stage, the Company is
primarily engaged in raising capital,
obtaining financing, advertising and
promoting the Company, and administrative
functions. The Company intends to provide
long distance service primarily to small and
medium-sized businesses and residential
customers throughout the United States. The
Company's long distance service offerings
include outbound service, inbound toll-free
800 service, dedicated private line services
for data, wireless T1 service and website
development and hosting.
Basis of Presentation
The accompanying financial statements have
been prepared assuming the Company will
continue as a going concern, which
contemplates, among other things, the
realization of assets and satisfaction of
liabilities in the normal course of
business. The Company's losses from
operations through June 30, 1998 and lack of
operational history, among other matters,
raise substantial doubt about its ability to
continue as a going concern. The Company
intends to fund operations through debt and
equity financing arrangements (see Note 5)
which management believes will be sufficient
to fund its capital expenditures, working
capital requirements and other cash
requirements for the fiscal year ending June
30, 1999.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosures of contingent
assets and liabilities at the date of the
financial statements, as well as the
reported amounts of revenues and expenses
during the reporting period. Actual results
could differ from those estimates.
Risks and Uncertainties
The Company is a start up company subject to
the substantial business risks and
uncertainties inherent to such an entity,
including the potential risk of business
failure.
Computer Equipment
Computer equipment is stated at cost.
Depreciation is computed using the
straight-line method over the useful life of
3 years.
<PAGE>
GENTEL COMMUNICATIONS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE PERIOD FROM MAY 29, 1997 (DATE OF
INCEPTION)
THROUGH JUNE 30, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING PRINCIPLES, CONTINUED
Betterments, renewals, and extraordinary
repairs that extend the lives of the assets
are capitalized; other repairs and
maintenance charges are expensed as
incurred. The cost and related accumulated
depreciation applicable to assets retired
are removed from the accounts, and the gain
or loss on disposition is recognized in
current operations.
During 1995, the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of," which requires
that long-lived assets and certain
identifiable intangibles to be held and used
by an entity be reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount of an
asset may not be recoverable. In accordance
with the provisions of SFAS No. 121, the
Company regularly reviews long-lived assets
and intangible assets for impairment
whenever events or changes in circumstances
indicate that the carrying amount of the
assets may not be recoverable. Based on its
analysis, the Company believes that no
impairment of the carrying value of its
long-lived assets existed at June 30,1998.
Stock-Based Compensation
During 1995, the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based
Compensation," which defines a fair value
based method of accounting for stock-based
compensation. However, SFAS 123 allows an
entity to continue to measure compensation
cost related to stock and stock options
issued to employees using the intrinsic
method of accounting prescribed by
Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to
Employees." Entities electing to remain
with the accounting method of APB 25 must
make pro forma disclosures of net income
(loss), as if the fair value method of
accounting defined in SFAS 123 had been
applied. The Company has elected to account
for its stock-based compensation to
employees under APB 25.
Revenue Recognition
The Company recognizes revenue during the
month in which services or products are
delivered, as follows:
The Company's long distance
telecommunications service revenues are
generated when customers make long distance
telephone calls from their business or
residential telephones or by using any of
the Company's telephone calling cards.
Proceeds from prepaid telephone calling
cards are recorded as deferred revenues when
the cash is received, and recognized as
revenue as the telephone service is
utilized. The reserve for deferred
revenues, if any, is carried on the balance
sheet as an accrued liability.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES,
CONTINUED
Income Taxes
The Company accounts for income taxes under
Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"
("SFAS 109"). Under SFAS 109, deferred tax
assets and liabilities are recognized for
the future tax consequences attributable to
differences between the financial statement
carrying amounts of existing assets and
liabilities and their respective tax bases.
Deferred tax assets and liabilities are
measured using enacted tax rates expected to
apply to taxable income in the years in
which those temporary differences are
expected to be recovered or settled. A
valuation allowance is provided for
significant deferred tax assets when it is
more likely than not that such assets will
not be recovered.
NOTE 2 - NOTE PAYABLE TO STOCKHOLDER
Note payable to stockholder represents
monies borrowed from a stockholder for
working capital purposes. The note
payable accrues interest at 12.50% and
is payable in two installments of
$40,000 plus interest due on November
15, 1998 and May 15, 1999. The note is
convertible into 40,000 shares of
restricted common stock at $2.00 per
share. Subsequent to the Merger (see
Note 5), the stockholder exercised the
conversion feature.
NOTE 3 - STOCKHOLDERS' EQUITY
Stock Options
Under the terms of employment agreements
with its CEO and Vice President, the
Company issued options to purchase
300,000 shares of the Company's common
stock at an exercise price of 50% of the
fair market price at the date the option
was granted (estimated by the Company to
be $0.475 at January 5, 1998). The
options vested 100% on the date of grant
and are exercisable through January 5, 2003.
A summary of all employee stock option
activity for the period ended June 30,
1998 follows:
</TABLE>
<TABLE>
<S> <C> <C>
OPTIONS PRICE
Balance, May 29, 1997 - $ -
Granted 300,000 $0.2375
Balance, June 30, 1998 300,000 $0.2375
Exercisable, June 30, 1998 300,000
<PAGE>
NOTE 3 - STOCKHOLDERS' EQUITY, CONTINUED
SFAS 123 Pro Forma Information
Pro forma information regarding net
income (loss) is required by SFAS 123,
and has been determined as if the
Company had accounted for its employee
stock options under the fair value
method of SFAS 123. The fair value for
these options was estimated at the date
of grant using the Black Scholes option
pricing model with the following
assumptions for the period ended June
30, 1998; risk free interest rate of
5.52%; dividend yield of 0%; expected
life of the options of 1 year; and
volatility factor of the expected market
price of the Company's common stock of
135%.
For purposes of pro forma disclosures,
the estimated fair value of the options
is amortized to expense over the option
vesting period. Adjustments are made
for options forfeited prior to vesting.
The effect on compensation expense and
net loss had compensation cost for the
Company's stock option issuances been
determined based on fair value on the
date of grant consistent with the
provisions of SFAS 123, for the period
ended June 30, 1998:
Net loss, as reported $(451,465)
Adjustment to compensation expense under SFAS 123 (24,750)
Pro forma net loss $(476,215)
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company leases certain facilities
for its corporate and operations offices
under a non-cancelable operating lease
agreement that expires in 2001.
Future annual minimum commitments under this lease
agreement are as follows:
Years Ending
June 30,
1999 $60,745
2000 66,715
2001 61,156
$188,616
Rent expense was $22,115 for the period ended June 30, 1998.
NOTE 4 - COMMITMENTS AND CONTINGENCIES, CONTINUED
Employment Agreements
<PAGE>
On January 5, 1998, the Company entered
into five-year employment agreements
with its CEO and majority stockholder
and its Vice President. Under the terms
of the agreements, the CEO and the Vice
President will receive an annual salary
and options to purchase Company common
stock (see Note 3). In addition, the
Company retains an option to extend each
employee's employment and renew the
agreement annually for up to ten
additional years. Subsequent to
year-end, these agreements were modified
to one-year at-will employment agreements.
Contracts and Agreements
On June 17, 1998, the Company entered
into an agreement with The Michelson
Group, Inc. ("Michelson"), whereby
Michelson will perform corporate
development services such as, but not
limited to, selecting key employees,
attracting capital investors, providing
advice on stock option plans and
maintaining an ongoing stock market
support system. Pursuant to the
agreement, the Company will pay
Michelson a monthly fee of $6,500. In
addition, the Company agrees to issue
Michelson warrants to purchase that
number of shares of common stock of the
Company which would, upon exercise,
result in Michelson holding 9.9% of the
outstanding shares of the Company (estimated
to be a maximum of 1,416,042) upon
the completion of a proposed bridge
financing. The agreement is effective
through June 2000.
Subsequent to the Merger (see Note 5),
Michelson exercised warrants to
purchase 1,135,000 shares of GTC stock
at an exercise price of $.01 per share.
The exercise price reflected the
Company's estimate of fair market value
at the date of grant and therefore no
additional amount was recognized as
expense.
NOTE 5 - SUBSEQUENT EVENTS (UNAUDITED)
Merger
Pursuant to an Agreement and Plan of
Reorganization dated August 31, 1998,
the Company completed a merger with and
into Bobernco (the "Merger"), a publicly
traded shell corporation. Under the
terms of the tax-free reorganization and
merger, all of the Company's common
stock was converted to 8,986,950 shares
(1 to 1) of Bobernco common stock and,
as a result, the separate corporate
existence of the Company ceased and
Bobernco continued as the surviving
corporation. The directors and officers
of the Company immediately prior to the
merger became the directors and officers
of Bobernco, which subsequently changed
its corporate name to GTC Telecom Corp.
("GTC").
Stock Issuances
On July 21, 1998, the Company issued a
confidential private placement
memorandum offering of 500,000 shares of
common stock at $1.00 per share. After
the Merger, this offering was amended to
become an offering of GTC. Per an
amendment dated January 29, 1999 the
maximum offering was increased to
1,500,000 shares. GTC was able to raise
approximately $1,330,000, net of
issuance costs paid for brokers and
finder's fees, from the offering.
<PAGE>
GTC Telecom
Income Statement
</TABLE>
<TABLE>
<S> <C> <C>
6 Months Ending December 31, 1998 FY 1998 6 months
Sales Jun-98 Dec-98
Total Sales $497,312 $17,962
Cost of Goods Sold
Total Variable COGS $447,312 $8,331
% of Total Sales 89.9% 46.4%
Total Fixed Cost of Goods Sold $0 $0
Total Cost of Goods Sold $447,312 $8,331
Gross Profit $50,000 $9,630
% of Total Sales 10.1% 53.6%
Operating Expenses
Sales & Marketing $840 $169,659
Research & Development $0
G & A $499,825 $518,221
Total Operating Expenses $500,665 $687,880
% of Total Sales 100.7% 3829.7%
Income From Operations ($450,665) ($678,250)
% of Total Sales -90.6% -3776.1%
Interest Income $0 $50
Interest Expense $0 $0
Income before Taxes ($450,665) ($678,200)
Taxes on Income $800 $400
Net Income After Taxes ($451,465) ($678,600)
% of Total Sales -90.8% -3778.1%
</TABLE>
<PAGE>
GTC Telecom
Balance Sheet
<TABLE>
<S> <C> <C> <C>
Assets Jun-98 Sep-98 Dec-98
Current Assets
Cash $3,892 $353 ($2,051)
Investments $0 $0 $0
Accounts Receivable $0 $0 $4,800
Subscriptions Receivable $142,500 $127,500 $100,000
Inventory $0 $0 $0
Other Current Assets $0 $0 $0
Total Current Assets $146,392 $127,853 $102,749
Plant & Equipment
Land $0 $0 $0
Buildings $0 $0 $0
Building/Leasehold Improvements $0 $0 $0
Machinery & Equipment $0 $0 $0
Office Equipment $17,394 $17,394 $23,602
Automobiles $0 $0 $0
Accumulated Depreciation ($1,701) ($3,150) ($4,901)
Total Net Plant & Equipment $15,693 $14,243 $18,700
Other Assets $0 $30,000
Total Assets $162,085 $142,096 $151,449
Liabilities & Owners' Equity
Current Liabilities
Short Term Debt $0 $40,000 $0
Accounts Payable $7,550 $48,703 $90,108
Other Payables $0 $0 $0
Accrued Liabilities $70,000 $80,000 $65,433
Total Current Liabilities $77,550 $168,703 $155,541
Long Term Debt $80,000 $80,000 $0
Total Liabilities $157,550 $248,703 $155,541
Owner/Stockholder Equity
Common Stock $456,000 $449,822 $1,125,974
Retained Earnings ($451,465) ($556,428)($1,130,065
Dividends Payable $0 $0 $0
Total Owners' Equity $4,535 ($106,607) ($4,091)
Total Liabilities & Equity $162,085 $142,096 $151,449
</TABLE>
<PAGE>
The following proforma financial information presents the results of operations
of the continuing businesses of the Company with GenTel as though the merger
had been made as of June 30, 1998. No proforma adjustments have been made
as their effect would be de minimus. Net loss per common share, basic and
diluted, is based on the weighted average number of common shares outstanding.
Common equivalent shares have been excluded as their effect is anti-dilutive.
<TABLE>
Fiscal Year Ended Six Months Ended
June 30, 1998 December 31, 1998
<S> <C> <C>
Net Sales $497,312 $17,962
Loss from continuing operations (450,665) (678,250)
Net loss (451,465) (678,600)
______________________________________________________________________________
Loss per common share
Loss from continuing operations
Basic and Diluted ($0.04) ($0.06)
Net loss
Basic and Diluted ($0.04) ($0.06)
_______________________________________________________________________________
</TABLE>
Such proforma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the merger had been
effective at the beginning of the periods presented or of the results which
may be achieved in the future.
<PAGE>
AGREEMENT AND
PLAN OF REORGANIZATION
DATED AUGUST 31, 1998
BETWEEN
BOBERNCO, INC.
AND
GENTEL COMMUNICATIONS, INC.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is entered into this 31st day of August, 1998 by and between
BOBERNCO, INC., a Nevada corporation ("Bobernco" and "Surviving
Corporation") and GENTEL COMMUNICATIONS, INC., a California
corporation, ("GenTel").
RECITALS
A. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Certificate of
Merger attached hereto as Exhibit A ("Certificate of Merger"), the
parties intend that GenTel will merge with and into Bobernco (the
"Merger"), whereby at the Effective Time, all of the GenTel Common
Stock will be converted into eight million nine hundred eighty-six
thousand nine hundred fifty (8,986,950) shares of Bobernco Common
Stock.
B. For federal income tax purposes, it is intended that
the Merger shall qualify as a tax free reorganization within the
meaning of Section368(a)(1)(A) of the Code.
C. The parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other
as an inducement to the consummation of the Merger.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in
and for the consideration and mutual covenants set forth herein, the
parties agree as follows:
1. Certain Definitions.
1.1 "Affiliate" shall have the meaning set forth in the
rules and regulations promulgated by the Commission pursuant to the
Securities Act.
1.2 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
1.3 "Closing Date" shall mean the date of the Closing.
1.4 "Code" shall mean the United States Internal Revenue
Code of 1986, as amended.
1.5 "Commission" shall mean the United States Securities
and Exchange Commission.
1.6 "Dissenting Shares" shall mean those shares held by
holders who perfect their appraisal rights under the applicable
state laws.
<PAGE>
1.7 "Effective Time" shall mean the date and time of the
effectiveness of the Merger under Nevada and California law.
1.8 "GAAP" shall mean generally accepted accounting
principles.
1.9 "GenTel Common Stock" shall mean all of the
outstanding shares of Common Stock of GenTel.
1.10 "Material Adverse Effect" shall mean a material
adverse effect on the operations, assets or financial condition
(financial or otherwise) of an entity considered as a whole.
1.11 "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
1.12 "Transaction Documents" shall mean all documents or
agreements attached as an exhibit or schedule hereto, and set forth
on the Table of Contents.
2. Plan of Reorganization.
2.1 The Merger. Subject to the terms and conditions of
this Agreement and the Certificate of Merger, GenTel shall be merged
with and into Bobernco in accordance with the applicable provisions
of the laws of the States of Nevada and California, and with the
terms and conditions of this Agreement and the Certificate of
Merger, so that:
(a) At the Effective Time (as defined in Section
2.5 (below)), GenTel shall be merged with and into Bobernco. As a
result of the Merger, the separate corporate existence of GenTel
shall cease, and Bobernco shall continue as the surviving
corporation, and shall succeed to and assume all of the rights and
obligations of GenTel in accordance with the laws of Nevada.
(b) The Certificate of Incorporation of the
Surviving Corporation shall be the Certificate of Incorporation of
Bobernco in effect immediately prior to the Effective Time. The
Bylaws of Bobernco prior to the Effective Time shall be the Bylaws
of the Surviving Corporation after the Effective Time unless and
until further amended as provided by law.
(c) Subject to the terms of this Agreement, the
directors and officers of GenTel immediately prior to the Effective
Time shall be the directors and officers of the Surviving
Corporation after the Effective Time. Such directors and officers
shall hold their position until the election and qualification of
their respective successors or until their tenure is otherwise
terminated in accordance with the Bylaws of the Surviving Corporation.
2.2 Conversion of Shares. Each share of GenTel Common
Stock, issued and outstanding immediately prior to the Effective
Time, will, by virtue of the Merger, and at the Effective Time, and
without further action on the part of any holder thereof, be
converted into one share of fully paid and nonassessable shares of
Bobernco Common Stock.
<PAGE>
2.3 Fractional Shares. No fractional shares of Bobernco
Common Stock will be issued in connection with the Merger.
2.4 The Closing. Subject to termination of this
Agreement as provided in Section 10 (below), the Closing shall take
place at the offices of M. Richard Cutler, 610 Newport Center Drive,
Suite 800, Newport Beach, CA 92660, as soon as possible upon the
satisfaction or waiver of all conditions set forth in Sections 8 and
9 hereof, or such other time and place as is mutually agreeable to
the parties.
2.5 Effective Time. Simultaneously with the Closing, the
Certificate of Merger shall be filed in the office of the Secretary
of State of the State of California and the Secretary of State of
the State of Nevada. The Merger shall become effective immediately
upon the filing of the Certificate of Merger with such offices.
2.6 Tax Free Reorganization. The parties intend to adopt
this Agreement as a tax-free plan of reorganization and to
consummate the Merger in accordance with the provisions of
Section368(a)(1)(A) of the Code. Each party agrees that it will not
take or assert any position on any tax return, report or otherwise
which is inconsistent with the qualification of the Merger as a
reorganization within the meaning of Section368(a) of the Code.
Bobernco represents now, and as of the Closing Date, that it
presently intends to continue GenTel's historic business or use a
significant portion of GenTel's business assets in a business.
3. Representations and Warranties of GenTel. GenTel
represents and warrants to Bobernco as set forth below. No fact or
circumstance disclosed shall constitute an exception to these
representations and warranties except as may mutually be agreed upon
in writing by the parties hereto.
3.1 Organization of GenTel; Authorization. GenTel is a
corporation duly organized, validly existing and in good
standing under the laws of California with full corporate
power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized
by all necessary corporate action of GenTel and this
Agreement constitutes a valid and binding obligation of
GenTel, enforceable against it in accordance with its terms.
3.2 Capitalization.
(a) The authorized capital of GenTel consists of
100,000,000 shares of Common Stock, par value $.00001 per
share, of which 8,986,950 shares are issued and outstanding.
(b) GenTel does not have outstanding any
preemptive rights, subscription rights, options, warrants,
rights to convert or exchange, capital stock equivalents, or
other rights to purchase or otherwise acquire any GenTel
capital stock or other securities.
(c) All of the issued and outstanding shares of
GenTel capital stock have been duly authorized, validly
issued, are fully paid and nonassessable, and such capital
stock
<PAGE>
has been issued in full compliance with all applicable
federal and state securities laws. None of GenTel's issued
and outstanding shares of capital stock are subject to
repurchase or redemption rights.
(d) Except for any restrictions imposed by
applicable state and federal securities laws, there is no
right of first refusal, option, or other restriction on
transfer applicable to any shares of GenTel's capital stock.
(e) GenTel is not a party or subject to any
agreement or understanding (and, to GenTel's actual
knowledge, there is no agreement or understanding between or
among any persons) that affects or relates to the voting or
giving of written consent with respect to any security.
3.3 No Conflict as to GenTel. Neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any
provision of the certificate of incorporation or by-laws of
GenTel or (b) violate, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under any agreement to
which GenTel is a party or (c) violate any statute or law or
any judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to GenTel.
3.4 No Conflict as to GenTel and Subsidiaries. Neither
the execution and delivery of this Agreement nor the
consummation of the consummation of the transactions
contemplated hereby will (a) violate any provision of the
certificate of incorporation or by-laws (or other governing
instrument) of GenTel or any of its Subsidiaries or (b)
violate, or be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of,
or accelerate the performance required by, or excuse
performance by any Person of any of its obligations under, or
cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets of
GenTel or any of its Subsidiaries under, any material
agreement or commitment to which GenTel or any of its
Subsidiaries is a party or by which any of their respective
property or assets is bound, or to which any of the property
or assets of GenTel or any of its Subsidiaries is subject,
or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental
Body applicable to Gen Tel or any of its Subsidiaries
except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in
clause (b) of this Section, for such matters which are not
likely to have a material adverse effect on the business or
financial condition of GenTel and its Subsidiaries, taken as
a whole.
3.5 Consents and Approvals of Governmental Authorities.
No consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Body is
required to be made or obtained by GenTel or Bobernco or any
of their Subsidiaries in connection with the execution,
delivery and performance of this Agreement by GenTel or the
consummation of the transactions contemplated hereby.
<PAGE>
3.6 Other Consents. No consent of any Person is required
to be obtained by GenTel or Bobernco or any of their
Subsidiaries to the execution, delivery and performance of
this Agreement or the consummation of transactions
contemplated hereunder, including, but not limited to,
consents from parties to leases or other agreements or
commitments, except for any consent which the failure to
obtain would not be likely to have a material adverse effect
on the business and financial condition of Bobernco and its
Subsidiaries, taken as a whole.
3.7 Financial Statements. Seller has delivered to Buyer:
consolidated balance sheets of GenTel and its Subsidiaries
as at December 31, 1998 and June 30, 1998 and statements of
income and changes in financial position for the one-year
period ended December 31, 1998 and the six-month period ended
June 30, 1998 (the "Financial Statements"). Such Financial
Statements fairly present the consolidated financial
condition and results of operations of GenTel and its
Subsidiaries as at the respective dates thereof and for the
periods therein referred to, all in accordance with generally
accepted United States accounting principles consistently
applied throughout the periods involved, except for audit
adjustments and the absence of footnotes.
3.8 Title to Properties; Either GenTel or one of its
Subsidiaries owns all the material properties and assets that
they purport to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the material
properties and assets reflected in the Balance Sheet (except
for property sold since the date of the Financial Statements
in the ordinary course of business or leased under
capitalized leases), and all the material properties and
assets purchased or otherwise acquired by GenTel or any of
its Subsidiaries since the date of the Financial Statements.
All properties and assets reflected in the Financial
Statements are free and clear of all material Encumbrances
and are not, in the case of real property, subject to any
material rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any
nature whatsoever except, with respect to all such properties
and assets, (a) mortgages or security interests shown in the
Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event
which, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or
assets after the date of the Financial Statements (such
mortgages and security interests being limited to the
property or assets so acquired), with respect to which no
default (or event which, with notice or lapse of time or
both, would constitute a default) exists, (c) as to real
property, (i) imperfections of title, if any, none of which
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of
GenTel or any of its Subsidiaries and (ii) zoning laws that
do not impair the present or anticipated use of the property
subject thereto, and (d) liens for current taxes not yet due.
The properties and assets of GenTel and its Subsidiaries
include all rights, properties and other assets necessary to
permit GenTel and its Subsidiaries to conduct GenTel's
business in all material respects in the same manner as it is
conducted on the date of this Agreement.
3.9 Buildings, Plants and Equipment. The buildings,
plants, structures and material items of equipment and other
personal property owned or leased by GenTel or its
Subsidiaries are, in all respects material to the business or
financial condition of GenTel and its Subsidiaries, taken as
a whole, in good operating condition and repair (ordinary
wear and
<PAGE>
tear excepted) and are adequate in all such respects
for the purposes for which they are being used. GenTel has
not received notification that it or any of its Subsidiaries
is in violation of any applicable building, zoning,
anti-pollution, health, safety or other law, ordinance or
regulation in respect of its buildings, plants or structures
or their operations, which violation is likely to have a
material adverse effect on the business or financial
condition of GenTel and its Subsidiaries, taken as a whole
or which would require a payment by Bobernco or its
subsidiaries in excess of $2000 in the aggregate, and which
has not been cured.
3.10 No Condemnation or Expropriation. Neither the whole
nor any portion of the property or leaseholds owned or held
by GenTel or any of its Subsidiaries is subject to any
governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any
Governmental Body or other Person with or without payment of
compensation therefor, which action is likely to have a
material adverse effect on the business or financial
condition of Bobernco and its Subsidiaries, taken as a whole.
3.11 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving GenTel or any of its Subsidiaries which is likely
to have a material adverse effect on the business or
financial condition of Bobernco and its Subsidiaries, taken
as whole, or which would require a payment by Bobernco or its
subsidiaries in excess of $2000 in the aggregate or which
questions or challenges the validity of this Agreement.
Neither GenTel nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material
adverse effect on the business or financial condition of
Bobernco and its Subsidiaries, taken as a whole, or which
would require a payment by Bobernco or its subsidiaries in
excess of $2000 in the aggregate.
3.12 Absence of Certain Changes. Since the date of the
Financial Statements, neither GenTel nor any of its
Subsidiaries has:
(a) suffered the damage or destruction of any of
its properties or assets (whether or not covered by
insurance) which is materially adverse to the business or
financial condition of GenTel and its Subsidiaries, taken as
a whole, or made any disposition of any of its material
properties or assets other than in the ordinary course of
business;
(b) made any change or amendment in its
certificate of incorporation or by-laws, or other governing
instruments;
(c) issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by redemption
or otherwise, any such Equity Securities, reclassified,
split-up or otherwise changed any such Equity Security, or
granted or entered into any options, warrants, calls or
commitments of any kind with respect thereto;
(d) organized any new Subsidiary or acquired any
Equity Securities of any Person or any equity or ownership
interest in any business;
(e) borrowed any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability with respect to any
such indebtedness for borrowed money;
<PAGE>
(f) paid, discharged or satisfied any material
claim, liability or obligation (absolute, accrued, contingent
or otherwise), other than in the ordinary course of business;
(g) prepaid any material obligation having a
maturity of more than 90 days from the date such obligation
was issued or incurred;
(h) canceled any material debts or waived any
material claims or rights, except in the ordinary course of
business;
(i) disposed of or permitted to lapse any rights
to the use of any material patent or registered trademark or
copyright or other intellectual property owned or used by it;
(j) granted any general increase in the
compensation of officers or employees (including any such
increase pursuant to any employee benefit plan);
(k) purchased or entered into any contract or
commitment to purchase any material quantity of raw materials
or supplies, or sold or entered into any contract or
commitment to sell any material quantity of property or
assets, except (i) normal contracts or commitments for the
purchase of, and normal purchases of, raw materials or
supplies, made in the ordinary course business, (ii) normal
contracts or commitments for the sale of, and normal sales
of, inventory in the ordinary course of business, and (iii)
other contracts, commitments, purchases or sales in the
ordinary course of business;
(l) made any capital expenditures or additions to
property, plant or equipment or acquired any other property
or assets (other than raw materials and supplies) at a cost
in excess of $2000 in the aggregate;
(m) written off or been required to write off any
notes or accounts receivable in an aggregate amount in excess
of $2000;
(n) written down or been required to write down
any inventory in an aggregate amount in excess of $ 2000;
(o) entered into any collective bargaining or
union contract or agreement; or
(p) other than the ordinary course of business,
incurred any liability required by generally accepted
accounting principles to be reflected on a balance sheet and
material to the business or financial condition of GenTel
and its subsidiaries taken as a whole.
3.13 Material Adverse Change. Since the date of the
Financial Statements, there has not been any material adverse
change in the business or financial condition of GenTel and
its Subsidiaries taken as a whole, other than changes
resulting from economic conditions prevailing in the United
States communications industry.
<PAGE>
3.14 Contracts and Commitments. Neither GenTel nor any of
its Subsidiaries is a party to any:
(a) Contract or agreement (other than purchase or
sales orders entered into in the ordinary course of business)
involving any liability on the part of GenTel or one of its
Subsidiaries of more than $2000 and not cancelable by GenTel
or the relevant Subsidiary (without liability to GenTel or
such Subsidiary) within 60 days;
(b) Lease of personal property involving annual
rental payments in excess of $2000 and not cancelable by
Bobernco or the relevant Subsidiary (without liability to
Bobernco or such Subsidiary) within 90 days;
(c) Employee bonus, stock option or stock
purchase, performance unit, profit-sharing, pension, savings,
retirement, health, deferred or incentive compensation,
insurance or other material employee benefit plan (as defined
in Section 2(3) of ERISA) or program for any of the
employees, former employees or retired employees of GenTel or
any of its Subsidiaries;
(d) Commitment, contract or agreement that is
currently expected by the management of GenTel to result in
any material loss upon completion or performance thereof;
(e) Contract, agreement or commitment that is
material to the business of GenTel and its Subsidiaries,
taken as a whole, with any officer, employee, agent,
consultant, advisor, salesman, sales representative, value
added reseller, distributor or dealer; or
(f) Employment agreement or other similar
agreement that contains any severance or termination pay,
liabilities or obligations.
All such contracts and agreements are in full force and
effect. Neither GenTel nor any or its Subsidiaries is in
breach of, in violation of or in default under, any
agreement, instrument, indenture, deed of trust, commitment,
contract or other obligation of any type to which GenTel or
any of its Subsidiaries is a party or is or may be bound that
relates to the business of GenTel or any of its Subsidiaries
or to which any of the assets or properties of GenTel or any
of its Subsidiaries is subject, the effect of which breach,
violation or default is likely to materially and adversely
affect the business or financial condition of GenTel and its
Subsidiaries, taken as a whole.
3.15 Labor Relations. Neither GenTel nor any of its
Subsidiaries is a party to any collective bargaining
agreement. Except for any matter which is not likely to have
a material adverse effect on the business or financial
condition of GenTel and its Subsidiaries, taken as a whole,
(a) GenTel and each of its Subsidiaries is in compliance with
all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice, (b)
there is no unfair labor practice complaint against GenTel or
any of its Subsidiaries pending before the National Labor
Relations Board, (c) there is no labor strike, dispute,
slowdown or stoppage actually pending or threatened against
GenTel or any of its Subsidiaries, (d) no representation
<PAGE>
question exists respecting the employees of GenTel or any of
its Subsidiaries, (e) neither GenTel nor any of its
Subsidiaries has experienced any strike, work stoppage or
other labor difficulty, and (f) no collective bargaining
agreement relating to employees of GenTel or any of its
Subsidiaries is currently being negotiated.
3.16 Employee Benefit Plans. No material employee pension
and welfare benefit plans covering employees of GenTel and
its Subsidiaries is (1) a multi-employer plan as defined in
Section 3(37) of ERISA, or (2) a defined benefit plan as
defined in Section 3(35) of ERISA, any listed individual
account pension plan is duly qualified as tax exempt under
the applicable sections of the Code, each listed benefit plan
and related funding arrangement, if any, has been maintained
in all material respects in compliance with its terms and the
provisions of ERISA and the Code.
3.17 Compliance with Law. The operations of GenTel and
its Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies
having jurisdiction over them, except for violations thereof
which are not likely to have a material adverse effect on the
business or financial condition of GenTel and its
Subsidiaries, taken as a whole, or which would not require a
payment by GenTel or its Subsidiaries in excess of $2000 in
the aggregate, or which have been cured. Neither GenTel nor
any of its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any
such applicable laws or regulations. GenTel and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the
conduct of their businesses, and are not in material
violation of any such licenses, permits, orders and
approvals. All such licenses, permits, orders and approvals
are in full force and effect, and no suspension or
cancellation of any thereof has been threatened.
3.18 Environmental Matters.
(a) At all times prior to the date hereof, GenTel
and its Subsidiaries have complied in all material respects
with applicable environmental laws, orders, regulations,
rules and ordinances relating to the Properties (as
hereinafter defined), the violation of which would have a
material adverse effect on the business or financial
condition of GenTel and its Subsidiaries, taken as a whole,
or which would require a payment by GenTel or its
Subsidiaries in excess of $2000 in the aggregate, and which
have been duly adopted, imposed or promulgated by any
legislative, executive, administrative or judicial body or
officer of any Governmental Body.
(b) The environmental licenses, permits and
authorizations that are material to the operations of GenTel
and its Subsidiaries, taken as a whole, are in full force and
effect.
(c) Neither GenTel nor any of its Subsidiaries
has released or caused to be released on or about the
properties currently owned or leased by GenTel or any of its
Subsidiaries (the "Properties") any (i) pollutants, (ii)
contaminants, (iii) "Hazardous Substances," as that term is
defined in Section 101(14) of the Comprehensive Environmental
Response Act, as amended or (iv) "Regulated Substances," as
that term in defined in Section
<PAGE>
9001 of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., as amended, which would be required to be remediated by
any governmental agency with jurisdiction over the Properties
under the authority of laws, regulations and ordinances as in
effect and currently interpreted on the date hereof, which
remediation would have a material adverse effect on the
business or financial condition of GenTel and its
Subsidiaries, taken as a whole.
3.19 Brokers or Finders. GenTel has not employed any
broker or finder or incurred any liability for any brokerage
or finder's fees or commissions or similar payments in
connection with the transactions contemplated by this Agreement.
3.20 Absence of Certain Commercial Practices. Neither
GenTel nor any of its Subsidiaries has, directly or
indirectly, paid or delivered any fee, commission or other
sum of money or item of property, however characterized, to
any finder, agent, government official or other party, in the
United States or any other country, which is in any manner
related to the business or operations of GenTel or its
Subsidiaries, which Seller or GenTel or one of its
Subsidiaries knows or has reason to believe to have been
illegal under any federal, state or local laws of the United
States or any other country having jurisdiction; and neither
GenTel nor any of its Subsidiaries has participated, directly
or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers in
violation of any applicable law or regulation.
3.21 Transactions with Directors and Officers. GenTel
and its Subsidiaries do not engage in business with any
Person (other than Seller) in which any of GenTel's directors
or officers has a material equity interest. No director or
officer of GenTel owns any property, asset or right which is
material to the business of GenTel and its Subsidiaries,
taken as a whole.
3.22 Borrowing and Guarantees. GenTel and its
Subsidiaries (a) do not have any indebtedness for borrowed
money, (b) are not lending or committed to lend any money
(except for advances to employees in the ordinary course of
business), and (c) are not guarantors or sureties with
respect to the obligations of any Person.
3.23 Tax-Free Reorganization.
(a) GenTel has not taken or agreed to take any
action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of
Section368(a) of the Code.
(b) GenTel is not an investment company as defined
in SectionSection368(a)(2)(F)(iii) and (iv) of the Code.
4. Representations and Warranties of Bobernco. Bobernco
represents and warrants to GenTel as set forth below. No fact or
circumstance disclosed to GenTel shall constitute an exception to
these representations and warranties except as may mutually be
agreed upon in writing by GenTel and Bobernco.
<PAGE>
4.1 Organization of Bobernco; Authorization. Bobernco is
a corporation duly organized, validly existing and in good
standing under the laws of Nevada with full corporate power
and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized
by all necessary corporate action of Bobernco and this
Agreement constitutes a valid and binding obligation of
Bobernco, enforceable against it in accordance with its
terms.
4.2 Capitalization.
(a) The authorized capital of Bobernco consists of
_________ shares of Common Stock, par value $____ per share,
of which 1,800,000 shares are issued and outstanding.
Bobernco has recently undertaken a 1 for 2 reverse stock
split and has had an aggregate of 1,200,000 shares of its
common stock canceled by certain shareholders.
(b) Bobernco does not have outstanding any
preemptive rights, subscription rights, options, warrants,
rights to convert or exchange, capital stock equivalents, or
other rights to purchase or otherwise acquire any Bobernco
capital stock or other securities.
(c) All of the issued and outstanding shares of
Bobernco capital stock have been duly authorized, validly
issued, are fully paid and nonassessable, and such capital
stock has been issued in full compliance with all applicable
federal and state securities laws. None of Bobernco's issued
and outstanding shares of capital stock are subject to
repurchase or redemption rights.
(d) Except for any restrictions imposed by
applicable state and federal securities laws, there is no
right of first refusal, option, or other restriction on
transfer applicable to any shares of Bobernco's capital stock.
(e) Bobernco is not a party or subject to any
agreement or understanding (and, to Bobernco's actual
knowledge, there is no agreement or understanding between or
among any persons) that affects or relates to the voting or
giving of written consent with respect to any security.
4.3 No Conflict as to Bobernco. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any
provision of the certificate of incorporation or by-laws of
Bobernco or (b) violate, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under any agreement to
which Bobernco is a party or (c) violate any statute or law
or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to Bobernco.
4.4 No Conflict as to Bobernco and Subsidiaries. Neither
the execution and delivery of this Agreement nor the
consummation of the consummation of the transactions
contemplated hereby will (a) violate any provision of the
certificate of incorporation or by-laws (or other governing
instrument) of Bobernco or any of its Subsidiaries or (b)
violate,
<PAGE>
or be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of,
or accelerate the performance required by, or excuse
performance by any Person of any of its obligations under, or
cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets of
Bobernco or any of its Subsidiaries under, any material
agreement or commitment to which Bobernco or any of its
Subsidiaries is a party or by which any of their respective
property or assets is bound, or to which any of the property
or assets of Bobernco or any of its Subsidiaries is subject,
or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental
Body applicable to Bobernco or any of its Subsidiaries
except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in
clause (b) of this Section, for such matters which are not
likely to have a material adverse effect on the business or
financial condition of Bobernco and its Subsidiaries, taken
as a whole.
4.5 Consents and Approvals of Governmental Authorities.
No consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Body is
required to be made or obtained by GenTel or Bobernco or any
of their Subsidiaries in connection with the execution,
delivery and performance of this Agreement by GenTel or the
consummation of the transactions contemplated hereby.
4.6 Other Consents. No consent of any Person is required
to be obtained by GenTel or Bobernco or any of their
Subsidiaries to the execution, delivery and performance of
this Agreement or the consummation of transactions
contemplated hereunder, including, but not limited to,
consents from parties to leases or other agreements or
commitments, except for any consent which the failure to
obtain would not be likely to have a material adverse effect
on the business and financial condition of GenTel and its
Subsidiaries, taken as a whole.
4.7 Financial Statements. Seller has delivered to Buyer:
consolidated balance sheets of Bobernco and its Subsidiaries
as at December 31, 1998 (the "Year End Financial Statements")
and June 30, 1998 (the "Interim Financial Statements", and,
together with the Year End Financial Statements, the
"Financial Statements") and statements of income and changes
in financial position for the one-year period ended December
31, 1998 and the six-month period ended June 30, 1998. The
Year End Financial Statements will have been reported upon by
Certified Public Accountants, retained by Bobernco, the
Interim Financial Statements will be internally prepared and
both of the Financial Statements will be true and complete
statement of the financial condition of Bobernco as of the
dates set forth therein. The Year End Financial Statements
will comply with the requirements of Regulation S-X of the
Securities and Exchange Commission and the provisions of the
Securities Act of 1933 (the "Securities Act") and will be
suitable for inclusion in any subsequent filing with any
state or federal regulatory agency under the Securities
Exchange Act of 1934 (the "Exchange Act"). There will be no
substantial liabilities either fixed or contingent not
reflected in the Financial Statements other than contracts or
obligations in the usual and ordinary course of business; and
no such contracts in the usual and ordinary course of
business will be liens or other liabilities which, if
disclosed, would alter substantially the financial condition
of Bobernco as reflected in the Financial Statements; Such
Financial Statements fairly present
<PAGE>
the consolidated
financial condition and results of operations of Bobernco and
its Subsidiaries as at the respective dates thereof and for
the periods therein referred to, all in accordance with
generally accepted United States accounting principles
consistently applied throughout the periods involved, except,
in the case of the Interim Financial Statements, for audit
adjustments and the absence of footnotes.
4.8 Title to Properties; Either Bobernco or one of its
Subsidiaries owns all the material properties and assets that
they purport to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the material
properties and assets reflected in the Balance Sheet (except
for property sold since the date of the Financial Statements
in the ordinary course of business or leased under
capitalized leases), and all the material properties and
assets purchased or otherwise acquired by Bobernco or any of
its Subsidiaries since the date of the Financial Statements.
All properties and assets reflected in the Financial
Statements are free and clear of all material Encumbrances
and are not, in the case of real property, subject to any
material rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any
nature whatsoever except, with respect to all such properties
and assets, (a) mortgages or security interests shown in the
Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event
which, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or
assets after the date of the Financial Statements (such
mortgages and security interests being limited to the
property or assets so acquired), with respect to which no
default (or event which, with notice or lapse of time or
both, would constitute a default) exists, (c) as to real
property, (i) imperfections of title, if any, none of which
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of
Bobernco or any of its Subsidiaries and (ii) zoning laws that
do not impair the present or anticipated use of the property
subject thereto, and (d) liens for current taxes not yet due.
The properties and assets of Bobernco and its Subsidiaries
include all rights, properties and other assets necessary to
permit Bobernco and its Subsidiaries to conduct Bobernco's
business in all material respects in the same manner as it is
conducted on the date of this Agreement.
4.9 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving Bobernco or any of its Subsidiaries which is
likely to have a material adverse effect on the business or
financial condition of GenTel and its Subsidiaries, taken as
whole, or which would require a payment by GenTel or its
subsidiaries in excess of $2000 in the aggregate or which
questions or challenges the validity of this Agreement.
Neither Bobernco nor any or its Subsidiaries is subject to
any judgment, order or decree that is likely to have a
material adverse effect on the business or financial
condition of GenTel and its Subsidiaries, taken as a whole,
or which would require a payment by Gentel or its
subsidiaries in excess of $2000 in the aggregate.
4.10 Absence of Certain Changes. Since the date of the
Financial Statements, neither Bobernco nor any of its
Subsidiaries has:
(a) suffered the damage or destruction of any of
its properties or assets (whether or not covered by
insurance) which is materially adverse to the business or
financial
<PAGE>
condition of Bobernco and its Subsidiaries, taken
as a whole, or made any disposition of any of its material
properties or assets other than in the ordinary course of
business;
(b) made any change or amendment in its
certificate of incorporation or by-laws, or other governing
instruments;
(c) issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by redemption
or otherwise, any such Equity Securities, reclassified,
split-up or otherwise changed any such Equity Security, or
granted or entered into any options, warrants, calls or
commitments of any kind with respect thereto;
(d) organized any new Subsidiary or acquired any
Equity Securities of any Person or any equity or ownership
interest in any business;
(e) borrowed any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability with respect to any
such indebtedness for borrowed money;
(f) paid, discharged or satisfied any material
claim, liability or obligation (absolute, accrued, contingent
or otherwise), other than in the ordinary course of business;
(g) prepaid any material obligation having a
maturity of more than 90 days from the date such obligation
was issued or incurred;
(h) canceled any material debts or waived any
material claims or rights, except in the ordinary course of
business;
(i) disposed of or permitted to lapse any rights
to the use of any material patent or registered trademark or
copyright or other intellectual property owned or used by it;
(j) granted any general increase in the
compensation of officers or employees (including any such
increase pursuant to any employee benefit plan);
(k) purchased or entered into any contract or
commitment to purchase any material quantity of raw materials
or supplies, or sold or entered into any contract or
commitment to sell any material quantity of property or
assets, except (i) normal contracts or commitments for the
purchase of, and normal purchases of, raw materials or
supplies, made in the ordinary course business, (ii) normal
contracts or commitments for the sale of, and normal sales
of, inventory in the ordinary course of business, and (iii)
other contracts, commitments, purchases or sales in the
ordinary course of business;
(l) made any capital expenditures or additions to
property, plant or equipment or acquired any other property
or assets (other than raw materials and supplies) at a cost
in excess of $2000 in the aggregate;
<PAGE>
(m) written off or been required to write off any
notes or accounts receivable in an aggregate amount in excess
of $2000;
(n) written down or been required to write down
any inventory in an aggregate amount in excess of $ 2000;
(o) entered into any collective bargaining or
union contract or agreement; or
(p) other than the ordinary course of business,
incurred any liability required by generally accepted
accounting principles to be reflected on a balance sheet and
material to the business or financial condition of Bobernco
and its subsidiaries taken as a whole.
4.11 Material Adverse Change. Since the date of the
Financial Statements, there has not been any material adverse
change in the business or financial condition of Bobernco and
its Subsidiaries taken as a whole.
4.12 Contracts and Commitments. Neither Bobernco nor any
of its Subsidiaries is a party to any Contract or agreement
involving any liability on the part of Bobernco or one of its
Subsidiaries of more than $2000 and not cancelable by
Bobernco or the relevant Subsidiary (without liability to
Bobernco or such Subsidiary) within 60 days.
4.13 Compliance with Law. The operations of Bobernco and
its Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies
having jurisdiction over them, except for violations thereof
which are not likely to have a material adverse effect on the
business or financial condition of Bobernco and its
Subsidiaries, taken as a whole, or which would not require a
payment by Bobernco or its Subsidiaries in excess of $2000 in
the aggregate, or which have been cured. Neither Bobernco nor
any of its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any
such applicable laws or regulations. Bobernco and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the
conduct of their businesses, and are not in material
violation of any such licenses, permits, orders and
approvals. All such licenses, permits, orders and approvals
are in full force and effect, and no suspension or
cancellation of any thereof has been threatened.
4.14 Brokers or Finders. Bobernco has not employed any
broker or finder or incurred any liability for any brokerage
or finder's fees or commissions or similar payments in
connection with the transactions contemplated by this Agreement.
4.15 Borrowing and Guarantees. Bobernco and its
Subsidiaries (a) do not have any indebtedness for borrowed
money, (b) are not lending or committed to lend any money
(except for advances to employees in the ordinary course of
business), and (c) are not guarantors or sureties with
respect to the obligations of any Person.
4.16 Tax-Free Reorganization.
<PAGE>
(a) Bobernco has not taken or agreed to take any
action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of
Section368(a) of the Code.
(b) Bobernco is not an investment company as
defined in SectionSection368(a)(2)(F)(iii) and (iv) of the Code.
5. Preclosing Covenants of GenTel.
5.1 Notices and Approvals. GenTel agrees: (a) to give
all notices to third parties which may be necessary or deemed
desirable by Bobernco in connection with this Agreement and the
consummation of the transactions contemplated hereby; (b) to use its
best efforts to obtain all federal and state governmental regulatory
agency approvals, consents, permit, authorizations, and orders
necessary or deemed desirable by Bobernco in connection with this
Agreement and the consummation of the transaction contemplated
hereby; and (c) to use its best efforts to obtain, and to cause
GenTel to obtain, all consents and authorizations of any other third
parties necessary or deemed desirable by Bobernco in connection with
this Agreement and the consummation of the transactions contemplated
hereby.
5.2 Information for Bobernco s Statements and
Applications. GenTel and its employees, accountants and attorneys
shall cooperate fully with Bobernco in the preparation of any
statements or applications made by Bobernco to any federal or state
governmental regulatory agency in connection with this Agreement and
the transactions contemplated hereby and to furnish Bobernco with
all information concerning GenTel necessary or deemed desirable by
Bobernco for inclusion in such statements and applications,
including, without limitation, all requisite internally prepared
financial statements and schedules.
<PAGE>
6. Mutual Covenants.
6.1 Regulatory Filings; Consents; Reasonable Efforts.
Subject to the terms and conditions of this Agreement, GenTel and
Bobernco shall use their respective best efforts to (i) make all
necessary filings with respect to the Merger and this Agreement
under the Securities Act, and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain
required approvals and clearances with respect thereto and shall
supply all additional internally prepared information requested in
connection therewith; (ii) make merger notification or other
appropriate filings with federal, state or local governmental bodies
or applicable foreign governmental agencies and shall use all
reasonable efforts to obtain required approvals and clearances with
respect thereto and shall supply all additional internally prepared
information requested in connection therewith; (iii) obtain all
consents, waivers, approvals, authorizations and orders required in
connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger; and (iv) take, or
cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.2 Further Assurances. Prior to and following the
Closing, each party agrees to cooperate fully with the other parties
and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the
transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement.
7. Closing Matters.
7.1 Filing of Certificate of Merger. On the date of the
Closing, but not prior to the Closing, the Certificate of Merger
shall be filed with the offices of the Secretary of State of the
State of Nevada and the offices of the Secretary of State of the
State of California and the merger of GenTel with and into Bobernco
shall be consummated.
7.2 Exchange of Certificates. At or within 30 days of
the Closing, Bobernco shall deliver and issue to each shareholder of
GenTel a certificate or certificates representing the Bobernco
Common Stock issuable to such shareholder as consideration in this
Merger.
7.3 Delivery of Documents. On or before the Closing, the
parties shall deliver the documents, and shall perform the acts,
which are set forth in Sections 8 and 9, as specified in such
Sections, including delivery of the counterpart signature pages of
the Transaction Documents executed by GenTel and/or Bobernco, as the
case may be. All documents which GenTel shall deliver or cause to
be delivered shall be in form and substance reasonably satisfactory
to Bobernco. All documents which Bobernco shall deliver or cause to
be delivered shall be in form and substance reasonably satisfactory
to GenTel.
<PAGE>
8. Termination of Agreement.
8.1 Termination. This Agreement may be terminated at any
time prior to the Closing by the mutual written consent of each of
the parties hereto. This Agreement may also be terminated and
abandoned by either GenTel or Bobernco, if the Merger is not
effected by September 30, 1998. Any termination of this Agreement
under this Section 8.1 shall be effected by the delivery of written
notice of the terminating party to the other parties hereto.
8.2 Liability for Termination. Any termination of this
Agreement pursuant to this Section 8 shall be without further
obligation or liability upon any party in favor of any other party
hereto; provided, that if such termination shall result from the
willful failure of a party to carry out its obligations under this
Agreement, then such party shall be liable for losses incurred by
the other parties as set forth in Section 8.5. The provisions of
this Section 8.2 shall survive termination.
8.3 Certain Effects of Termination. In the event of the
termination of this Agreement as provided in Section 8.1 herein,
each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available)
furnished to it by the other party (or any subsidiary, division,
associate or affiliate of such other party) in connection with the
transactions contemplated hereby, whether so obtained before or
after the execution of this Agreement, and any copies thereof which
may have been made, and will cause its representatives and any
representatives of financial institutions and investors and others
to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made; or (ii)
destroy such documents and cause its representatives and such other
representatives to destroy such documents, and such party shall
deliver a certificate executed by its president or vice president
stating to such effect; and
8.4 Remedies. No party shall be limited to the
termination right granted in Section 8.1 hereto by reason of the
nonfulfillment of any condition to such party's closing obligations
but may, in the alternative, elect to do one of the following:
(a) proceed to close despite the nonfulfillment of
any closing condition, it being understood that consummation of the
transactions contemplated hereby shall be deemed a waiver of any
misrepresentation or breach of warranty or covenant and of any
party's rights and remedies with respect thereto to the extent that
the other party shall have actual knowledge of such
misrepresentation or breach and the Closing shall nonetheless take
place; or
(b) decline to close, terminate this Agreement as
provided in Section 8.1 hereof, and thereafter seek damages to the
extent permitted in Section 8.5 hereof.
8.5 Arbitration. Any dispute arising out of this
Agreement, or its performance or breach, shall be resolved by
binding arbitration conducted by JAMS/Endispute under the
JAMS/Endispute Rules for Complex Arbitration (the "JAMS Rules").
This arbitration provision is expressly made pursuant to and shall
be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-14.
The parties hereto agree that pursuant to Section 9 of the Federal
Arbitration Act, a judgment of the United States District Courts for
the Central District of California shall be entered upon the award
made pursuant to the arbitration. A single arbitrator, who shall
have the authority to allocate the costs of any arbitration
initiated under this paragraph, shall be selected according to
<PAGE>
the JAMS Rules within ten (10) days of the submission to
JAMS/Endispute
of the response to the statement of claim or the date on which any
such response is due, whichever is earlier. The arbitrator shall
conduct the arbitration in accordance with the Federal Rules of
Evidence. The arbitrator shall decide the amount and extent of
pre-hearing discovery which is appropriate. The arbitrator shall
have the power to enter any award of monetary and/or injunctive
relief (including the power issue permanent injunctive relief and
also the power to reconsider any prior request for immediate
injunctive relief by either of the parties and any order as to
immediate injunctive relief previously granted or denied by a court
in response to a request therefor by either of the parties),
including the power to render an award as provided in Rule 43 of the
JAMS Rules; provided, however, that the arbitrator shall not have
the power to award punitive damages under any circumstances (whether
styled as punitive, exemplary, or treble damages, or any penalty or
punitive type of damages) regardless of whether such damages may be
available under applicable law, the parties hereby waiving their
rights to recover any such damages. The arbitrator shall award the
prevailing party its costs and reasonable attorneys' fees, and the
losing party shall bear the entire cost of the arbitration,
including the arbitrator's fees. All arbitration shall be held in
Orange County, California. In addition to the above court, the
arbitration award may be enforced in any court having jurisdiction
over the parties and the subject matter of the arbitration.
Notwithstanding the foregoing, the parties irrevocably submit to the
nonexclusive jurisdiction of the state and federal courts situated
where the respondent is domiciled or resides as of the Effective
Date in any action to enforce an arbitration award. With respect to
any request for immediate injunctive relief, that state and federal
courts in Orange County, California shall have exclusive
jurisdiction and venue over any such disputes.
9. Miscellaneous.
9.1 Governing Laws. It is the intention of the parties
hereto that the internal laws of the State of California
(irrespective of its choice of law principles) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the
parties hereto.
9.2 Binding upon Successors and Assigns. Subject to, and
unless otherwise provided in, this Agreement, each and all of the
covenants, terms, provisions, and agreements contained herein shall
be binding upon, and inure to the benefit of, the permitted
successors, executors, heirs, representatives, administrators and
assigns of the parties hereto.
9.3 Severability. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent be
invalid or unenforceable, the remainder of this Agreement and
application of such provision to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the void or
unenforceable provision.
9.4 Entire Agreement. This Agreement, the exhibits
hereto, the documents referenced herein, and the exhibits thereto,
constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and
thereto. The express terms hereof control
<PAGE>
and supersede any course of performance or usage of the trade
inconsistent with any of the
terms hereof.
9.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original as
against any party whose signature appears thereon and all of which
together shall constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of
the parties reflected hereon as signatories.
9.6 Expenses. Except as provided to the contrary herein,
each party shall pay all of its own costs and expenses incurred with
respect to the negotiation, execution and delivery of this
Agreement, the exhibits hereto, and the other Transaction Documents.
9.7 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed
to constitute a waiver of any other default or any succeeding breach
or default.
9.8 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby notwithstanding any investigation
of the parties hereto and shall terminate on the date one year after
the Closing Date.
9.9 No Waiver. The failure of any party to enforce any
of the provisions hereof shall not be construed to be a waiver of
the right of such party thereafter to enforce such provisions.
9.10 Attorneys' Fees. Should suit be brought to enforce
or interpret any part of this Agreement, the prevailing party shall
be entitled to recover, as an element of the costs of suit and not
as damages, reasonable attorneys' fees to be fixed by the court
(including without limitation, costs, expenses and fees on any
appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds
to final judgment. A party not entitled to recover its costs shall
not be entitled to recover attorneys' fees. No sum for attorneys'
fees shall be counted in calculating the amount of a judgment for
purposes of determining if a party is entitled to recover costs or
attorneys' fees.
9.11 Notices. Any notice provided for or permitted under
this Agreement will be treated as having been given when (a)
delivered personally, (b) sent by confirmed telex or telecopy, (c)
sent by commercial overnight courier with written verification of
receipt, or (d) mailed postage prepaid by certified or registered
mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other
party has been notified in accordance with the provisions of this
Section 9.11.
GenTel:
GenTel Communications, Inc.
3151 Airway Avenue, Building P-3
<PAGE>
Costa Mesa, CA 92626
Facsimile No.: (949) 549-7707
Attn. Eric Clemons
With a copy to:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (949) 719-1988
Bobernco:
Bobernco, Inc.
c/o Shawn F. Hackman, Esq.
1600 E. Desert Inn Road, #206-A
Las Vegas, NV 89109
Facsimile No.: (702) 732-2253
Such notice will be treated as having been received upon actual
receipt.
9.12 Time. Time is of the essence of this Agreement.
9.13 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and
the language hereof shall not be construed for or against any party.
The titles and headings herein are for reference purposes only and
shall not in any manner limit the construction of this Agreement
which shall be considered as a whole.
9.14 No Joint Venture. Nothing contained in this
Agreement shall be deemed or construed as creating a joint venture
or partnership between any of the parties hereto. No party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party shall have the power to
control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any
power or authority to bind or commit any other. No party shall hold
itself out as having any authority or relationship in contravention
of this Section 9.14.
9.15 Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person, persons, entity
or entities may require.
9.16 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further
instruments, documents and agreements and to give such further
written assurances, as may be reasonably requested by any other
party to better evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
9.17 Absence of Third-Party Beneficiary Rights. No
provisions of this Agreement are intended, nor shall be interpreted,
to provide or create any third-party beneficiary
<PAGE>
rights or any other rights of any kind in any client, customer,
affiliate, stockholder,
partner of any party hereto or any other person or entity except
employees and stockholders of GenTel specifically referred to
herein, and, except as so provided, all provisions hereof shall be
personal solely between the parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
GENTEL COMMUNICATIONS, INC. BOBERNCO, INC.
By: /s/Paul Sandhu By: /s/Andrew Berney
Name: Paul Sandhu Name: Andrew Berney
Title: President & CEO Title: President
<PAGE>
GenTel Communications, Inc.
Secretary's Certificate
The undersigned, Eric Clemons, Secretary of GenTel
Communications, Inc., a California corporation and one of the
merging corporations mentioned in the foregoing Agreement and Plan
of Reorganization (the "Agreement"), certifies that the Agreement
has been adopted by the written consent of a majority of the
shareholders of the outstanding stock of GenTel Communications, Inc.
entitled to vote thereon in accordance with the provisions of the
General Corporation Law of the State of California.
Dated: August 31, 1998
/s/Eric Clemons
Eric Clemons
Secretary of GenTel Communications, Inc.
<PAGE>
Bobernco, Inc.
Secretary's Certificate
The undersigned, ______________, Secretary of Bobernco,
Inc., a Nevada corporation and one of the merging corporations
mentioned in the foregoing Agreement and Plan of Reorganization (the
"Agreement"), certifies that the Agreement has been adopted by the
affirmative vote of the holders of a majority of the outstanding
Common Stock of Bobernco, Inc. entitled to vote thereon at a meeting
held pursuant to notice in accordance with the provisions of the
Nevada Corporation Law.
Dated: August 31, 1998
/s/Caron Kelly
Caron Kelly
Secretary of Bobernco, Inc.
<PAGE>
GenTel Additions:
3.24 Anti Dilution. Gen Tel and its officers and directors hereby agree that
for a period of 1 year the merged company shall not engage in any stock splits
or reverses nor may they change any other attributes of any of the company's
stock, nor may they issue any new series of stock without the initial Bobernco
shareholders approval. Gen Tel and its officers and directors also agree that
for a period of 1 year the percentage of stock ownership by the initial
shareholders or Bobernco shall be maintained. Thus any additional issuance of
stock (of any type or series, whether common or preferred) by the Company
post merger would require a proportional issuance to the initial shareholders
of Bobernco. This section 3.24 shall survive the closing of the merger.
The initial shareholders of Bobernco, through an agent of their selection,
shall hold 300,000 restricted shares in escrow. The surviving corpoiration
shall have the option for sixty days to buy back the three hundred thousand
(300,000) shares at a price of seventy five thousand ($75,000) dollars.
/s/Anthony Berney /s/Paul Sandhu
FILED
[In the office of the
Secretary of State of the
STATE OF NEVADA]
May 17, 1994
No. 7569-94
ARTICLES OF INCORPORATION
of
Bobernco, Inc.
Know all men by these present;
That the undersigned, have this day voluntarily associated
ourselves together for the
purpose of forming a corporation under and pursuant to the
provisions of Nevada Revised Statutes 78.010. to Nevada
Revised Statues 78.090 inclusive, as amended,
and certify that;
1.The name of this corporation is:
Bobernco, Inc.
2.Offices for the transaction of any business of the
Corporation, and where meetings of
the Board of Directors and of Stockholders may be held, may be
established and maintained in any part of the State of
Nevada, or in any other state, territory, or possession of
the United States.
3.The nature of the business is to engage in any lawful activity.
4. The capital Stock shall consist of 3,000,000 shares of
common stock, $0.001 par value.
5.The members of the governing board of the corporation shall
be styled directors, of
which there shall be o more than five. The Directors of this
corporation need not be stockholders. The first Board of Directors
is: Andrew W. Berney, whose address is
1700 E. Desert Inn Rd. Suite 100 Las Vegas, NV 89109.
6.This corporation shall have perpetual existence.
<PAGE>
7. Corporation shall have president, a secretary, a treasurer
and a resident agent, to be chose by the Board of Directors, any person
may hold two or more offices.
8. The resident agent of this Corporation shall be Raymond M.
Girard 1700 E. Desert Inn Rd. Suite 100 Las Vegas, NV 89109.
9. The Capital Stock of the corporation, after the fixed
consideration thereof has been paid or performed, shall not be subject
to assessment, and the individual liable for the debts and liabilities of the
Corporation, and the Articles of Incorporation shall never be
amended as the aforesaid provisions.
10. No director or officer of the corporation shall be
personally liable to the corporation of any of its stockholders
for the damages for breach of fiduciary duty as a director or
officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director or officer for acts
or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends
in violation of Section 78.300 of the Nevada Revised
Statutes. Any repeal or modification of this Article of the
Stockholders of the Corporation for acts or omissions
prior to such repeal or modification.
11. Except to the extent limited or denied by Nevada Revised
Statutes 78.265 Shareholders have a preemptive right to
acquire unissued shares, treasury shares or securities convertible
into such shares, of this corporation.
<PAGE>
I, the undersigned, being the incorporator herein above named
for the purpose of forming a corporation pursuant to the general
corporation law of the State of Nevada, do make and file these Articles
of Incorporation, hereby declaring and certifying that the facts within
stated are true, and accordingly have hereunto set my hand this
17 day of May, 1994.
/s/Andrew W. Berney
Andrew W. Berney
1700 E. Desert Inn Rd. Ste. 100
Las Vegas, NV 89109
State of Nevada )
)ss
County of Clark )
On 17 May,1994, personally appeared before me, a notary public,
personally known
to me to be the person whose name is subscribed to the above
instrument who
acknowledged that he/she executed the instrument.
/s/ Netta Gerard
Signature
FILED
[In the office of the
Secretary of State of the
STATE OF NEVADA]
No.7569-94
March 30,1998
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Bobernco, Inc.
(the Corporation)
We the undersigned, Andrew W. Berney (President/Director) and
Caron A. Kelly(Secretary/Director) of the Corporation do hereby
certify:
That the board of Directors of the Corporation at a meeting
duly convened and held on Wednesday, April 30, 1997, adopted a
resolution to amend the original articles as follows:
Article 4 is hereby amended and restated as follows:
4. The Capital Stock shall consist of 50,000,000 shares
of common stock, $0.001 par value.
Additionally:
The currently issued and outstanding common stock of
the corporation being 3,000,000 shares, is hereby
FORWARD split on a 2 for 1 basis making the
currently issued and outstanding stock of the
corporation 6,000,000 shares.
The number of shares of the Corporation outstanding and
entitled to vote on an amendment to the Articles of Incorporation
are 3,000,000, that the said change(s) and amendment has been
consented to and approved by a majority vote of the stockholders
holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
Dated Wednesday, April 30, 1997
Bobernco, Inc. Attest:
/s/ Caron A. Kelly /s/ Andrew W. Berney
Caron A.Kelly Andrew W. Berney
Secretary President
State of Nevada
ss.
County Of Clark
The undersigned Notary Public certified, deposes and
states that Andrew W. Berney and Caron A Kelly, personally appeared
before me and executed the foregoing on behalf of the Corporation as
its President and Secretary respectively, 25th day of March 1998.
By: /s/ Bridget E. Richards
Notary Public in and for said County and State
[Secretary of State of the
STATE OF NEVADA
SEP 03 1998
No. C7569-1998
Dean Heller, Secretary of State]
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
of
BOBERNCO, INC.
BERNEY certifiess that:
1.The original articles were filed with the Office of the
Secretary of State on December 31, 1997
2. As of the date of this certificate, 6,000,000 shares of stock
of the corporation have been issued.
3. Pursuant to a shareholders meeting at which in excess of 51%
voted in favor of the following amendment of the Articles of Incorporation of
this Corporation.
First: Name of Corporation
The name of the corporation is GTC Telecom
(The "Corporation")
4. Pursuant to a meeting of the Board of Directors, it has been
voted and approved a reverse split of 2:1, authorized to remain the same,
issued and outstanding to change from 6,000,000 outstanding shares to
3,000,000 outstanding shares.
/s/ Andy Berney
Andy Berney, President/Director
/s/Caron Kelly
Caron Kelly/Director
State of Nevada)
)ss.
County of Clark)
On Sept 2, 1998, personally appeared before me, a Notary public, Andy
Berney, and Caron Kelly who acknowledged that they excuted the above
instrument.
[NINA S. DELISE
Notary Public, State of Nevada
/s/Nina S. Delise
Appointment No. 98-0712-1 A Notary Public in and
for said County and State.
My Appt. Expires Jan. 27, 2002]
Bylaws
of
Bobernco, Inc.
(the "Corporation")
Article I
Office
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation also ,may have offices in such other
places as the Board may from time to time designate. The location of the
initial principal office of the Corporation shall be designated by resolution.
Article II
Shareholders Meetings
1. Annual Meetings
The annual meeting of the shareholders of the Corporation shall be held at
such place within or without the State of Nevada as shall be set forth in
compliance with these Bylaws. The meeting shall be held on the Fourth
Tuesday of May of each year. If such day is a legal holiday, the meeting
shall be on the next business day. This meeting shall be for the election of
Directors and for the transaction of such other business as may properly
come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by statute, may
be called by the President upon written request of the holders of 50% or
more of the outstanding shares entitled to vote at such special meeting.
Written notice of such meeting stating the place, the date and hour of the
meeting, the purpose or purposes for which it is called, and the name of the
person by whom or at whose direction the meeting is called shall be given.
3. Notice of Shareholders Meeting
The Secretary shall give written notice stating the place, day, and hour of
the meeting, and in the case of a special meeting, the purpose or purposes
for which the meeting is called, which shall be delivered not less than ten
or more than fifty days before the date of the meeting, either personally or
by mail to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at their address as it
appears on the books of the Corporation, with postage thereon prepaid.
Attendance at the meeting shall constitute a waiver of notice thereof.
4. Place of Meeting
The Board of Directors may designate any place, either within or without the
State of Nevada, as the place of meeting for any annual meeting or for any
special meeting called by
<PAGE>
the Board of Directors. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place, either within or
without the State of Nevada, as the place for the holding of such meeting.
If no designation is made, or if a special meeting is otherwise called, the
place of meeting shall be the principal office of the Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more than fifty
days prior to any meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at such meetings of the
shareholders. The transfer books may be closed by the Board of Directors for
a stated period not to exceed fifty days for the purpose of determining
shareholders entitled to receive payment of and dividend, or in order to
make a determination of shareholders for any other purpose.
6. Quorum
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted, which might have been
transacted at the meeting, as originally noticed.
7. Voting
A holder of outstanding shares, entitled to vote at a meeting, may vote at
such meeting in person or by proxy. Except as may otherwise be provided in
the currently filed Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing their name on the record of
shareholders. Except as herein or in the currently filed Articles of
Incorporation otherwise provided, all corporate action shall be determined
by a majority of the votes cast at a meeting of shareholders by the holders
of shares entitled to vote thereon.
8. Proxies
At all meeting of shareholders, a shareholder may vote in person or by proxy
executed in writing by the shareholder or by their duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after six months from the date of its execution.
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the shareholders entitled to vote
with respect to the subject matter thereof.
<PAGE>
Article III
Board of Directors
1 General Powers
The business and affairs of the Corporation shall be managed by its Board of
Directors. The Board if Directors may adopt such rules and regulations for
the conduct of their meetings and the management of the Corporation as they
appropriate under the circumstances. The Board shall have authority to
authorize changes in the Corporation's capital structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number between one and
five, as the Directors may by resolution determine from time to time. Each
of the Directors shall hold office until the next annual meeting of
shareholders and until their successor shall have been elected and qualified.
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without other
notice than by this Bylaw, immediately after and, at the same place as the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular
meetings without other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order of the
Chairman of the Board or the President. The Secretary shall give notice of
the time, place and purpose or purposes of each special meeting by mailing
the same at least two days before the meeting or by telephone, telegraphing
or telecopying the same at least one day before the meeting to each
Director. Meeting of the Board of Directors may be held by telephone
conference call.
5. Quorum
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn
any meeting from time to time until a quorum shall be present, whereupon the
meeting may be held, as adjourned, without further notice. At any meeting at
which every Director shall be present, even though without any formal notice
any business may be transacted
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall have one
vote. The act of a majority of Directors present at a meeting shall be the
act of the full Board of Directors, provided that a quorum is present.
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in the case of
death, resignation, or removal of any Director, or if the authorized number
of Directors is increased,
<PAGE>
or if the shareholders fail, at any meeting of the shareholders, at which
any Director is to be elected, to elect the full authorized number of
Directors to be elected at that meeting.
8. Removals
Directors may be removed, at any time, by a vote of the shareholders holding
a majority of the shares outstanding and entitled to vote. Such vacancy
shall be filled by the Directors entitled to vote. Such vacancy shall be
filled by the Directors then in office, though less than a quorum, to hold
office until the next annual meeting or until their successor is duly
elected and qualified, except that any directorship to be filled by election
by the shareholders at the meeting at which the Director is removed. No
reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of their term of office.
9. Resignation
A director may resign at any time by delivering written notification thereof
to the President or Secretary of the Corporation. A resignation shall become
effective upon its acceptance by the Board of Directors; provided, however,
that if the Board of Directors has not acted thereon within ten days from
the date of its delivery, the resignation shall be deemed accepted.
10 Presumption of Assent
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action(s) taken unless their dissent shall be placed
in the minutes of the meeting or unless he or she shall file their written
dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors or
a stated salary as Director. No such payment shall preclude any Director
from serving the Corporation in any other capacity and receiving
compensation therefor.
12. Emergency Power
When, due to a national disaster or death, a majority of the Directors are
incapacitated or otherwise unable to attend the meetings and function as
Directors, the remaining members of the Board of Directors shall have all
the powers necessary to function as a complete Board, and for the purpose of
doing business and filling vacancies shall constitute a quorum, until such
time as all Directors can attend or vacancies can be filled pursuant to
these Bylaws.
13. Chairman
The Board of Directors may elect from its own number a Chairman of the
Board, who shall preside at all meetings of the Board of Directors, and
shall perform such other duties as may
<PAGE>
be prescribed from time to time by the Board of Directors. The Chairman may
by appointment fill any vacancies on the Board of Directors.
Article IV
Officers
1. Number
The officers of the Corporation shall be a President, one or more Vice
Presidents, a Secretary, and a Treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other Officers and assistant
Officers as may be deemed necessary may be elected or appointed by the Board
of Directors. In its discretion, the Board of Directors may leave unfilled
for any such period as it may determine any office except those of President
and Secretary. Any two or more offices may be held by the same person.
Officers may or may not be Directors or shareholders of the Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the shareholders.
If the election of Officers shall not be held at such meeting, such election
shall be held as soon thereafter as convenient. Each Officer shall hold
office until their successor shall have been duly elected and shall have
qualified or until their death or until they shall resign or shall have been
removed in the manner hereinafter provided.
3. Resignations
Any Officer may resign at any time by delivering a written resignation
either to the President or to the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
4. Removal
Any Officer or agent may be removed by the Board of Directors whenever in
its judgment the best interests Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an Officer or agent shall not
of itself create contract rights. Any such removal shall require a majority
vote of the Board of Directors, exclusive of the Officer in question if he
or she is also a Director.
5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, or is a new office shall be created, may be
filled by the Board of Directors for- the un-expired portion of the term.
<PAGE>
6. President
The president shall be the chief executive and administrative Officer of the
Corporation. He or she shall preside at all meetings of the stockholders
and, in the absence of the Chairman of the Board, at meetings of the Board
of Directors. He or she shall exercise such duties as customarily pertain to
the office of President and shall have general and active supervision over
the property, business, and affairs of the Corporation and over its several
Officers, agents, or employees other than those appointed by the Board of
Directors. He or she may sign, execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations, and
shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
7. Vice President
The Vice President shall have such powers and perform such duties as may be
assigned to him by the Board of Directors or the President. In the absence
or disability of the President, the Vice President designated by the Board
or the President shall perform the duties and exercise the powers of the
President. A Vice President may sign and execute contracts any other
obligations pertaining to the regular course of their duties.
8. Secretary
The Secretary shall keep the minutes of all meetings of the stockholders and
of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meeting, of all committees. He
or, she shall cause notice to be given of meetings of stockholders, of the
Board of Directors, and of any committee appointed by the Board. He or she
shall have custody of the corporate seal and general charge of the records,
documents and papers of the Corporation not pertaining to the performance of
the duties vested in other Officers, which shall at all reasonable times be
open to the examination of any Directors. He or she may sign or execute
contracts with the President or a Vice President thereunto authorized in the
name of the Corporation and affix the seal of the Corporation thereto. He or
she shall perform such other duties as may be prescribed from time to time
by the Board of Directors or by the Bylaws.
9. Treasurer
The Treasurer shall have general custody of the collection and disbursement
of funds of the Corporation. He or she shall endorse on behalf of the
Corporation for collection check, notes and other obligations, and shall
deposit the same to the credit of the Corporation in such bank or banks or
depositories as the Board of Directors may designate. He or she may sign,
with the President or such other persons as may be designated for the
purpose of the Board of Directors, all bills of exchange or promissory notes
of the Corporation. He or she shall enter or cause to be entered regularly
in the books of the Corporation full and accurate account of all monies
received and paid by him on account of the Corporation; shall at all
reasonable times exhibit his (or her) books and accounts to any Director of
the Corporation upon application at the office of the Corporation during
business hours; and, whenever required by the Board of Directors or the
President, shall render a statement of his (or her) accounts. The Treasurer
shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such powers as may
be assigned to them by the Board of Directors.
11. Salaries
Salaries or other compensation of the Officers of the Corporation shall be
fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate Officers or agents. No
Officer shall be prevented from receiving any such salary or compensation by
reason of the fact the he or she is also a Director of the Corporation.
12. Surety Bonds
In case the Board of Directors shall so require, any Officer or agent of the
Corporation shall execute to the Corporation a bond in such sums and with
such surety or sureties as the Board of Directors may direct, conditioned
upon the faithful performance of his (or her) duties to the Corporation,
including responsibility for negligence and for the accounting for all
property, monies or securities of the Corporation, which may come into his
(or her) hands.
Article V
Contracts, Loans, Checks and Deposits
1. Contracts
The Board of Directors may authorize any Officer or Officers, agent or
agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be
general or confined to specific instances.
2. Loans
No loan or advance shall be contracted on behalf of the Corporation, no
negotiable paper or other evidence of its obligation under any loan or
advance shall be issued in its name, and no property of the Corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of the Corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
3. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies
or other depositories as the Board of Directors may select, or as may be
selected by an Officer or agent of the Corporation authorized to do so by
the Board of Directors.
<PAGE>
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence of
indebtedness of the Corporation shall be signed by such Officer or Officers
or such agent or agents of the Corporation and in such manner as the Board
of Directors from timer to time may determine. Endorsements for deposits to
the credit of the Corporation in any of its duly authorized depositories
shall be made in such manner as the Board of Directors may from time to time
determine.
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the form of an
appropriate legal writing, which shall be signed by the President or Vice
President and by the Treasurer or by the Secretary, and sealed with the seal
of the Corporation. The seal may be facsimile, engraved or printed. Where
such bond or debenture is authenticated with the manual signature of an
authorized Officer of the Corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued,
the signature of any of the Corporation's Officers named thereon may be
facsimile. In case any Officer who signed, or whose facsimile signature has
been used on any such bond or debenture, shall cease to be an Officer of the
Corporation for any reason before the same has been delivered by the
Corporation, such bond or debenture may nevertheless by adopted by the
Corporation and issued and delivered as though the person who signed it or
whose facsimile signature has been used thereon had not ceased to be such
Officer.
Article VI
Capital Stock
1 . Certificate of Share
The shares of the Corporation shall be represented by certificates prepared
by the Board of Directors and signed by the President. The signatures of
such Officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than
the Corporation itself or one of its employees. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
(or her) legal representative, who shall furnish proper evidence of
authority to transfer, or by his (or her) attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes.
<PAGE>
3. Transfer Agent and Registrar
The Board of Directors of the Corporation shall have the power to appoint
one or more transfer agents and registrars for the transfer and registration
of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any certificate
theretofore issued by it alleged to have been lost or destroyed. The Board
of Directors may require the owner of such a certificate or his (or her)
legal representative to give the Corporation a bond in such sum and with
such sureties as the Board of Directors may direct to indemnify the
Corporation as transfer agents and registrars, if any, against claims that
may be made on account of the issuance of such new certificates. A new
certificate may be issued without requiring any bond.
5. Registered Shareholders
The Corporation shall be entitled to treat the holder of record of any share
or shares of stock as the holder thereof, in fact, and shall not be bound to
recognize any equitable or other claim to or on behalf of this Corporation
to any and all of the rights and powers incident to the ownership of such
stock at any such meeting, and shall have power and authority to execute and
deliver proxies and consents on behalf of this Corporation in connection
with the exercise by this Corporation of the rights and powers incident to
the ownership of such stock. The Board of Directors, from time to time, may
confer like powers upon any other person or persons.
Article VII
Indemnification
No Officer or Director shall be personally liable for any obligations of the
Corporation or for any duties or obligations arising out of any acts or
conduct of said Officer or Director performed for or on behalf of the
Corporation. The Corporation shall and does hereby indemnify and hold
harmless each person and their heirs and administrators who shall serve at
any time hereafter as a Director or Officer of the Corporation from and
against any and all claims, judgments and liabilities to which such persons
shall become subject by reason of their having heretofore or hereafter been
a Director or Officer of the Corporation, or by reason of any action alleged
to have heretofore or hereafter taken or omitted to have been taken by him
as such Director or Officer, and shall reimburse each such person for all
legal and other expenses reasonably incurred by him in connection with any
such claim or liability, including power to defend such persons from all
suits or claims as provided for under the provisions of the Nevada Revised
Statutes; provided, however, that no such persons shall be indemnified
against, or be reimbursed for, any expense incurred in connection with any
claim or liability arising out of his (or her) own negligence or willful
misconduct. The rights accruing to any person under the foregoing provisions
of this section shall not exclude any other right to which he or she may
lawfully be entitled, nor shall anything herein contained restrict the right
of the Corporation to indemnify or reimburse such person in any proper case,
even though not specifically herein provided for. The Corporation, its
<PAGE>
Directors, Officers, employees and agents shall be fully protected in taking
any action or making any payment, or in refusing so to do in reliance upon
the advice of counsel.
Article VIII
Notice
Whenever any notice is required to be given to any shareholder or Director
of the Corporation under the provisions of the Articles of Incorporation, or
under the provisions of the Nevada Statutes, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of
such notice. Attendance at any meeting shall constitute a waiver of notice
of such meetings, except where attendance is for the express purpose of
objecting to the holding of that meeting.
Article IX
Amendments
These Bylaws may be altered, amended, repealed, or new Bylaws adopted by a
majority of the entire Board of Directors at any regular or special meeting.
Any Bylaw adopted by the Board may be repealed or changed by the action of
the shareholders.
Article X
Fiscal Year
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
Article XI
Dividends
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the Corporation.
Article X11
Corporate Seal
The seal of the Corporation shall be in the form of a circle and shall bear
the name of the Corporation and the year of incorporation per sample affixed
hereto.
<PAGE>
Dated Tuesday, May 24, 1994 Bobernco, Inc.
/s/Caron A. Kelly
Caron A. Kelly
Secretary
MICHELSON GROUP CORPORATE DEVELOPMENT AGREEMENT
This Agreement (the "Agreement') is entered into as of this 17th day of
June, 1998, by and between The Michelson Group, Inc., a Nevada corporation
("Michelson"), with its principal place of business at 5000 Birch Street,
Suite 9600, Newport Beach, CA 92660, and Gen-Tel Communications with its
principal place of business at 3151 Airway Ave., Suite P-3, Costa Mesa, CA
92626 (the "Company").
RECITALS
WHEREAS, Company intends to be a public company which is required to file
periodic and other reports under section 13 or 15(d) of the Securities
Exchange Act of 1934 and envisions that it will need the services of
corporate development activities of Michelson; and
WHEREAS, Company desires to engage Michelson to perform corporate
development services on behalf of Company; and
WHEREAS, Michelson has the ability and knowledge necessary for the
performance of such services; and
WHEREAS, Michelson and Company desire, pursuant to the terms of this
Agreement, to set forth the ten, and conditions pursuant to which Michelson
will perform corporate development services on behalf of Company.
WHEREAS, as used herein, "Applicable Date" means June 23, 1998 if Michelson
does not terminate this Agreement as provided in Section 1.2.6.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and adequate consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Scope of Services
1.1 Michelson agrees to perform for the Company the corporate development
services describe as follows:
1.1.1 Referrals; Key Employees. Michelson shall advise the Company on
the selection of professionals and Company agrees to meet and retain such
professionals provided that the compensation to such professionals is at or
less than market rate and that such professionals and their compensation are
mutually agreed upon by the Company and Michelson. Company will name one
designee of Michelson to its Board of Directors and recommend said designee
to its shareholders for election as a director at future shareholder
meetings of the Company. Michelson recognizes that the shareholders may not
cast their votes for such designee and such failure shall not constitute a
breach of this Agreement.
<PAGE>
1.1.2 Stock Option Plan. Michelson recognizes that having management own a
significant ownership position in the Company is a valuable tool for
focusing their attention on increasing shareholder value. Accordingly,
Michelson recommends that the Board of Directors put into effect a stock
option plan to be used for acquiring additional management as well as
incentivizing current management.
1.1.3 Capitalization. Michelson shall make all reasonable efforts to help
Company reach the business objectives to be mutually agreed upon at a later
date.
1.1.4 The Support System. Michelson will develop, implement and maintain an
ongoing stock market support system with the general objective of expanding
stockbroker awareness of the Company's activities, and hence to generate
commensurate interest in the Company's stock.
1.2 Company acknowledges as follows:
1.2.1 No Guarantees. Michelson makes no guarantees, representations or
warranties as to the particular results from Michelson corporate development
services, the response and timeliness of action by the stockholder and
brokerage community, including but not limited to guarantees,
representations or warranties as to future stock price of Company.
1.2.2 Review Responsibility. Company understands that the accuracy and
completeness of any document prepared by Michelson or its advisers is
dependent upon Company's alertness to assure that such document contains all
material facts which might be important and that all such documents must not
contain any misrepresentation of a material fact nor omit information
necessary to make the statements therein not misleading. To that end,
Company agrees to review, and confirm to Michelson in writing that you have
reviewed, all materials for their accuracy, and completeness prior to any
use thereof. Company also acknowledges that this responsibility continues in
the event that the materials become deficient in this regard.
1.2.3 Representations and Warranties. The Company represents and warrants to
Michelson that all information provided prior to the execution of this
Agreement, in writing or otherwise, is true and complete. In the event that
such information is determined to be inaccurate, incomplete or otherwise
misleading, this Agreement may be immediately terminated, at the sole
discretion of Michelson.
1.2.4 Issuance of Additional Securities/Indebtedness. Commencing with the
execution of this Agreement and ending two years from the date of the
Agreement, the Company and its princi al shareholders will not issue any
additional securities (except Securities issued inconnection with the
currently proposed private securities offerings and Securities issuable upon
the exercise or conversion of existing warrants, options or other
convertible securities, or those issuable upon presently existing employee
stock option plans) or incur and additional indebtedness (except in the
ordinary course of business of to an aggregate of $250,000.00. It is the
Company's ordinary course of business to buy switches that can be $5
million) without the prior written consent of Michelson.
<PAGE>
1.2.5 The contract is subject to Michelson completing its due diligence by
June 23, 1998. if Michelson is not satisfied for any reason, Michelson may
terminate this contract with no obligation to Michelson by June 23, 1998.
ARTICLE II
Compensation for Services
2.1 In consideration for entering into this Agreement and performing the
services described immediately above, Company agrees to compensate
Michelson as follows:
2.1.1 Cash Compensation. Company agrees to pay to Michelson a monthly fee of
$6,500.00, to
be paid on the 15th of each month, in advance, beginning upon execution of this
agreement. Michelson agrees to accrue one half of its fees until Company
breaks escrow
on its secondary financing, and Michelson agrees to accrue the first month's
fees until
Company is a public entity. Company agrees to bring current all Michelson
fees upon
breaking of escrow and to pre-pay three months forward fees when Company breaks
escrow on its secondary financing.
2.1.2 Stock Compensation. Commencing on the Applicable Date, Company agrees
to issue to Michelson warrants to purchase that number of shares of common
stock of the Company (the "Warrants") which would, upon exercise, result in
Michelson holding of 9.9% of the outstanding shares of the Company upon
completion of the proposed bridge financing. Such Warrants shall be
exercisable for a period of five years from the Applicable Date at an
initial price of $.01 per share. The Company shall execute and deliver a
customary Warrant Agreement evidencing the Warrants. Michelson acknowledges
that the Warrants and the shares issuable upon exercise of the Warrants (the
"Shares") will initially be "restricted securities" (as such term is define
in Rule 144 promulgated under the Securities Act of 1933, as amended ("Rule
144"), that the Warrants and Shares will include a restrictive legend, and
that the Warrants and Shares cannot be sold unless registered with the
United States Securities and Exchange Commission ("SEC") and qualified by
appropriate state securities regulators, or unless Michelson complies with
an exemption from such registration and qualification (including without
limitation, compliance with Rule 144).
2.1.3 In order to facilitate Company's growth plan, Michelson agrees to
exercise the warrants due Michelson under this contract in the following
schedule: one fourth of the warrants can bc exercised by Michelson
immediately, an additional one fourth upon Company's stock trading at a $40
million public stock market valuation (for example: 10 million shares
outstanding trading at $4 per share is a $40 million valuation); the
remainder under this contract, including those listed under paragraph 2.1.4,
are due Michelson upon Company breaking escrow on a debt or equity financing
of $3 million or over for the Company.
Company shall issue the stock certificate for the Shares within five (5)
days after the exercise of any Warrants.
<PAGE>
2.1.4 Antidilution. It is the intention of the parties hereto that upon
completion of the reverse merger and bridge financing, the number of
warrants to be held by Michelson shall equal 9.9% of the then issued and
outstanding shares of stock. This 9.9% is to be calculated on a fully
diluted basis assuming that the entire bridge financing is completed. The
Company agrees that it shall issue additional warrants to Michelson, if
necessary, in order to assure that Michelson receives this 9.9%. Michelson
shall be diluted in the same manner that all other shareholders of the
Company are diluted, in all offerings occurring subsequent to the completion
proposed bridge financing.
2.1.5 Expenses. Company agrees to pay all incidental costs and expenses
associated with services provided by Michelson. Such expenses are separate
from cash compensation as set out above, and include but not limited to such
incidental costs and expenses as travel and lodging, copying charges,
printing charges, long distance telephone charges, facsimile charges,
postage, special mailings and other reasonable expenses. Such expense shall
in every instance be reasonable and verifiable with appropriate back-up
documentation. All expenses over $1,000.00 a month will be pre-approved by
Company.
ARTICLE III
Term of the Agreement
3.1 This Agreement shall commence upon execution of this Agreement and
continue during the two year period of time following the date of this
Agreement. Renewal shall be determined by a vote of the Board of Directors
of the Company. Notwithstanding the foregoing, the Company or Michelson, as
the case may be, may terminate this Agreement immediately upon written
notice to such party upon the occurrence of any of the following: (a) the
other party shall become insolvent or make an assignment for the benefit of
Creditors; and (b) the other party shall breach any of the material terms of
this Agreement. If this Agreement is terminated on or before the termination
date of this Agreement (as set forth above) for any reason other than a
default by Michelson, the entire cash fee shall immediately become due and
payable, shall be deemed to be earned as of such date, and no offset, refund
or reduction of payments shall be attributable to such termination. The
provisions of Article II shall survive the termination of this Agreement.
<PAGE>
ARTICLE IV
Status of Parties
4.1 Nothing contained in this Agreement shall be construed to imply that
either Michelson, the Company, or any employee, agent or other authorized
representative of any such party, is a partner, joint venturer, agent
officer or employee of the other. Neither party hereto shall have
any authority to bind the other in any respect vis a vis any third party, it
being intended that each shall remain an independent contractor and
responsible only for its own actions. The Company and Michelson arc
independent contractors, each responsible for its own actions, costs and
expenses. Neither Michelson nor the Company shall have any right to, and
shall not, commit the other party to any agreement, contract, or undertaking
or waive or compromise any of such other party's rights against customers or
other parties. All compensation paid to Michelson shall
constitute earnings from self-employment income and the Company shall not
withhold any amounts therefrom as federal or state income tax withholding
from wages or as employee contributions under the Federal Insurance
Contribution Act (Social Security) or any similar federal or state law
applicable to employers and employees.
ARTICLE V
Indemnification
5.1 Company acknowledges that Michelson must at all times rely upon the
accuracy and completeness of information and documents supplied to Michelson
by the Company's officers, directors, agents and employees. Consequently,
Company and the entities affiliated with Company agree to indemnify and hold
harmless Michelson, its officers, directors, employees and agents
(collectively, the "Indemnitees") against and from any and all losses,
claims, damages or liabilities, joint or several, which Indemnitees or any
of them may become subject, and to reimburse Indemnitees or any of them for
any legal or other expenses (including the cost of any investigation and
preparation) incurred by Indemnitees or any of them, arising out of or in
connection with any inquiry, litigation or other proceeding, whether or not
resulting in any liability, insofar as such losses, claims, damages,
liabilities or expenses arise out of, or are based
upon, (i) any act taken or omitted to be taken by Indemnitee's services
hereunder, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any information (written or oral) furnished by
you to Indemnitees or the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading.
<PAGE>
ARTICLE VI
Confidentiality
6.1 Michelson agrees not at any time (during or after the term of this
Agreement) to disclose or use, except in pursuit of the business of the
Company (for purposes of this Article, "the Company" shall include the
Company and any affiliate of the Company), and Proprietary Information of
the Company acquired during the term of this Agreement- For Purposes of this
Agreement the phrase "Proprietary Information" means all information which
is known or intended to be known only to Michelson or employees of the
Company any document, record or other information of the Company or others
in a confidential relationship with the Company and relates to specific
business matters such as patents, patent applications, trade secrets, secret
processes, proprietary know-how, information of the Company's business, and
identity of suppliers or customers or accounting procedures of the Company
or relates to other business of the Company. Michelson agrees not to remove
from the premises of the Company except in the pursuit of business of the
Company any document, record or other information of the Company. Michelson
recognizes that all such documents, records or other information, whether
developed by Michelson or by
someone else for the Company are the exclusive property of the Company, as
the case may be.
ARTICLE VII
Miscellaneous
7.1 .Waiver. No waiver of any breach of default of this Agreement by
Michelson shall be considered to be a waiver of any other breach or default
of this Agreement.
7.2 Severability. If any portion of this Agreement is found by a court of
competent jurisdiction to be void or unenforceable, that portion hereof
shall be deemed to be reformed to the extent necessary to cause such portion
to be enforceable and the same shall not affect the remainder of this
Agreement, which shall be given full force and effect without regard to the
invalid or unenforceable portions.
7.3 Entire Agreement. This Agreement, which may be signed in duplicate or
counterparts, replaces and supersedes all previous Agreements between
Michelson and the Company, contains the entire understanding between the
parties, and may not be changed, altered, amended, or modified, except in
writing, duly executed by each of the parties.
7.4 Assignment. This Agreement may not be assigned or transferred by either
party hereto without the prior written consent of the other.
7.5 Governing Law. This Agreement shall be governed by the laws of the State
of California.
<PAGE>
7.6 Attorney's Fees. Should any action be commenced between the parties to
this Agreement concerning the matters set forth in this Agreement or the
right and duties of either in relation thereto, the prevailing party in such
action shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for its Attorney's Fees and Costs.
7.7 Arbitration and Venue. Any controversy arising out of or relating to
this Agreement or any modification or extension thereof, including any claim
for damages and/or recision, shall be settled by arbitration in Orange
County, California in accordance with the Commercial Arbitration Rules of
the American Arbitration Association before one arbitrator. The arbitrator
sitting in any such controversy shall have no power to alter or modify any
express provisions of this Agreement or to render any award which by its
terms effects any such alteration, or modification. The parties consent to
the jurisdiction of the Superior Court of California, and of the United
States District Court for the Central District of California for all
purposes in connection with such arbitration including the entry of judgment
on any award. The parties consent that any process or notice of motion or
other application to either of said courts, and any paper in connection with
arbitration, may be served by certified mail or the equivalent, return
receipt requested, or by personal service or in such manner as may be
permissible under the rules of the applicable court or arbitration tribunal,
provided a reasonable time for appearance is allowed. The parties further
agree that arbitration proceedings must be instituted within one year after
the claimed breach occurred, and that such failure to institute arbitration
proceedings within such period shall constitute an absolute bar or the
institution of any proceedings and a waiver of all claims. This section
shall survive the termination of this Agreement.
7.8 Facsimile Signature. Any signature on a facsimile copy of the Agreement
shall be binding and valid as if made on the original copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement t e uly
executed and delivered as of the date first written above.
MICHELSON GROUP, INC.
By: /s/Bruce Berman
Bruce Berman, President
"COMPANY"
By: /s/ Paul Sandhu
Its: President
<PAGE>
Amendment to The Michelson Group, Inc. Corporate Development
Agreement with Gen-Tel Communications dated June 17, 1998
It is mutually agreed to amend paragraph 2.1.1 to read:
Cash Compensation. Company agrees to pay to Michelson a monthly fee of
$6.500.00, to be paid on the 15th of each month, in advance, beginning upon
execution of this agreement. Michelson agrees to accrue its fees until
Company breaks escrow on its bridge financing. Company agrees to bring
current all Michelson fees upon breaking of escrow of bridge financing.
Company also agrees to pre-pay three months forward fees when Company
reaches $750,000.00 in gross proceeds.
It is mutually agreed to amend paragraph 2.1.3 to read:
In order to facilitate Company's growth plan Michelson agrees to exercise
the warrants due Michelson under this contract in the following schedule:
one fourth of the Warrants can be exercised by Michelson immediately, an
additional one fourth can be exercised by Michelson when company breaks
escrow on their proposed bridge financing; an additional one fourth can be
exercised upon Company's stock trading at a $40 million public stock market
valuation (for example: 10 million shares outstanding trading at $4 per
share is a $40 million valuation); the remainder under this contract,
including those listed under paragraph 2.1.4, are due Michelson upon Company
breaking escrow on a debt or equity financing of $3 million or over for the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first written above.
MICHELSON GROUP, INC.
By: /s/Bruce Berman
Bruce Berman, President
"COMPANY"
By: /s/Paul Sandhu
Its: President
<PAGE>
AGREEMENT
November 3, 1998
The Michelson Group agrees to loan GTC Telecom $20,000.00. GTC agrees to allow
The Michelson Group to exercise 567,983 shares of GTCC stock due The Michelson
Group.
Accepted and Agreed Accepted and Agreed
/s/Bruce Berman /s/ Eric Clemons
Bruce Berman Eric A. Clemons
President Chief Operating Officer
ONE PLUS
BILLING AND INFORMATION MANAGEMENT
SERVICES AGREEMENT
This One Plus Billing and Information Management Services Agreement (the
"Agreement") is entered into this 8th day of September, 1998, by and between
Billing Concepts, Inc., a Delaware corporation, dba U.S. Billing
(hereinafter "USBI") and GenX Communication LLC dba Preferred Disc. Plan,
a/an Delaware corporation ("Customer").
WITNESSETH:
WHEREAS, Customer is engaged in the business of providing certain
pre-subscribed telecommunication services for which Customer desires to bill
and collect for these services through the Local Exchange Carriers (LECs) or
Competitive Local Exchange Carriers (CLECs) [hereinafter collectively
referred to as "LECs"]; and
WHEREAS, USBI has entered into billing and collection agreements with
certain LECs which allow USBI to provide billing and information management
services for Qualifying Message Telephone Service ("MTS") calls on behalf of
USBI's customers; and
WHEREAS, USBI has the ability through its computer hardware, computer
software and accounting systems to provide billing and information
management services for Qualifying MTS calls for Customer, and Customer
desires to obtain such billing and information management services from USBI
on the terms and conditions contained herein:
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants
and agreements contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, do hereby agree
as follows:
<PAGE>
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth below, unless the context otherwise requires:
Bad Debt: See Uncollectible Amounts and Written-Off Accounts.
Billing Telephone Company (BTC): See Local Exchange Carrier and Competitive
Local Exchange Carrier.
BOC: Bell Operating Company.
Business Day: A day other than Saturday and Sunday on which commercial banks
are open in the State of Texas.
Claim: Claim, loss, liability, damage, cost, correction or expense, whether
ordinary, special, consequential or otherwise.
Casual Operator Services (OS) Telephone Traffic: Casual operator assisted
telephone calls that originate from locations where Customer is the
pre-subscribed direct dial IXC or reseller of direct dial IXC services and
the OS telephone calls are billed: (I) to the originating telephone number,
(ii) collect to the terminating telephone number, (iii) to a third telephone
number other than the originating or terminating telephone number, or (iv)
to a LEC or IXC calling card.
Competitive Local Exchange Carrier: Any competitive or alternate local
access telephone service provider, or reseller of LEC local access services,
with which USBI has entered into a billing and collection agreement.
Confidential Information: See Section S.
EMI Billing Record: Computer readable records containing the billing data
for Customer's Qualifying MTS calls, in the Bellcore EMI (exchange message
interface) format, for which each LEC has the capability of processing
through its billing and collection systems.
End User: A natural person, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture,
governmental agency or instrumentality, or other entity that subscribes to
or uses Customer's telecommunication services.
<PAGE>
F.C.C.: The Federal Communications Commission.
Foreign Intrastate Taxes: Those applicable taxes for OS and Travel Card
calls originating and terminating in the same state but billed in another
state as described in Section 9 herein.
ILEC: Incumbent Local Exchange Carrier.
Independent Telephone Companies: Those ILECs that are not BOCs, which
presently include, subject to revision by USBI from time to time: General
Telephone Operating Companies (GTOCs), United Telecommunications Operating
Companies (United), Alltel, the alliance of Independent Telephone Companies
through Independent NECA Services, and Illuminet.
Interexchange Carrier (IXC): Those telephone companies, other than the LECs,
that can provide intraLATA (where applicable), interLATA, interstate and
international telecommunications service.
LEC Processing Fees: As described in paragraph 4.(c)(I) and 4.(f).
Library Code: An accounting identification code assigned to Customer by USBI
that is used to account for Customer's funds, fees, charges, charge backs,
adjustments and credits which Customer encodes within each EMI Billing
Record submitted to USBI.
Local Exchange Carrier (LEC): Any one of the local telephone companies, as
listed on Exhibit "A" hereto, providing local access telephone services with
whom USBI has entered into a billing and collection agreement.
MTS (Message Telephone Services): Direct dialed or operator assisted
station-to-station or person-to-person telephone calls billed: (I) to the
originating telephone number, (ii) collect to the terminating telephone
number, (iii) to a third telephone number other than the originating or
terminating telephone number, or (iv) to a LEC calling card or an IXC travel
card. "Enhanced Telecommunications Services" or "Information Services" are
not considered MTS calls herein and cannot be billed under this Agreement.
One Plus Telephone Traffic: Direct dialed telephone calls which: (I)
originate from an equal access end office, (ii) are billed to the
originating telephone number or (iii) are billed to an IXC travel card
issued by Customer.
<PAGE>
Post Billing Adjustment or Credit: Credit or rate adjustments applied to an
End User's account by the LEC or by USBI.
Qualifying Message Telephone Service (Qualifying MTS): Casual OS Telephone
Traffic and One Plus Telephone Traffic which are not of objectionable
content as set forth in paragraph 7.(I) of this Agreement.
RBOCs: Regional Bell Operating Companies.
Submission Date: As described in paragraph 3.(a).
Tariffs: The rates, terms and conditions for providing intraLATA, interLATA
(intrastate), interstate, and international telecommunication services as
authorized and filed with the state and local regulatory authorities.
Taxes: Those taxes and tax-like surcharges described in paragraph 9.(a) herein.
Unbillable Records: Those EMI Billing Records that pass USBI's edits and
screens and are submitted to the LECs for billing and collection but
subsequently cannot be posted to an End User's account by the LECs.
Uncollectible Amounts: Those amounts that are billed to an End User's
account for Customer's Valid EMI Billing, Records but are not collected due
to the End User receiving a Post Billing Adjustment or Credit to its bill or
the End User failing to pay its bill to the LEC and the account subsequently
being written off as Bad Debt by the LEC.
USBI Rejected Records: Those EMI Billing Records that fail USBI's edits and
screens and are returned to Customer and not submitted to the LECs for
billing and collection.
Valid EINII Billing Records: As described in paragraph 3.(b).
Written-Off Accounts: Those End Users' accounts that are not paid by the End
Users and are subsequently written off as Bad Debt by the CECIL.
SECTION 2. SCOPE OF AGREEMENT.
Customer hereby agrees to purchase from USBI the services described in
Section 3 herein, and USBI agrees to provide such services at the time and
in the manner, and subject to the terms and upon the conditions, set forth
herein. Customer agrees that USBI shall be the exclusive source for LEC
billing and information management services in the United States and Canada
for the
<PAGE>
billing telephone companies listed in Exhibit "A", attached hereto. As USBI
enters into billing and collection arrangements with additional LECs, USBI
will provide billing and information management services to Customer for
such LECs on the same terms and conditions as contained herein.
SECTION 3. BILLING SERVICES.
(a) Submission of EMI Billing Records: Customer shall submit to USBI its
EMI Billing Records for its Qualifying MTS calls for USBI to submit to each
LEC under contract with USBI. Customer shall be responsible for submitting
to USBI EMI Billing Records that contain adequate information so that USBI
and the LECs can process such EMI Billing Records. Customer shall submit its
EMI Billing Records to USBI once per week, except when Customer cannot
satisfy USBI's minimum volume requirements as described in paragraph 7.(g),
in which case Customer shall submit its EMI Billing Records at least once
per month. The cost of these submissions shall be borne by Customer. The
date USBI receives Customer's EMI Billing Records will be, for those
records, the "Submission Date."
(b) USBI's Edits and Screens: Upon receipt of Customer's EMI Billing
Records, USBI will promptly process Customer's EMI Billing Records through
USBI's computer edits and screens. Those EMI Billing Records that pass
USBI's edits and screens shall be "Valid EMI Billing Records." Those EMI
Billing Records that do not pass USBI's edits and screens shall be "USBI
Rejected Records," and be returned to Customer.
(c) Submission to LEC's: Promptly after receipt of Customer's EMI
Billing Records (within five (5) Business Days after receipt for the RBOCs
and GTE, or within ten (10) Business Days after such receipt for Independent
Telephone Companies and CLECs), USBI will submit Customer's Valid EMI
Billing Records to the appropriate LECs.
(d) Purchase by LEC: Each LEC shall be responsible, to the extent
required by its agreement with USBI, to purchase Customer's Valid EMI
Billing Records.
(e) Billing and Collection LEC: Each LEC shall be responsible, for such
Valid EMI Billing Records purchased by the LEC, for the purchase and
collection of the revenue for Customer's Qualifying MTS Calls from End Users
residing within the applicable billing area of such LEC, subject to the
terms, conditions and operating procedures contained in each LEC's billing
and collection agreement with USBI.
(f) Printing of Customer's Name on End User's LEC Telephone Bill:
Wherever possible, USBI will use its best efforts to cause each Billing
Telephone Company to print
<PAGE>
Customer's name, along with the associated Valid EMI Billing Records, on
each End User's telephone bill. Customer acknowledges that where the Billing
Telephone Companies do not provide this service, Customer's name shall not
appear on the End User's telephone bill.
SECTION 4. LEC PAYMENTS, FEES AND CHARGES.
(a) Payment by LECs: Each LEC shall make payments to USBI for Valid EMI
Billing Records purchased from Customer in accordance with the LEC's billing
and collection agreement with USBI.
(b) Amount Paid by LECs: The LEC shall pay to USBI the gross amount of Valid
EMI Billing, Records purchased by the LEC less the then-applicable fees,
charges, charge backs, credits and adjustments as prescribed in its billing
and collection agreement with USBI.
(c) LEC Fees. Charges. Charge Backs, Credits and Adjustments: Customer
acknowledges and understands that USBI is and will be bound by the terms of
its billing and collection agreement with each LEC with respect to each
LEC's right to deduct or to reduce its collectible funds for: (I) the amount
charged by each LEC for processing, billing and collecting Customer's Valid
EMI Billing Records ["LEC Processing Fees"], (ii) any Unbillable Records,
(iii) any Post-Billing Adjustments or Credits provided to End Users, (iv)
any reserve for anticipated Uncollectible Amounts ["Bad Debt Holdback
Reserve"], and (v) any LEC Bad Debt "true-ups" [periodic true-ups between
the Bad Debt Holdback Reserve and the actual Uncollectible Amounts realized
by the LECs]. In addition, Customer shall be responsible for any data
transmission and distribution fees for delivering or receiving Customer's
EMI Billing Records and for any other LEC charges specifically related to
billing and collecting Customer's EMI Billing Records. Customer further
agrees that payment of all amounts described in this paragraph 4.(c) shall
be its sole responsibility and that USBI may withhold such amounts from
payments to Customer. Should such amounts exceed the amounts due to
Customer, such amounts shall be due and payable by Customer to USBI within
ten (10) Business Days of notification by USBI of any amounts due. A
schedule setting forth USBI's current contractual LEC Processing Fees for
each LEC is attached hereto as Exhibit "B", as may be changed from time to
time.
(d) Bad Debt Holdback Reserve: USBI will holdback or cause the LECs to
holdback an amount estimated to be sufficient to set off any Uncollectible
Amounts that may be determined after the date USBI makes its final payment
to Customer for Customer's Valid EMI Billing Records billed and collected by
the LEC. Any Bad Debt Holdback Reserve withheld by the LEC shall be passed
through to Customer on the same percentage or the same amount as
<PAGE>
USBI was assessed by the individual LECs. However, once sufficient data
becomes available to USBI from the LECs to enable USBI to determine a
specific Bad Debt history attributable to Customer, the Bad Debt Holdback
Reserve rate shall be based on Customer's specific historical Uncollectible
Amounts when eater than the amount withheld by the LEC. A schedule setting
forth the past twelve months' average Bad Debt Holdback Reserve withheld by
each LEC is attached hereto, for your reference, as Exhibit "G".
(e) Monthly LEC Bad Debt True-Up: Between six and eighteen 6 - 18) months
after USBI submits Customer's Valid EMI Billing Records to the LECs' for
billing and collection, the LECs will determine the actual amounts collected
from the End Users and true-up the difference between this amount and the
face amount of Customer's Valid EMI Billing Records purchased by the LEC.
USBI will provide Customer monthly reports on Bad Debt true-ups for these
differences. If the amount of these true-ups is "in favor" (positive) of
Customer, USBI will remit such amount to Customer when USBI receives the
true-up amount from the LECs. If the amount of these true-ups is "not in
favor" (negative) of Customer, USBI will withhold such amounts from the next
scheduled payment due to Customer. If the amounts due -to Customer are not
sufficient to satisfy such true-up amounts, such amounts shall be due and
payable by Customer to USBI within ten (10) Business Days of notification by
USBI of any amounts due.
(f) LEC Processing Fee Calculation: Each calendar month USBI will determine
the number of End User bills (renderings) that were or will be required to
bill Customer's Valid EMI Billing Records submitted to USBI during that
month and the average number of Valid EMI Billing Records contained on each
End User's bill. 'USBI will multiply these quantities'-by its contractual
LEC Processing Fee schedule, as set forth in Exhibit "B", for each LEC to
calculate the LEC Processing Fees associated with billing Customer's Valid
EMI Billing Records. The LEC Processing Fee will also include any data
transmission fees, distribution fees, programming fees and any other charges
directly associated with billing Customer's Valid EMI Billing Records.
(g) End User Inquiry, Investigation and Rebate: Primary End User inquiry
inquiry, investigation and rebate policies are set forth in Exhibit "F"
attached hereto. Customer shall be responsible for payment of all
Post-Billing Adjustments, Credits and associated charges provided to End
Users by either the LEC or USBI. Customer understands that each LEC has its
own policies regarding assessment of credits, fees and penalties for
customer service complaints and Customer agrees to be bound by such
policies. Such amounts may be deducted weekly from the amounts due to
Customer. If the amount due to Customer is not sufficient to satisfy these
<PAGE>
amounts, then Customer shall pay to USBI such amount as is required to
satisfy these amounts within ten (10) Business Days of notification by USBI
of any amounts due.
(h) Rejected Records: Those EMI Billing Records that fail USBI's edits and
screens and are not submitted to the LECs for billing and collection, USBI
Rejected Records, shall be returned to Customer at no charge. Unbillable
Records rejected by the LEC, through no fault of USBI, shall be charged the
same USBI Processing, Fees as described in Exhibit "C" attached hereto.
(i) Resubmitted EMI Billing Records: Unbillable Records which are
resubmitted to the LECs for billing and collection shall be charged the
standard USBI Processing Fees as described in Exhibit "C" attached hereto.
(j) Allocation Method: Customer understands and agrees that USBI will use
an allocation method for chargebacks to determine amounts due under this
Agreement when Customer-specific information is not matched or available
from the LECs.
SECTION 5. USBI BILLING SERVICE FEES, CHARGES AND CHARGE BACKS.
In addition to the LEC Processing Fees, charges, charge backs, credits and
adjustments set forth in Section 4, Customer agrees to pay to USBI and USBI
may deduct from amounts collected by the LECs on behalf of Customer and paid
to USBI, the following USBI billing service fees, charges charge backs,
credits and assessments:
(a) A billing and information management service fee, the USBI Processing
Fee, for each Valid EMI Billing Record submitted to the LECs for billing and
collection by USBI, as specified in Exhibit "C" attached hereto;
(b) A fee for each End User inquiry, investigation and rebate handled by
USBI on Customer's behalf, as specified in Exhibit "C" attached hereto;
(c) Any Post-Billing Adjustment or Credit amounts refunded to End Users by
USBI's customer service inquiry and investigation activities, along with any
LEC charges associated with making such refunds to End Users;
(d) A charge, as specified in Exhibit "C" attached hereto, for any
submission of EMI Billing Records that contains less than the minimum volume
requirements of USBI for each "Library Code";
<PAGE>
(e) An additional End User inquiry, investigation and rebate fee, as
described in Exhibit "C" attached hereto, for each inquiry that exceeds one
percent (1%) of the number of Valid EMI Billing Records for each Library
Code processed by USBI on behalf of Customer each month;
(f) Accounts Receivable Reconciliation System. - FASTRACK: An initial,
one-time, non-renewable fee, as described in Exhibit "C" attached hereto,
for USBI's accounts receivable reconciliation system known as FASTRACK; and
(g) As collateral for all obligations now existing or hereafter arising
from Customer to USBI, Customer hereby grants to USBI a security interest in
all the following property of Customer, whether now owned or hereafter
acquired or created, and all proceeds and products thereof:
(i) All amounts paid, and all amounts owing, by each LEC to
USBI on accounts for Customer's Valid EMI Billing Records;
(ii) All accounts owing from an End User to Customer arising
from services which give rise to Customer's Valid EMI Billing Records;
(iii) All amounts deposited by Customer with USBI pursuant
to paragraph 13.(b) hereof; and
(iv) All amounts owing and all amounts to be owing from USBI
to Customer.
SECTION 6. PAYMENTS TO CUSTOMER.
(a) Determination of Amount Due Customer: USBI will determine the amount
collected by each LEC for Customer's Valid EMI Billing Records and deduct
the then-applicable fees, charges, charge backs, credits and adjustments of
the LECs and USBI. If the amount due to Customer is not sufficient to
satisfy these fees, charges, charge backs, credits and adjustments, then
Customer shall pay this difference to USBI within ten (10) Business Days of
notification by USBI of any amounts due.
(b) Reserves and True-Ups for Unbillable Records: USBI will reserve an
amount, from one month to the next, that is equal to Customer's prior
history for Unbillable Records. USBI will recalculate Customer's historical
experience quarterly from its prior three months results. Until such history
can be determined for Customer, USBI will reserve one and one-half percent
(1.5%) from the amount due to Customer. USBI will true-up this reserve each
month
<PAGE>
when the information becomes available from the LECs. USBI will then return
excess amounts to Customer or withhold additional amounts as may be required
to satisfy these liabilities from the amounts due to Customer.
(c) Payment Schedules: USBI will advance to Customer the estimated amount
determined under paragraph 6.(a) above within seven (7) Business Days of
receipt by USBI of funds from a LEC for Customer's Valid EMI Billing
Records; PROVIDED. HOWEVER, that if Customer has ceased doing business for
five (5) Business Days, is the subject of a bankruptcy proceeding, has a
receiver, trustee or custodian appointed over substantially all of
Customer's assets, fails to make any deposit required by paragraph 13.(b),
or if USBI has reasonable grounds to believe that the fees, charges, charge
backs, credits and adjustments to Customer may exceed any amount owing or to
become owing from USBI to Customer, USBI may withhold payments to Customer
until al I such amounts have been determined and deducted from the amount
owing to Customer. If the amount owing to Customer is determined not
sufficient to satisfy these fees, charges, charge backs, credits and
adjustments, then Customer shall pay the difference to USBI within ten (10)
Business Days of notification by USBI of any amount due.
(d) Method of Payment: USBI will make all advance payments and final
payments due to Customer, using ACH wire transfer, each Tuesday or the first
Business Day following Tuesday should Tuesday not fall on a Business Day,
based on the schedule described in paragraph 6.(c) herein.
(e) Accounting for Funds: Funds received from the LECs for Customer's Valid
EMI Billing Records, less applicable fees, charges, charge backs, credits
and adjustments, shall be deposited and held by USBI in a common account
until such time as the amount determined to be due Customer is paid to
Customer. USBI will maintain an accounting of the balance owing or to be
owing by USBI to Customer of such amounts deposited and held by USBI.
SECTION 7. CUSTOMER'S OBLIGATIONS.
The Customer agrees as follows:
(a) Cooperation by Customer: Customer agrees to cooperate with USBI to the
fullest extent possible and to the best of Customer's ability to facilitate
the provisioning of services described in Section 3 herein. Such cooperation
shall include, but not be limited to, the following:
<PAGE>
Billing Records. The minimum USBI Processing Fee as set forth in Exhibit
"C", attached hereto, shall apply if this minimum volume per transmission is
not met.
(h) Review of FASTRACK: Customer agrees to review FASTRACK reports provided
to Customer and notify USBI of any inaccuracies within thirty (30) days of
the date such FASTRACK reporting is made available to Customer. Failure to
notify USBI of any inaccuracies within such time period will constitute
acceptance thereof.
(i) Objectionable Content: Customer agrees, as a condition of USBI's
performance under this Agreement, that USBI will not provide billing and
- -information management services which USBI deems harmful, damaging or
against public policy, including, but not limited to:
(i) Services which explicitly or implicitly refer to
sexual conduct;
(ii) Services which contain indecent, obscene or profane
language;
(iii) Services which allude to bigotry, racism, sexism or
other forms of discrimination;
(iv) Services which through advertising, -content or
delivery are deceptive, or that may take unfair advantage of minors or the
general public;
(v) Services which are publicly accessible, multiparty
connections commonly known as "gab" or "chat" services;
(vi) Services which have not been authorized by End Users,
or which have had excessive customer service complaints associated with
such services;
(vii)Services which are prohibited by Federal, state, or
local laws or Tariffs; or
(viii)Services which individual LECs exclude from the
"types" of services or products for which their policies permit them to bill
and collect.
(j) No Other Billing Arrangement: Customer warrants that the EMI Billing
Records submitted and to be submitted by Customer to USBI pursuant to this
Agreement are not and will not be subject to any other valid or existing
billing and collection agreement and have not been billed previously and
will not be billed by another party following their submission by Customer
to USBI.
(k) LEC Billing Compliance: Customer agrees to conduct business in
accordance with all LEC policies and guidelines, which are provided to
Customer by USBI.
(l) Customer shall limit the number of EMI Billing Records for Casual OS
Telephone Traffic to not more than ten percent (10%) of the total EMI
Billing Records submitted to USBI on any given transmission. If Customer's
volume of EMI Billing Records for Casual OS Telephone Traffic exceeds ten
percent (10%), then Customer must execute a Zero Plus - Zero
<PAGE>
Minus Billing and Information Management Services Agreement with ZPDI and
shall submit its EMI Billing Records for Casual OS Telephone Traffic to ZPDI
for billing under this Zero Plus Zero Minus Billing and Information
Management Services Agreement.
(m) Payment of Amounts Due USBI: For any amounts determined to be due USBI
by Customer under this Agreement, Customer agrees to pay such amounts to
USBI within ten (10) days of notification by USBI to Customer. After a
period of thirty (30) days from such invoice date, interest on unpaid
balances shall accrue at the lower r of 18% per annum or the highest legal
rate allowed by law.
SECTION 8. PROTECTION OF CONFIDENTIAL INFORMATION.
As used herein, "Confidential Information" shall mean (a) proprietary
information, (b) information marked or designated as confidential, (C)
information otherwise disclosed in a manner consistent with its confidential
nature, (d) information of one party, whether or not in written form and
whether or not designated as confidential, that is known or should
reasonably be known by the other party as being treated as confidential, and
(e) information submitted by one party to the second party where the second
party knows or reasonably should know that the first party is obligated to
keep the information confidential. The parties hereto expressly recognize
and acknowledge that, as a result of the provision of services pursuant to
this Agreement, Confidential Information which may be proprietary to each
party must or may be disclosed to the other. Each party hereby agrees that
it will make no disclosure of Confidential Information provided under this
Agreement with OAT the prior written consent of the other party.
Additionally, each party shall restrict disclosure of said information to
its own employees, agents or independent contractors to whom disclosure is
necessary and who have agreed to be bound by the obligations of
confidentiality hereunder. Such employees, agents or independent contractors
shall use reasonable care, but not less care than they use with respect to
their own information of like character, to prevent disclosure of any
Confidential Information. Nothing contained in this Agreement shall be
considered as granting or conferring rights by license or otherwise in any
Confidential Information disclosed.
SECTION 9. TAXES.
(a) Calculation of Telecommunications Taxes: USBI will be responsible for
calculating or will use its best efforts to cause the LECs to calculate the
following taxes applicable to each MTS call and allow them to be passed
through to the End User, such taxes being referred to herein collectively as
"Taxes": Federal excise tax, any state and local sales taxes or tax-like
charges, and any other standard telecommunications sales taxes.
<PAGE>
Notwithstanding the foregoing, Customer acknowledges and agrees it is
responsible for compliance with all taxing requirements; therefore, Customer
shall promptly notify USBI of any tax or tax-like surcharges and the
associated rates that apply to Customer's MTS calls in any specific
jurisdiction.
(b) Billing and Collection of Taxes: USBI will, for the benefit of and on
behalf of Customer, use its best efforts to cause the LECs to bill End Users
for all Taxes. Customer acknowledges and agrees that USBI is acting merely
as Customer's agent with respect to arranging for the billing and collection
of Taxes, and in no event shall USBI be entitled to retain or receive from
Customer, or from any End User, any statutory fee or share of Taxes to which
the person collecting the same may be entitled under applicable law.
(c) Tax Exempt Status for End Users: USBI will have the authority, on behalf
of Customer, to authorize the LECs to calculate Taxes in the same manner as
the LECs calculate Taxes for their End Users and to authorize the LECs to
establish the tax exempt status of End Users in the same manner as the LECs
establish such status for their End Users. If-Customer's MTS calls are
exempt from Federal, state and local taxes or tax-like charges, Customer
shall so indicate on each EMI Billing Record submitted to USBI.
(d) Filing and Payment of Taxes: Based upon the information calculated by
USBI and/or received from the LECs with respect to Taxes assessed, billed
and collected by the LECs, USBI will, on behalf of Customer, prepare and
file in a timely manner with the applicable taxing authorities all returns
covering Taxes, and will, on behalf of Customer, but only to the extent of
amounts otherwise owing from USBI to Customer, pay in full and promptly
remit to such taxing authorities all Taxes owed thereto. Upon written
request, USBI will provide to Customer copies of any and all tax returns and
other applicable information relating to the payment of Taxes by USBI within
thirty (30) days after being filed and paid by USBI.
(e) Hold Harmless: Customer shall indemnify and hold USBI and its employees,
agents and representatives free and harmless from and against any Claim
(including, without limitation, reasonable attorneys' fees and court costs)
relating to or arising out of any Taxes, penalties, interest, additions to
tax, surcharge or other amounts to which USBI may be subject or incur,
relating to or arising, out of (i) USBI's reliance upon any calculations,
determinations or other directives, or lack thereof, given by Customer to
USBI with respect to the calculation, assessment, billing and/or collection
of any Taxes contemplated by this Agreement; or (ii) a determination by the
Internal Revenue Service or any other taxing authority that any amount paid
by USBI pursuant to paragraph 9.(d) above with respect to Taxes was
insufficient, except in the event such insufficiency was the result of
negligence on the part of USBI; provided, however,
<PAGE>
that Customer shall not be required to indemnify USBI or the employees,
agents and representatives thereof for any loss, damage, Claim, cause of
action or other liability to the extent, but only to the extent, caused by
the gross negligence or willful misconduct of USBI.
(f) Billed Taxes: Customer shall be responsible for the payment of any
additional Taxes or tax-like charges assessed against USBI based on the
revenues collected by USBI from Customer's Valid EMI Billing Records,
"Billed Taxes", excluding Federal and state income Taxes.
SECTION 10. FORCE MAJEURE.
USBI shall not be held liable for any delay or failure in performance- of
any part of this Agreement or Exhibits attached hereto from any cause beyond
its control and without its fault or negligence, such as acts of God, acts
of civil or military authority, government regulations, embargoes,
epidemics, war, terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, strikes, power blackouts, volcanic
action, other major environmental disturbances, unusually severe weather
conditions, inability to secure products or services of other persons or
transportation facilities, or acts or omissions of transportation common
carriers.
SECTION 11. LIMITATION OF LIABILITY.
(a) USBI will use its best efforts at all times to provide prompt and
efficient service; however, USBI makes no warranties or representations
regarding the services except as specifically stated in this paragraph
11.(a). USBI will use due care in processing all work submitted to it by
Customer and agrees that it will, at its expense, correct any errors which
are due solely to malfunction of USBIs computers, operating systems or
programs or errors by USBI's employees or agents. Correction shall be
limited to reprocessing Customer's EMI Billing Records. USBI will not be
responsible in any manner for failures of, or errors in, proprietary systems
and programs other than those of USBI, nor shall USBI be liable for errors
or failures of Customer's software or operational systems. THIS WARRANTY IS
EXCLUSIVE AND IS IN LIEU OF ALL OTHER WARRANTIES, AND CUSTOMER
HEREBY WAIVES
ALL OTHER WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING,
BUT NOT
LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR
A
PARTICULAR PURPOSE. Should there be any failure in performance or errors or
omissions by USBI with respect to the information being processed and being
submitted to the LECs for billing, and collection, USBI's liability shall be
limited to using its best efforts to correct such failure. In no event,
except as specifically set forth herein, shall USBI be liable to Customer or
<PAGE>
any third parties (including Customer's customers) for any Claim even if
USBI has been advised of the possibility of such Claim.
<PAGE>
(b) Due to the nature of the services being performed by USBI, Customer
agrees that in no event will USBI be liable for any Claim caused by USBI's
performance or failure to perform hereunder which is not reported by
Customer in writing to USBI within thirty (30) days of such performance or
failure to perform.
(c) Customer shall indemnify and save harmless USBI from and against any
Claim asserted against USBI by third parties and arising out of Customer's
use of the services provided under this Agreement, unless such Claim arises
out of the willful misconduct or gross negligence of USBI.
(d) Liability of USBI in any and all categories and for any and all Claims
arising out of this Agreement or out of any act or omission relating thereto
shall, in the aggregate, not exceed one (1) month's average of USBI's
Processing, Fees to Customer over the twelve (12) months preceding such date
in which the damage or injury is alleged to have occurred, but if this
Agreement has not been in effect for twelve (12) months preceding such date,
then over such fewer number of preceding months that this Agreement has been
in effect.
SECTION 12. TERM OF AGREEMENT.
The initial term of this Agreement shall begin on the date on page I of this
Agreement or the date Customer begins submitting its EMI Billing Records to
USBI, whichever is later, and continue in full force and effect for a
minimum period of one (1) year from such date unless terminated in
accordance with paragraph 14.(b)(i) and shall automatically renew for
successive periods of one (1) year under the then-existing company standard
terms and conditions unless terminated by written notice from either party
at least sixty (60) days prior to the scheduled expiration date.
Notwithstanding anything to the contrary contained herein, if Customer is
currently billing more than two hundred and fifty thousand (250,000) EMI
Billing Records per month, Customer may elect an initial term for this
Agreement of two (2) or three (3) years. Should Customer elect to extend the
initial term of this Agreement, Customer shall pay USBI a minimum Processing
Fee, as described in Exhibit "C" attached hereto, each month for the entire
term of this Agreement. In consideration for such, USBI will charge Customer
a reduced billing services fee for the term selected which coincides with
the USBI fee schedule as presented in Exhibit "C", attached hereto.
<PAGE>
SECTION 13. EXPIRATION OR TERMINATION.
(a) Payment Upon Expiration Or Termination: Upon the expiration or
termination of this Agreement for any reason, Customer agrees to satisfy,
when or before due, any and all of its obligations under this Agreement.
(b) Deposit for Charges: In addition Customer acknowledges and understands
that certain LEC charges for Uncollectible Amounts, Bad Debt true-ups and
'Post-Billing Adjustments and Credits are not determined by the LECs or
provided to USBI for a period of up to eighteen (18) months after the final
processing of Customer's EMI Billing Records by USBI on behalf of Customer.
Customer further acknowledges and agrees that payment of these amounts shall
be its sole responsibility. To ensure such payments, Customer shall, at the
expiration or termination of this Agreement for any reason, deposit with
USBI an amount equal to two and one-half percent (2.5%) of the face amount
of Customer's gross billings for the prior twelve (12) months, or such other
amount as is estimated by USBI, based on Customer's prior history, necessary
to satisfy such charges. Such deposited amount shall be used by USBI to pay
Uncollectible Amounts, Bad Debt true-ups, Post-Billing Adjustments and
Credits and other charges incurred on behalf of Customer for billing and
collecting Customer's EMI Billing Records submitted by Customer to USBI
during the term of this Agreement. Each quarter USBI will re-examine the
amount of funds deposited and make such adjustments as USBI estimates may be
necessary to satisfy the aforementioned charges. USBI will provide Customer
with proper documentation to substantiate charges attributable to Customer
on the same and consistent method as USBI determines such charges for all of
its customers. At the end of eighteen (18) months from the expiration or
termination date, USBI will return all unused amounts to Customer.
(c) Remaining Liability: Notwithstanding the foregoing, the deposit of such
amounts does not relieve or waive Customer's responsibility and obligation
to pay its obligations to USBI including, without limitation, any and all
fees, charges, charge backs, credits and adjustments associated with billing
and collecting its EMI Billing Records. In the event such associated fees,
charges, charge backs, credits and adjustments exceed the amount of the
deposit described in paragraph 13(b), Customer shall remit to USBI such
additional amounts as are required to satisfy Customer's obligations under
this Agreement to USBI within ten (10) Business Days of notification by USBI
of any such amounts due.
(d) Savings Clause: Except as otherwise provided herein, expiration or
termination of this Agreement under this Section 13 shall terminate all
further rights and obligations of the parties hereunder, provided that:
<PAGE>
(i) Neither USBI nor Customer shall be relieved of its respective
obligations to pay any sums of money due or to become due or payable or
accrued under this Agreement;
(ii) If such expiration or termination is a result of a default
hereunder or a breach hereof by a party hereto, the other party shall be
entitled to pursue any and all rights and remedies it has to redress such
default or breach in law or equity, subject to Sections 11 & 14 hereof-, and
(iii) The provisions of Sections 8 and 9 hereof, except paragraph
9.(b), shall survive the expiration or termination of this Agreement.
(e) Early Termination of Extended Term Agreement: If Customer elects to
extend the initial term of this Agreement and should Customer terminate or
breach this Agreement before the expiration of the full initial term elected
by Customer upon execution hereof, USBI will recalculate and Customer shall
pay to USBI a USBI Processing Fee for all EMI Billing Records processed
under this Agreement based on the current USBI Processing Fee schedule at
the one I year rate, attached hereto as Exhibit "C", plus ten percent (10%)
for each EMI Billing Record processed under this Agreement, at Customer's
monthly volume levels.
SECTION 14. DEFAULT AND REMEDIES.
(a) Default: Either Party shall be in default hereunder if it::
(i) Fails to make any payment specified
hereunder when or before due and such failure continues for five (5)
Business Days after written notice;
(ii) Breaches any other material covenant
or undertaking, contained in this Agreement and fails to remedy such breach
within thirty (30) Business Days after written notice thereof from the
non-defaulting party;
(iii) Submits EMI Billing Records to USBI
for services that have not been authorized by End Users;
(iv) Submits EMI Billing Records to USBI
which generate excessive customer service complaints; or
(iv) Files, or there is filed against
it, any voluntary or involuntary proceeding under the Bankruptcy Code, makes
an assignment for the benefit of creditors, dissolves, ceases to conduct
business for three (3) Business Days, resorts to any insolvency law,
declares that it is unable to pay its debts as they mature or if a receiver,
trustee or custodian is appointed over, or an execution, attachment, or levy
is made upon, all or any material part of the property of such party.
<PAGE>
(b) Remedies: Time is of the essence in the performance of this Agreement.
In the event of any default hereunder, the non-defaulting party shall have
the following rights and remedies:
(i) To terminate or cancel this Agreement, subject to the
provisions of paragraph 13(d), by giving written notice thereof to the
defaulting party;
(ii) To declare all amounts due under this Agreement
from the defaulting party to the non-defaulting party to be immediately due
and payable, including attorney's fees and expenses incurred or which may be
incurred in the collection of such amounts;
(iii) To withhold, set off, and retain, until all obligations
of Customer to USBI have been satisfied in full, any and all amounts which
may otherwise be due and payable to Customer under this Agreement and apply
such amounts to any balance due or to become due from Customer to USBI
(iv) All rights and remedies allowed by the applicable
Uniform Commercial Code;
(v) All other rights and remedies allowed by this USBI
Agreement and under applicable law; and
(vi) All rights and remedies shall be cumulative and can be
exercised separately or concurrently.
SECTION 15. AMENDMENTS; WAIVERS.
No modification, amendment or waiver of any provision of this Agreement, and
no consent to any default under this Agreement, shall be effective unless
the same shall be in writing and signed by or on behalf of the party against
whom such modification, amendment, waiver or consent is claimed. In
addition, no course of dealing or failure of any party to strictly enforce
any term, right or condition of this Agreement shall be construed as a
waiver or such term, right or condition.
SECTION 16. ASSIGNMENT.
(a) By Customer or USBI: Assignment by Customer or USBI of any right,
obligation, duty or any other interest hereunder, in whole or in part, shall
require consent by both parties. Such consent shall not be unreasonably
withheld by either party.
(b) Generally: All rights, obligations, duties and interests of any party
under this Agreement shall inure to the benefit of and be binding on all
successors in interest and assigns of such party and shall survive any
acquisition, merger, reorganization or other business combination to which
it is a party.
<PAGE>
SECTION 17. NOTICES AND DEMANDS.
(a) How Notice Is Given: Except as otherwise provided under this Agreement,
all notices, demands and requests which may be given by any party to the
other party shall be in writing and shall be: (I) delivered in person; (ii)
mailed, postage prepaid, registered or certified mail, return receipt
requested; (iii) placed in the hands of a national overnight delivery
service or (iv) sent by facsimile transmission to the recipient's facsimile
machine, with an extra copy immediately following by first class mail; and
addressed as follows:
If to USBI, to it at:
Billing Concepts, Inc.
dba U.S. Billing
Attention: Alan W. Saltzman
7411 John Smith Drive, Suite 200
San Antonio, Texas 78229-4898
Telephone: (210) 949-7004
Fax: (210) 692-0720
If to Customer, to it at:
GenX Communications, LLC dba Preferred Disc. Plan
Attention: Paul Sandhu
3151 Airway Avenue, Unit P-3
Costa Mesa, CA 92626
Telephone: (714) 549-7700 x
Fax: (714) 549-7707
If personal delivery is selected as the method of giving notice under this
Section, a receipt for such delivery shall be obtained. The address to which
such notices, demands, requests, elections or other communications may be
given by either party may be changed by written notice given by such party
to the other party pursuant to this Section 17.
(b) When Notice Effective: Except as otherwise expressly provided herein,
all such notices shall be effective upon receipt if delivered by hand,
facsimile, national overnight delivery service, certified or registered mail
and otherwise five (5) Business "Days after placement in the U.S. Mails.
<PAGE>
EXHIBIT "A"
USBI BILLING TELEPHONE COMPANIES
Alltel
Ameritech
Bell Atlantic
Bell South
Century Telephone
Chillicothe Telephone
Cincinnati Bell
Citizens Via Alltel
Citizens Via GTE
GTE Central
GTE Contel
GTE North
GTE South
GTE West
Illuminet
NECA
NYNEX
Pacific Telcom
Pactelis
Southern New England Bell
Southwestern Bell
Sprint Mid-Atlantic Telecom
Telecom Canada
U.S. WEST
United Florida
United Midwest
United North Central
NOTE: NPA-NXX list (ONNET File) of above BTCs will be furnished to Customer
monthly, via the Electronic Bulletin Board.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
U.S. BILLING CONTRACTUAL LEC COST
May 1998
Page l of 5
<TABLE>
LEC # COMPANY NAME BILL RENDERING CALL RECORDS ENHANCED
INTER INTRA INTER INTRA 42 RCDS
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C> <C>
BELL OPERATING COMPANIES:
10 NYNEX
9102 NEW ENGLAND TELEPHONE
MASSACHUSETTS 0.9600 0.5500 0.0100 0.02000.0000
MAINE 0.9600 0.9600 0.0100 0.01000.0000
NEW HAMPSHIRE 0.9600 0.9600 0.0100 0.01000.0000
RHODE ISLAND 0.9600 0.9600 0.0100 0.01000.0000
VERMONT 0.9600 0.9600 0.0100 0.01000.0000
9104 NEW YORK TELEPHONE 1:
CONNECTICUT 0.9600 0.9600 0.0100 0.01000.0000
NEW YORK 0.9600 0.9600 0.0100 0.01000.0000
12 SNET
9147 SOUTHERN NEW ENGLAND 0.5100 0.5100 0.0560 0.05600.0000
14 BELL ATLANTIC
9206 NEW JERSEY BELL 0.3300 0.3300 0.0240 0.0240 0.2500
9208 PENNSYLVANIA BELL 0.3300 0.3300 0.0240 0.0240 0.2500
9210 DIAMOND STATE 0.3300 0.3300 0.0240 0.0240 0.2500
9211 C&P WASHINGTON, D.C. 0.3300 0.3300 0.0240 0.0240 0.2500
9212 C&P MARYLAND 0.3300 0.3300 0.0240 0.0240 0.2500
9213 C&P VIRGINIA 0.3300 0.3300 0.0240 0.0240 0.2500
9214 C&P WEST VIRGINIA 0.3300 0.3100 0.0240 0.0240 0.2500
16 AMERITECH
9321 OHIO BELL 0.3500 0.3500 0.0300 0.0300 0.0000
9323 MICHIGAN BELL 0.3500 0.3500 0.0300 0.0300 0.0000
9325 INDIANA BELL 0.3500 0.3500 0.0300 0.0300 0.0000
9327 WISCONSIN BELL 0.3500 0.3500 0.0300 0.0300 0.0000
9329 ILLINOIS BELL 0.3500 0.3500 0.0300 0.0300 0.0000
18 CINCINNATI BELL
9348 KENTUCKY 0.6000 0.5500 0.0192 0.0197 0.0300
9348 OHIO 0.6000 0.6000 0.0192 0.0192 0.0300
</TABLE>
COMPANY CONFIDENTIAL
The rendering fee includes the first ten (10) messages. The additional $.01
only applies beginning at the eleventh (11th) message and greater.
<PAGE>
EXHIBIT "B"
U.S. BILLING CONTRACTUAL LEC COST
May 1998
Page 2 of 5
<TABLE>
LEC # COMPANY NAME BILL RENDERINGCALL RECORDS ENHANCED
INTER INTRA INTER INTRA 42 RADS
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C> <C>
20 BELL SOUTH
9417 SOUTHERN BELL
FLORIDA 0.3690 0.3690 0.0262 0.0262 0.1010
GEORGIA 0.3690 0.3690 0.0262 0.0262 0.1010
NORTH CAROLINA 0.3690 0.3690 0.0262 0.0262 0.1010
SOUTH CAROLINA 0.3690 0.3690 0.0262 0.0262 0.1010
9419 SOUTH CENTRAL BELL:
ALABAMA 0.3690 0.3690 0.0262 0.0262 0.1010
KENTUCKY 0.3690 0.3690 0.0262 0.0262 0.1010
LOUISIANA 0.3690 0.3690 0.0262 0.0262 0.1010
MISSISSIPPI 0.3690 0.3690 0.0262 0.0262 0.1010
TENNESSEE 0.3690 0.3690 0.0262 0.0262 0.1010
22 SOUTHWESTERN BELL
9533 SOUTHWESTERN BELL 0.3500 0.3500 0.0300 0.0300 0.0351
24 U.S. WEST
9631 NORTHWESTERN BELL 0.4200 0.4200 0.0250 0.0250 0.1000
9631 MINNESOTA 0.4200 0.4200 0.0350 0.0350 0.1000
9636 MOUNTAIN BELL 0.4200 0.4200 0.0250 0.0250 0.1000
9638 PACIFIC NORTHWEST BELL 0.4200 0.4200 0.0250 0.0250 0.1000
9638 WASHINGTON 0.4200 0.4200 0,0350 0.0350 0.1000
26 PACTELIS
9740 PACIFIC BELL 0.2400 0.1900 0.0110 0.0110 0.0000
9742 NEVADA BELL 0.3500 0.6000 0.0350 0.0910 0.0000
GTE COMPANIES:
30 GTE SOUTH
328 GTE OF FLORIDA 0.3900 0.3500 0.0450 0.0762 0.1350
407 KENTUCKY 0.3900 0.3500 0.0450 0.0762 0.1350
4331 ALABAMA 0.3900 0.3500 0.0450 0.0762 0.1350
4334 NORTH CAROLINA 0.3900 0.3500 0.0450 0.0762 0.1350
4335 SOUTH CAROLINA 0.3900 0.3500 0.0450 0.0762 0.1350
4337 VIRGINIA 0.3900 0.3900 0.0450 0.0450 0.1350
40 GTE NORTH
169 GTE OF PENNSYLVANIA 0.3900 0.3900 0.0450 0.0450 0.1350
615 GTE OF OHIO 0.3900 0.3900 0.0450 0.0450 0.1350
695 GTE OF MICHIGAN 0.3900 0.3900 0.0450 0.0450 0.1350
772 GTE OF INDIANA 0.3900 0.3900 0.0450 0.0450 0.1350
886 GTE OF WISCONSIN 0.3900 0.3500 0.0450 0.0762 0.1350
1015 GTE ILLINOIS 0.3900 0.3500 0.0450 0.0762 0.1350
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
U.S. BILLING CONTRACTUAL LEC COST
May 1998
Page 3 of 5
<TABLE>
LEC # COMPANY NAME BILL RENDERINGCALL RECORDS ENHANCED
INTER INTRA INTER INTRA 42 RADS
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C> <C>
GTE COMPANIES - CON'T.:
46 GTE CENTRAL
4311 IOWA 0.3900 0.3900 0.0450
0.0450 0.1350
4312 MINNESOTA 0.3900 0.2700 0.0450
0.0170 0.1350
4313 MISSOURI 0.3900 0.3500 0.0450
0.0643 0.1350
4314 NEBRASKA 0.3900 0.3900 0.0450
0.0450 0.1350
4341 ARKANSAS 0.3900 0.3900 0.0450
0.0450 0.1350
4342 NEW MEXICO 0.3900 0.2700 0.0450
0.0967 0.1350
4343 OKLAHOMA 0.3900 0.3900 0.0450
0.0450 0.1350
4344 CONTEL dba GTE TEXAS 0.3900 0.7500 0.0450
0.0300 0.1350
4344 GTE SOUTHWEST INC. 0.3900 0.3500 0.0450
0.0565 0.1350
52 GTE WEST
2319 CALIFORNIA 0.3900 0.1900 0.0450
0.0110 0.1350
2319 GTE WC CA 0.3900 0.3500 0.0450
0.0762 0.1350
2319 GTE CALIFORNIA 0.3900 0.3500 0.0450
0.0762 0.1350
3100 GTE OF HAWAII 0.3900 0.0000 0.0450
0.0000 0.1350
4321 IDAHO 0.3900 0.3500 0.0450
0.0762 0.1350
4323 OREGON 0.3900 0.3500 0.0450
0.0762 0.1350
4324 WASHINGTON 0.3900 0.4800 0.0450
0.0762 0.1350
53 CITIZENS VIA GTE
4321 IDAHO 0.0000 0.0000 0.0938
0.0938 0.0900
4322 MONTANA 0.0000 0.0000 0.0938
0.0938 0.0900
4336 TENNESSEE 0.0000 0.0000 0.0634
0.0634 0.0900
4338 WEST VIRGINIA 0.0000 0,0000 0.0634
0.0634 0.0900
4426 ARIZONA 0.0000 0.0000 0.0522
0.0522 0.0900
4429 UTAH 0.0000 0,0000 0.0522
0.0522 0.0900
INDEPENDENTS:
28 TELECOM CANADA 0.0000 0.0000 0.5500
0.5500 0.0000
58 UNITED FLORIDA
340 CENTRAL 0.3150 0.0000 0.0280
0.0210 0.0000
341 UNITED 0.3150 0.0000 0.0280 0.0210 0.0000
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
U.S. BILLING CONTRACTUAL LEC COST
May 1998 -
Page 4 of 5
<TABLE>
LEC # COMPANY NAME BILL RENDERINGCALL RECORDS ENHANCED
INTER INTRA INTER INTRA 42 RADS
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C> <C>
62 UNITED MIDWEST
1456 MINNESOTA 0.3150 0.3150 0.0280 0.0280 0.0000
1594 WYOMING b.3150 0.3150 0.0280 0.0280 0.0000
1595 NEBRASKA 0.3150 0.3150 0.0280 0.0280 0.0000
1810 EASTERN KANSAS 0.3150 0.3150 0.0280 0.0280 0.0000
1810 SOUTH CENTRAL KANSAS 0.3150 0.3150 0.0280 0.0280 0.0000
1842 KANSAS 0.3150 0.3150 0.0280 0.0280 0.0000
1957 MISSOURI 0.3150 0.2016 0.0280 0.0243 0.0000
2084 TEXAS 0.3150 0.3765 0.0280 0.0164 0.0000
2114 TEXAS-CENTRAL 0.3150 0.1348 0.0280 0.0945 0.0000
2348 NEVADA 0.3150 0.0091 0.0280 0.0379 0.0000
2400 NORTHWEST 0.3150 0.3133 0.0320 0.0379 0.0000
63 SPRINT MID-ATLANTIC TELECOM
254 CENTRAL TELEPHONE 0.3150 0.3150 0.0280 0.0280 0.0000
470 CAROLINA T&T 0.3150 0.5590 0.0280 0.0240 0.0000
471 CENTRAL TELEPHONE 0.3150 0.2844 0.0280 0.0574 0.0000
506 UNITED TELEPHONE-SE (SC) 0.3150 0.3150 0.0280 0.0280 0.0000
567 UNITED TELEPHONE-SE (TN) 0.3150 0.3150 0.0280 0.0280 0.0000
567 UNITED TELEPHONE-SE (VA) 0.3150 0.3150 0.0280 0.0280 0.0000
66 UNITED NORTH CENTRAL
138 NEW JERSEY 0.3150 0.3000 0.0280
0.0500 0.06,00
209 PENNSYLVANIA 0.3150 0.3000
0.0280 0.0500 0.0000
661 OHIO 0.3150 0.3000 0.0280
0.0500 0.0000
832 INDIANA 0.3000 0.3000 0.01500 0.0500 0.0000
985 ILLINOIS 0. 3 15 0 0.3000 0.0280
0.0500 0.0000
74 ALLTEL
45 NEW YORK 0.5400 0.5400
0.0700 0.0700 0.0000
61 PENNSYLVANIA 0.5400 0.5400
0.0700 0.0700 0.0000
84 OHIO 0.5400 0.5400 0.0700
0.0700 0.0000
157 PENNSYLVANIA 0.5400 0.4700
0.0700 0.0000 0.0000
176 PENNSYLVANIA 0.5400 0.5400
0.0700 0.0700 0.0000
302 ALABAMA 0.5400 0.5400
0.0700 0.0700 0.0000
336 FLORIDA 0.5400 0.5400
0.0700 0.0700 0.0000
357 GEORGIA 0.5400 0.4700
0.0700 0.1090 0.0000
402 GEORGIA 0.5400 0.4700
0.0700 0.1085 0.0000
402 KENTUCKY 0.5400 0.8800
0.0700 0.0563 0.0000
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
U.S. BILLING CONTRACTUAL LEC COST
May 1998
Page 5 of 5
<TABLE>
LEC # COMPANY NAME BILL RENDERINGCALL RECORDS ENHANCED
INTER INTRA INTER INTRA 42 RADS
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C> <C>
74 ALLTEL - CON'T.
453 MISSISSIPPI 0.5400 0.5400 0.0700
0.0700 0.0000
476 NORTH CAROLINA 0.5400 0.2800 0.0700 0.0604 0.0000
517 SOUTH CAROLINA 0.5400 0.5400 0.0700 0.0700 0.0000
665 OHIO 0.5400 0.5400 0.0700 0.0700 0.0000
762 FLORIDA 0.5400 0.0000 0.0700 0.0716 0.0000
850 NORTH CAROLINA 0.5400 0.2800 0.0700 0.0716 0.0000
894 SOUTH CAROLINA 0.5400 0.3600 0.0700 0.0790 0.0000
938 MISSISSIPPI 0.5400 0.4700 0.0700 0.0700 0.0000
1691 ARKANSAS 0.5400 0.5400 0.0700 0.0700 0.0000
1885 MISSOURI 0.5400 0.8200 0.0700 0.0509 0.0000
1965 OKLAHOMA 0.5400 0.5400 0.0700 0.0700 0.0000
2011 OKLAHOMA 0.5400 0.5400 0.0700 0.0700 0.0000
2121 TEXAS 0.5400 0.4700 0.0700 0.0700 0.0000
2153 TEXAS 0.5400 0.4700 0.0700 0.1085 0.0000
4332 GEORGIA 0.5400 0.3500 0.0700 0.0812 0.0000
4425 GEORGIA 0.5400 0.4700 0.0700 0.1085 0.0000
75 CITIZENS ALLTEL II
2354 NEVADA 0.0000 0.0000 0.1275 0.1275 0.2500
4432 OREGON 0.0000 0.0000 0.1275 0.1275 0.2500
4449 ARIZONA 0.0000 0.0000 0.1275 0.1275 0,2500
4450 NEW MEXICO 0.0000 0.0000 0.1275 0.1275 0.2500
76 CITIZENS VIA ALLTEL
96 NEW YORK 0.0000 0.0000 0.1275 0.1275 0.2500
157 PENNSYLVANIA 0.0000 0.0000 0.1275 0.1275 0.2500
270 WEST VIRGINIA 0.0000 0.0000 0.1275 0.1275 0.2500
577 TENNESSEE 0.0000 0.0000 0.1275 0.1275 0.2500
4336 TENNESSEE 0.0000 0.0000 0.1275 0.1275 0.2500
81 INDEPENDENT NECA SVC. 0.3000 0.3203 0.2600
0.2244
0.0000
87 GTE CONTEL 0.4700 0.4700 0.7000
0.7000
0.0900
91 CHILLICOTHE TEL. CO. 0.0000 0.0000 0.3000
0.3000
0.0000
92 PACIFIC TELCOM 0.3000 0.3203 0.2600
0.2244
0.0000
93 CENTURY TELEPHONE 0.3900 0.1979 0.1.300 0.1355 0.0000
94 ILLUMINET 0.3750 0.3750 0.2210
0.2210 0.0000
96 COX 0.4200 0.4200 0.01500 0.0500 0.0000
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "C"
PRICING
Effective July 15, 1998
U.S. Billing Most Favored Processing Fees:
<TABLE>
Volume RATE/RCD 1 Year 2 Year 3 Year
<S> <C> <C> <C> <C> <C>
0- 250,000 LEC Charge + $0.0525 $0.0525 $0.0525
Next 250,000 LEC Charge + $0.0525 $0.0485 $0.0440
Next 500,000 LEC Charge + $0.0475 $0.0435 $0.0390
Next 1,000,000 LEC Charge + $0.0435 $0.0395 $0.0350
Next 1,000,000 LEC Charge + $0.0405 $0.0365 $0.0320
Next 1,000,000 LEC Charge + $0.0385 $0.0345 $0.0300
Next 2,000,000 LEC Charge + $0.0385 $0.0345 $0.0225
Next 4,000,000 LEC Charge + $0.0385 $0.0345 $0.0185
Over 10,000,000 LEC Charge + $0.0385 $0.0345 $0.0150
</TABLE>
USBI's most favored Processing Fees are in addition to the USBI's
contractual LEC Processing Fees as outlined in Exhibit "B" attached hereto
which are calculated monthly as described in paragraph 4.(f) hereof
If Customer elects an initial term of this Agreement of two (2) or three (3)
years, Customer acknowledges and agrees to pay a minimum monthly processing
fee of at least $13,125/month (250,000 records/month times $.0525/record),
for the entire two (2) or three (3) year term of the Agreement.
(2)End User Customer Service Inquiry, Investigation, and Rebate:
USBI will perform End User customer service inquiry, investigation and
rebate for those areas where the LEC billing and collection agreements
provide for such. Customer will be charged a total of $2.50 for each
customer service inquiry, investigation or rebate handled by USBI on behalf
of Customer.
(3)Excessive End User Customer Service Inquiry, Investigation and Rebate:
Customer shall pay an additional fee of three dollars and fifty cents
($3.50) for each End User inquiry, investigation or rebate that exceeds one
percent (1%) of the number of EMI Billing Records processed by USBI on
behalf of Customer for each Library Code each calendar month.
(4)Minimum USBI Processing Fee per Transmission:
For each submission of EMI Billing Records to USBI, Customer shall pay a
minimum USBI Processing Fee per Library Code of five hundred twenty-five
dollars ($525).
(5)Accounts Receivables Reconciliation System - FASTRACK:
Customer shall pay an initial, one-time fee for USBI's accounts receivable
reconciliation system known as FASTRACK. The charge is one thousand five
hundred dollars ($1,500) for the first Library Code and five hundred dollars
($500) for each additional Library Code. There is no charge for weekly
accounts receivable status updates.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "D"
MTS CALL COMPLETION CRITERIA
A MTS call is completed if some type of direct communication or hardware or
software answer detection has been established between the originating
person and the terminating location. Collect and third number billed calls
must be verified that the receiving party or third party agrees to accept
the charges for the call. If automated technologies are used, the receiving
party must positively acknowledge the acceptance of the call. In the case of
person-to-person calls, the operator must verify that the receiving party is
the person whom the originating party requested. For other direct dialed,
automated calling card or operator assisted calls, the call shall be
considered completed when the connection is verified by means of hardware or
software detection as required by Federal, state and local regulatory
authorities.
In those cases where the Customer cannot determine the exact time the
terminating person has gone "off hook" (beginning of communication with the
originating party), and Federal, state or local regulatory authorities do
not require hardware or software answer detection, a call shall be
considered to be connected if the originating and receiving parties hold the
connection for more than thirty-six (36) seconds.
Calls for four hundred eighty (480) minutes (8 hours) or more are not
considered valid, completed calls and will not be billed.
Calls to operators, customer announcements, busy signals or ringing shall
not be considered completed calls and shall not be billed.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "E"
EXCHANGE MESSAGE INTERFACE (EMI) BILLING RECORD
The following Bellcore EMI billing record formats will be processed by USBI
for the LECs that are capable of billing and collecting for services using
the following EMI billing record format:
RECORDED ID
010101 Domestic Message Telephone Service (MTS) Charge
010132 Domestic Directory Assistance Charge
010201 North American Originated and Billable International Charge
425001 Miscellaneous Recurring and Non-Recurring Service Charge
102203 Pack Header Record
202204 Pack Trailer Record
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "F"
USBI PROCEDURES FOR END USER CUSTOMER SERVICE
INQUIRIES INVESTIGATIONS AND REBATES
Page 1 of 3
1. For those LEC's whose billing and collection agreements provide for USBI
to provide End User inquiry and resolution, USBI's toll-free "800" number
will appear on the End User's LEC telephone bill to be used for resolution
of any USBI issues associated with the End User's bill.
At the time of the initial call from an End User, USBI's customer service
representative will access the End User's account. Once the account has been
accessed, the calls or charges in dispute will be determined. If the End
User is disputing any of the following, including, but not limited to:
(a) Denying All Knowledge (DAK) of calls, equipment or service;
(b) Rates; or
(C) Charges for unanswered calls
then an automated internal credit form will be prepared which usually
contains the following information:
(a) Bill name and number;
(b) Reason and dollar amount in dispute; and
(C) Copy of the EMI Billing Records being, disputed.
II. All disputes will normally be handled by following the customer's
guidelines or by USBI using best judgement to resolve the dispute. It is the
customer's responsibility to provide to USBI in writing initial guidelines
or changes to existing guidelines.
All inquiries over fifty dollars ($50.00) will be forwarded to USBI's
Investigations Department. Upon receipt of the internal credit form and the
End Users' records in dispute, the following procedures shall be followed:
(A) Notify Customer (via automated fax) that an End User is disputing
calls or charges over $75.00 and that USBI will determine the validity of
such claim. The following information will usually be given:
(1) End User's full name;
(2) Telephone number;
(3) Statement date; and
(4) Amount in dispute.
(B) Confer with the LEC as needed to obtain pertinent information such
as if customer was assigned telephone number at the time of billing, etc.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "F"
USBI PROCEDURES FOR END USER CUSTOMER SERVICE
INQUIRIES INVESTIGATIONS AND REBATES
Page 2 of 3
(C) As deemed necessary by USBI, confer with Customer to obtain
pertinent information such as date service was canceled, etc.
(D) Maintain details of conversations when investigating the calls
(i.e., person's name, complete telephone number, date and time of each call).
(E) Notify the End User and the Customer concerning the disposition
of the dispute.
III. The following procedures will be utilized for credit issued through
Bell Operating Companies (BOC's) and the Local Exchange Carriers:
(A) An electronic EMI credit record will be submitted with the next
billing submission.
(B) For those situations where an electronic credit cannot be
submitted, an IC/EC memorandum will usually be mailed to the End User's
Local Exchange Carrier for credit toward End User's account if the credit
amount is over seventy-five dollars ($75.00). For amounts less than $75.00,
a check will usually be made payable to the local telephone company, but
forwarded to the End User.
The above procedures for refund checks, electronic EMI credit records and
IC/EC memorandums usually take a total of five (5) Business Days.
IV. A record of all disputes and resolutions will be kept for weekly
customer service reports.
V. All formal and informal regulatory complaints will be handled by USBI
unless USBI authorizes the customer to handle their own. If the regulatory
agency serves both USBI and the customer, the customer is responsible for
their response to the agency. If the customer is permitted to handle their
own regulatory complaints, USBI reserves the right to assume this
function from the customer if they deem necessary to ensure proper handling
and timely responses to the agency. Whether the customer or USBI normally
handles the complaint procedure, USBI reserves the right to make any
decisions regarding credit in response to a complaint.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "F"
USBI PROCEDURES FOR END USER CUSTOMER SERVICE
INQUIRIES, INVESTIGATIONS AND REBATES
Page 3 of 3
VI. The USBI policy regarding refunds as related to 42 Records is as follows:
(A) If a customer disputes a fee billed as a 42 Record (i.e., a monthly
reoccurring charge, a membership fee, voice mail service, etc.). USBI will,
to the best of our knowledge, explain the service and how the customer may
have obtained the service. If the customer continues to dispute the service
or states that they are refusing to pay, USBI will refund the 42 Record fee.
(B) In the case of a dispute of an unauthorized switch of long distance
service, not only will the charge for the 42 Record be refunded, but a rate
adjustment to satisfy will also be provided for long distance calls, if one
is requested by the customer.
(C) If the customer wants the service canceled, or if the LOA information is
requested after a refund has been provided by USBI, the customer will be
referred to the carrier.
(D) If the customer disputes a subsequent charge after requesting
cancellation of service from the carrier, credit will be provided to satisfy
the customer.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "G"
USBI BAD DEBT PERCENTAGE
for period 04/01/97 - 03/31/98
Page 1 of 2
<TABLE>
LEC NAME CHARGE(%)
<S> <C> <C> <C>
BELL OPERATING COMPANIES:
10 NYNEX
9102 NEW ENGLAND TELEPHONE .0316
9104 NEW YORK TELEPHONE .1415
12 SNET
9147 SOUTHERN NEW ENGLAND N/A
14 BELL ATLANTIC
9206 NEW JERSEY BELL .0350
9208 PENNSYLVANIA BELL .0328
9210 DIAMOND STATE .0171
9211 C&P OF WASHINGTON, D.C. .1089
9212 C&P- OF MARYLAND .0316
9213 C&P OF VIRGINIA .0237
9214 C&P OF WEST VIRGINIA .0230
16 AMERITECH
9321 OHIO BELL .0308
9323 MICHIGAN BELL .0308
9325 INDIANA BELL .0306
9327 WISCONSIN BELL .0309
9329 ILLINOIS BELL .0306
18 CINCINNATI BELL
9348 CINCINNATI BELL .0241
20 BELL SOUTH
9417 SOUTHERN BELL .0271
9419 SOUTH CENTRAL BELL .0281
22 SOUTHWESTERN BELL
9533 SOUTHWESTERN BELL .0454
24 U.S. WEST
9631 U.S. WEST - EASTERN .1014
9636 U.S. WEST - CENTRAL .0446
9638 U.S. WEST - WESTERN .0732
26 PACTELIS
9740 PACIFIC BELL .0894
9742 NEVADA BELL .0358
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "G"
USBI BAD DEBT PERCENTAGE
for period 04/01/97 - 03/31/98
Page 2 of 2
<TABLE>
LEC NAME CHARGE(%)
<S> <C> <C>
GTE COMPANIES:
30 GTE SOUTH .0624
40 GTE NORTH .0335
46 GTE CENTRAL .0605
52 GTE WEST .0598
53 CITIZENS VIA GTE .0282
87 GTE CONTEL COMPANIES N/A
INDEPENDENTS:
28 TELECOM - CANADA N/A
58 UNITED FLORIDA .0298
62 UNITED MIDWEST .0382
63 SPRINT MID ATLANTIC TELECOM .0344
66 UNITED NORTH CENTRAL .0042
74 ALLTEL .0247
75 CITIZENS ALLTEL II N/A
76 CITIZENS VIA Alltel .0115
81 INDEPENDENT NECA SVC. N/A
91 CHILLICOTHE TELEPHONE COMPANY N/A
92 PACIFIC TELCOM N/A
93 CENTURY TELEPHONE N/A
94 ILLUMINET .0044
96 Cox N/A
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
USBI
ADDENDUM "A"
ADVANCED PAYMENT AGREEMENT
THIS ADDENDUM is made 8th day of September 1999 by GenX Communications,
LLC dba Preferred Disc, Plan "Customer"), a Delaware corporation with an office
at 3151 Airway Avenue, Unit P-3, Costa Mesa, CA 92626 and Billing Concepts,
Inc., a Delaware corporation, dba U.S. Billing - ("USBI") with its principal
offices located 7411 John Smith Drive, Suite 200, San Antonio, Texas 78229-4898.
RECITALS
WHEREAS, on or before the date hereof, Customer and USBI entered into a
certain Billing and Information Management Services Agreement (the
- -"Customer Contract"), pursuant to which USBI is obligated to provide, among
other things, processing services for the billing and collection of
Customer's qualified MTS telecommunication services through its billing and
collection agreements with certain Local Exchange Companies ("LECs"). Unless
otherwise defined in this Addendum, all defined terms used herein shall have
the meaning given to such terms in the Customer Contract.
WHEREAS, Customer acknowledges that USBI has entered into a certain
Loan and Security Agreement (the "Loan Agreement") with a third-party
lender, and that the terms of this Agreement are subject to the Loan
Agreement. Upon approval of this Addendum and Customer by USBI and its
third-party lender, and pursuant to the Loan Agreement, the third party
lender will provide financing through USBI for the benefit of Customer of
certain accounts receivable of Customer arising from the provisioning of
qualified MTS telecommunication services by Customer to End Users of Customer's
services which are billed and collected from End Users by the LECs
(hereinafter the "Customer Accounts"). The Customer's accounts receivable
are payable by the LECs and are to be acquired by USBI; and
WHEREAS, to facilitate the financing arrangements between its
third-party lender and USBI, as well as to facilitate the financing of the
Customer Accounts, Customer acknowledges and agrees to amend the terms of
the Customer Contract in accordance with the terms and provisions set forth
herein:
<PAGE>
NOW, THEREFORE, Customer and USBI, intending to be legally bound,
hereby agree as follows:
1. Amendment of Customer Contract. The Customer Contract is hereby
amended as set forth in this Addendum. This Addendum is incorporated into
and made a part of the Customer Contract, the terms and conditions of which,
unless expressly modified by this Addendum, continue unchanged and in full
force and effect. To the extent that any terms or provisions of this
Addendum are or may be deemed expressly inconsistent with any terms or
conditions of the Customer Contract, the terms of this Addendum shall control.
2. Purchase of Customer Accounts. Commencing immediately after the
date USBI's third-party lender has given its approval of this Addendum and
its approval of Customer, then upon receipt and processing by USBI of those
EMI Billing Records of Customer's qualified MTS telecommunication services
for which Customer desires financing (the "Processed EMI Billing Records"),
USBI shall purchase from Customer, and Customer shall sell, assign, transfer
and convey to USBI, all rights, title and interest of Customer in and to all
Customer Accounts contained on any Processed EMI Billing Records. The
purchase date for Processed EMI Billing Records shall be the date upon which
USBI submits Customer's EMI Billing Records to the LECs for billing and
collection (the "Purchase Date"). USBI shall promptly process Customer's EMI
Billing Records for collection in the same manner and with the same timing
that all EMI Billing Records are processed by USBI under its other customer
contracts.
3. Purchase Price; Financing and Payment.
a. USBI shall pay to Customer as the purchase price for the Customer
Accounts an amount equal to the aggregate face amount thereof of the
Customer's EMI Billing Records submitted to LECs by USBI for billing and
collection, less:
(i) All LEC charges, rejects, unbillables and bad debt deductions;
(ii) All credits and adjustments granted End Users;
(iii) All USBI processing fees and sales taxes, if applicable;
(iv) All financing Service Charges (as defined below); and
(v) Any and all losses, costs or expenses incurred by USBI in
processing or collecting the
Customer Accounts from all previously Processed EMI Billing
Records.
b. With regard to each transmission of Processed EMI Billing Records,
Customer requests that USBI finance under its Loan Agreement with its third-
party lender up to seven percent (70%) of the dollars arising from Customer's
Eligible Accounts (defined as those calls which are transmitted by USBI to
LECs for collection) on such Processed EMI Billing Records, the amount so
financed being the "Initial Payment" to be made to Customer for the Processed
<PAGE>
EMI Billing Records and to, be made within five (5) Business Days from the
Purchase Date. However, USBI reserves the right to periodically evaluate the
amount realized from Processed EMI Billing Records and shall have the right
to adjust the amount financed to provide adequate collateral for future
funding. As used herein, the term "Payment Date" shall be the date upon
which Customer is wired the Initial Payment for the Processed EMI Billing
Records, less any bank fees charged for such wire transfer.
C. USBI shall pay Customer the remaining balance of the purchase price
for the Processed EMI Billing Records monthly, net of USBI processing fees,
the service charge or other costs and expenses related to processing or
collecting for the Processed EMI Billing Records being settled. If a
remittance from a LEC is insufficient to pay the aforementioned fees and
costs, Customer shall be responsible therefore, and USBI shall have the
right, but not as its sole remedy, to deduct such amount from the Initial
Payment of the next EMI Billing Records being purchased, or from the
receivables generated from subsequent processing of records for Customer.
4. Service Charge. With respect to each Initial Payment, Customer
agrees to pay to USBI, in addition to the billing and collection processing
fees set forth in the Customer Contract, a service charge ("Service Charge")
at a fluctuating rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate (as hereinafter defined) or (b) a rate
("Contract Rate"), calculated on the basis of the actual days elapsed but
computed as if each year consisted of 360 days, equal to the sum of (i) the
Index Rate (as hereinafter defined) plus (ii) four percent (4.0%). Each
change in such Service Charge will become effective without notice to
Customer on the effective date of each change in the Maximum Rate or the
Index Rate, as the case may be. The term "Index Rate" as used herein, shall
mean a fluctuating interest rate per annum at all times equal to the "Prime
Rate" published in the "Money Rates" table in The Wall Street Journal from
time to time, and if multiple prime rates are published, the highest such
rate. The term "Maximum Rate," as used herein, shall mean at the particular
time in question, the maximum rate on interest which, under applicable law,
may then be charged on the Initial Payment. If such maximum rate of interest
changes after the date hereof, the Maximum Rate shall be automatically
increased or decreased, as the case may be, without notice to Customer from
time to time as of the effective date of each change in such maximum rate.
If applicable law ceases to provide for such maximum rate of interest, the
Maximum Rate shall be equal to eighteen percent (18%) per annum. The Finance
Period shall start on the Payment Date and shall be the entire period of
time until USBI recoups the full amount of the Initial Payment from payments
made by LECs to USBI for Eligible Accounts from the Processed EMI Billing
Records or by payments made by customer.
<PAGE>
5. Financing Statements. Customer hereby grants to USBI a first lien
security interest in all of the following, whether presently existing or
hereafter acquired or created, and all proceeds, products, returns,
additions, successions, and substitutions with regard thereto: accounts,
general intangibles, contract rights, chattel paper, documents (including
without limitation, computer records), equipment, inventory, goods, money
fixtures and other assets, including but not limited to the Customer
Accounts and those accounts not acquired by USBI, and agrees to execute and
deliver to USBI duly executed UCC-1 Financing Statements, together with any
and all other necessary instruments, assignments or documents, and agrees to
take such other action as may be required to perfect or continue the
perfection of USBI's first lien security interest in all such assets.
Customer hereby grants to USBI a first lien security interest in and right
of offset with respect to all Customer Accounts to secure all obligations of
Customer to USBI. Customer hereby grants USBI a limited power of attorney to
enforce USBI's right arising under this Agreement and Article 9 of the
Uniform Commercial Code.
6. Reliance. Customer acknowledges that USBI's third-party lender is
relying on the agreements, representations and warranties of Customer contained
in this Addendum in determining whether to provide financing to USBI for the
benefit of Customer.
7. Representations and Warranties. Customer represents and warrants to
USBI with respect to each Customer Account that:
a. Each account receivable assigned and sold to USBI is a genuine
receivable of the Customer, is valid in all respects, is what it purports to
be; and is not evidenced by a judgment;
b. Each account receivable assigned and sold to USBI arises out of
the completed delivery of qualified MTS telecommunication services in the
ordinary course of Customer's business and in accordance with
the terms and conditions of any contracts or other documents
relating thereto;
C. Each account receivable assigned and sold to USBI is for a
specific amount due and owing as reflected on the detailed EMI Billing
Records covering such Customer Account provided by Customer to
d. Such Customer Account is not subject to any offset, lien, deduction,
defense, dispute, counterclaim or any other adverse condition, is absolutely
owing to Customer, and is not contingent in any respect or for any reason
except matters for which discounts, credits or allowances are granted by
Customer in the ordinary course of business consistent with past practices;
<PAGE>
e. Customer has not made any agreement with any End Users thereunder
for any deduction thereof, except discounts, credits or allowances which are
granted by Customer in the ordinary course of business;
f. There are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the amount reflected on any EMI Billing Records
thereof,
g. To the best knowledge and belief of the Customer, each End User
generating any Customer Account
(i) had the capacity to contract at the time any contract or
other document relating to the Customer Account was executed and (ii) is
solvent;
h. Customer has no knowledge of any fact or circumstance which
would impair the validity or collectability by Customer of the Customer
Account, and to the best of Customer's knowledge, there are no proceedings or
actions which are
threatened or pending against the End Users thereunder which might result in
any material adverse change in such End User's financial condition or the
collectability of such Customer
Account;
i. All supporting documents and other evidence of Customer
Accounts delivered to USBI are complete, correct, valid and enforceable in
accordance with their terms, and all signatures and endorsements that appear
thereon are genuine, and all signatories and endorsers have full capacity to
contract; and
Barring gross negligence or fraud, USBI shall not be liable for
any damages in connection with or relating to the services to be provided
hereunder, including, but not limited to, special, indirect or consequential
damages.
9. Financial Statements Inspection. Customer shall furnish USBI annual and
quarterly financial statements and other financial information as may be
requested by USBI (as set forth in the attached Exhibits or as requested by
its third-party lender). Financial statements shall be compiled, reviewed or
audited [as required] in compliance with GAAP (Generally Accepted Accounting
Principals) by an independent accounting or auditing firm. Customer will
keep USBI current on this requested financial information for as long as
this Addendum is in effect.
j. No Customer Account is subject to any prohibition or
limitation upon assignment.
8. Limitation of Liability. Barring gross negligence or fraud, USBI shall
not be liable for any damages in connection with or relating to the services
to be provided hereunder, including, but not limited to special, indirect or
consequential damages.
9. Financial Statements Inspection. Customer shall furnish USBI
annual and quarterly financial statements and other financial information as
may be requested by USBI (as set forth in the attached Exhibits or as
requested by its third-party lender). Financial statements shall be
complied, reviewed or audited [as required] in compliance with GAAP
(Generally Accepted Accounting Principals) by an independent accounting or
auditing firm. Customer will keep USBI current on this requested financial
information for as long as this Addendum is in effect.
<PAGE>
10. Initial Processing Costs. One thousand five hundred dollars
($1,500) will be deducted from the initial (first) Processed EMI Billing
Record's settlement payments for the initial processing costs incurred and
to be incurred by USBI. This expense is subject to an increase dependent
upon the difficulty in handling the priority position of Customer's existing
lender(s).
11. Construction. This Addendum shall be governed by and construed
under the laws of the State of Texas. The provisions hereof are severable,
and the invalidity or unenforceability of any provision shall not affect or
impair the remaining provisions, which shall continue in full force and
effect. This Addendum shall be binding upon Customer, its successors and
assigns.
12. Maximum Rate. This Addendum and the Customer Contract are intended
to be performed in accordance with, and only to the extent permitted by, all
applicable usury laws. If any provision hereof or of the Customer Agreement
or the application thereof to any person or circumstance shall, for any
reason and to any extent, be invalid or unenforceable, neither the application
of such provision to
any other person or circumstance nor the remainder of the agreement in which
such provision is contained -shall be affected thereby and shall be enforced
to the greatest extent permitted by law. It is expressly stipulated and
agreed to be the intent of USBI to at all times comply with the usury and
other applicable laws now or hereafter governing the amounts payable under
this addendum and the Customer Contract (the "Customer Amounts"). If the
applicable law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under this Addendum or the Customer
Contract, or contracted for, charged, taken, reserved or received with
respect to the Customer Amounts, or if any payment by Customer results in
Customer having paid any amount that is determined to constitute interest in
excess of that permitted by law, then it is the express intent of Customer
and USBI that all excess amounts theretofore collected by USBI be refunded
to Customer, and the provisions of this Addendum and the Customer Contract
immediately be deemed reformed and the amounts thereafter collectable
hereunder and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder or
thereunder. All sums paid, or agreed to be paid, by Customer for the use,
forbearance, detention, taking, charging, receiving or reserving of the
Customer Amounts or arising under or pursuant to this Addendum and the
Customer Contract shall, to the maximum extent permitted by applicable law,
be amortized, prorated, allocated and spread throughout the full term
thereof until payment in full so that such sums on account of such Customer
Amounts do not exceed the usury ceiling from time to time in effect and
applicable to such Customer Amounts. In no event shall TEX.REV.CIV.STAT.ANN.
art. 5069 Ch. 15 apply to this Addendum. To the extent that TEX.REV.CIV.STAT.
ANN.art. 5069-1.04, as amended, is applicable to this Addendum, the
<PAGE>
"indicated rate ceiling" specified in such article is the applicable
ceiling; provided that, if any applicable law permits greater interest, the
law permitting the greatest interest shall apply.
13. Termination. This Agreement may be terminated only upon thirty
(30) days written notice by either USBI or Customer. Termination by Customer
does not terminate the Customer Contract. At USBI's discretion, its
termination of this Addendum may terminate the Customer Contract.
IN WITNESS WHEREOF, Customer and USBI have executed this Addendum as of
the day and year first written above.
Acknowledged, Accepted and Approved:
CUSTOMER:
GenX Communications, LLC dba Preferred Disc. Plan
BY: /s/Paul Sandhu DATE: 8/5/98
Paul Sandhu President
(Printed or Typed Name) TITLE
Acknowledged, Accepted and Approved:
Billing Concepts, Inc.
dba U.S. Billing:
BY: /s/Alan W. Saltzman DATE: 9-9-98
Alan W. Saltzman
President and
Chief Operating Officer
WORLDCOM NETWORK SERVICES, INC.
CLASSICITRANSCENDTm SWITCHED SERVICES
PROGRAM ENROLLMENT TERMS
These Program Enrollment Terms (the "PET") are made by and between WorldCom
Network Services, Inc. ("WorldCom") and GENX, LLC/DBA: PREFERRED DISCOUNT
PLATCustomer") and are a part of their Telecommunications Services Agreement
for Switched Services. Capitalized terms not defined herein shall have the
meaning ascribed to them in the TSA, the Service Schedule or the applicable
Rate and Discount Schedule.
1. SERVICE TERM:
(A) The Service Term shall commence as of the Effective Date (as described
below) and shall continue for a period of THIRTY-SIX (36 months (the
"Service Term"). Upon expiration of the Service Term, the Switched Services
in question will continue to be provided pursuant to the same terms and
conditions as are then in effect (including without limitation, the
applicable rates, discounts and commitments, if any), subject to
termination- by either party upon thirty (30) days prior written notice to
the other party. WorldCom will not be obligated to accept any Service
Request under this Agreement if Customers initial Service Request is (i) not
submitted by Customer within thirty (30) days of the Effective Date of this
Agreement, and (ii) not subject to a Requested Service Date within ninety
(90) days of the Effective Date.
(B) For purposes of this Agreement, the appropriate Effective Date as
determined below will be filled in by WorldCom where provided above. If
Customer has an existing switched services agreement with a member of the
WorldCom Group (as defined in Subsection 24(A) of the TSA), the "Effective
Date" will be the 1st day of the month following the later of (i) twenty-one
(21) days after this Agreement has been fully executed by both parties, or
(ii) Customer has received a satisfactory credit review and approval from
WorldCom's Credit Department pursuant to Subsection 6(A) of the TSA, and all
security documentation, if any, required by WorldCom has been properly
executed and delivered to WorldCom (collectively, the "Credit Review"). If
Customer does not have an existing switched services agreement with a member
of the WorldCom Group, the "Effective Date" will be the date this Agreement
has been fully executed by both parties and the Credit Review has been
completed.
2.CUSTOMER'S MINIMUM REVENUE COMMITMENT: Commencing with the first day of
the 7th billing period [e.g., 71, 13tth, etc.] following the Effective Date
(as determined under Section 1 above) and continuing through the end of the
Service Term (including any extensions thereto)(the "Commitment Period"),
Customer agrees to maintain, on a take-or-pay basis, Monthly Revenue (as
defined in the applicable Rate and Discount Schedule) of at least $10,000.
00 ("Customer's Minimum Revenue Commitment"). In the event Customer is not
maintaining TERMINATION Service or TOLL FREE ORIGINATION Service but is
maintaining other Services from WorldCom hereunder (e.g., SWITCHED ACCESS
Service, DEDICATED ACCESS Service or TRAVEL CARD Service), Customer's
Minimum Revenue Commitment will be the greater of (i) $10,000, or (ii) the
amount stated above.
<PAGE>
3.DEFICIENCY CHARGE: In the event Customer does not maintain Customer's
Minimum Revenue Commitment in any month during the Commitment Period
(regardless of whether Customer has commenced using any or all of the
Switched Services described herein), then for those month(s) only, Customer
will pay WorldCom the difference between Customer's Minimum Revenue
Commitment and Customer's actual Monthly Revenue (as described in the
applicable Rate and Discount Schedule) (the "Deficiency Charge"). The
Deficiency Charge will be due at the same time payment is due for Service
provided to Customer, or immediately in an amount equal to Customer's
Minimum Revenue Commitment for the unexpired portion of the Service
Term, if WorldCom terminates this Agreement based on Customer's default.
IN WITNESS WHEREOF, the parties have executed these Classic/TRANSCENDTM
Switched Services Program Enrollment Terms.
WORLDCOM NETWORK SERVICES, INC. GENX, LLC/DBA: PREFERRED DISCOUNT PLAN
By:/s/ Mitch Linder By:/s/ Paul Sandhu
(Signature) (Signature)
Mitch L. Linder PAUL SANDHU
(Print Name) (Print Name)
DIRECTOR, WESTERN REGION PRESIDENT & CHIEF EXECUTIVE OFFICER
(Title) (Title)
<PAGE>
WORLDCOM NETWORK SERVICES, INC.
TRANSCEND TM SWITCHED SERVICES
RATE AND DISCOUNT SCHEDULE
This Rate and Discount Schedule is made by and between WorldCom Network
Services, Inc. ("WorldCom") and GENX LLC/DBA: PREFERRED DISCOUNT
("Customer") and is a part of their Telecommunications Services Agreement
for Switched Services. Capitalized terms not defined herein shall have the
meaning ascribed to them in the TSA, the PET or the Service Schedule. NOTE:
ANY MODIFICATIONS, ADDITIONS OR DELETIONS FROM THIS RATE AND DISCOUNT
SCHEDULE WILL NOT BE EFFECTIVE UNLESS SPECIFICALLY SET FORTH IN THE PET.
1. RATES
Rates for Switched Services hereunder will be generally comprised of
the following charges, if applicable: (i) local exchange company ("LEC")
charges (including without limitation, access charges, egress charges, SMS
800 queries etc.), (ii) Domestic Transport Charges (i.e., transport within
the continental United States), (iii) Extended Location Transport Charges,
(iv) International Transport Charges, (v) Canada and Mexico Transport
Charges, and (vi) surcharges (e.g., directory assistance) as such charges
are further defined herein.
(A)
DOMESTIC TRANSPORT CHARGES.
(i) Domestic Transport Charges"are based on the location (i.e.,
Tier A, Tier B or
Tier C) of the originating and terminating local access transport areas
("LATAs")
or the applicable state (excluding TRAVEL CARD Service). A
list of the LATAs
comprising Tier A, Tier B and Tier C LATAs is shown on
Schedule "1" attached
hereto and incorporated herein by reference which Schedule 1"
may be amended
from time to time by WorldCom. The Domestic TrRnsport Charge
will be based
upon the number of originating seconds, and will be assessed
on (i) all completed
or answered calls, and (ii) all incomplete' transport
billable calls. The Transport
Charge for each Tier (the "Tier Charge") relative to each
Service is shown below:
(ii) The Tier Charges for Carrier TERMINATION Service calls
(regardless of jurisdiction or time of day)
within the continental United States or from the continental
United States to an Extended Location
or International location are shown below. The Domestic
Transport Charge will be comprised of the
applicable Tier Charge based on the Tier to which the call is
terminated. With respect to TERMINATION
Service calls to Alaska, Hawaii, Puerto Rico and the United
States Virgin Islands (hereinafter an
"Extended Location"), or to an International location
(including Canada and Mexico), the Domestic
Transport Charge will be comprised of the applicable
terminating Tier Charge which will be deemed to be
Tier A.
Tier A $0.0230
Tier B $0.0270
Tier C $0.0300
<PAGE>
(ii The Tier Charges for Carrier TOLL FREE ORIGINATION Service
calls (regardless of jurisdiction or time of day) within the
continental United States are shown below. The Domestic
Transport Charge will be comprised of the applicable Tier
Charge based on the Tier from which the call is originated.
With respect to TOLL FREE ORIGINATION Service calls from an
Extended Location or from Canada, the Domestic Transport
Charge will be comprised of the applicable originating Tier
Charge which will be deemed to be Tier A.
Tier A $0.0230
Tier B $0.0270
Tier C $0.0300
(iv) The Tier Charges for Interstate SWITCHED ACCESS Service and DEDICATED
ACCESS Service calls within the continental United
States are shown below. With
respect to SWITCHED ACCESS Service and DEDICATED ACCESS
Service calls
within the continental United States, the Domestic
Transport Charge will be
comprised of an originating Tier Charge and a
terminating Tier Charge.
Tier A Tier B Tier C
Tier A $0.0300 $0.0325 $0.0350
Tier B $0.0325 $0.0350 $0.0375
Tier C $0.0350 $0.0375 $0.0400
With respect to SWITCHED ACCESS calls and DEDICATED
ACCESS calls to an
Extended Location, or to an International location
(including Canada and Mexico), the Domestic
Transport Charge will be comprised of the applicable
originating Tier Charge and the terminating Tier
Charge which will be deemed to be Tier A. With respect
to Toll Free calls (and 1+ calls from
Hawaii only) from an Extended Location, the Domestic
Transport Charge will be comprised of the
originating Tier Charge which will be deemed to be Tier
A and the applicable terminating Tier Charge.
(v)The Tier Charges for Intrastate SWITCHED ACCESS Service
and DEDICATED ACCESS Service calls
are shown below.
STATES TIER CHARGE
California, California (Intra-LATA), Florida $0.0250
New York, Texas
Alabama, Arizona, Arkansas, Colorado $0.0350
Connecticut, Idaho, Indiana, Iowa, Kansas,
Louisiana, Maine, Massachusetts,
Minnesota, Missouri, Montana, Nebraska
New Jersey, New Mexico, North Carolina,
North Dakota, Oregon, Rhode Island,
Tennessee, Utah, Vermont, Washington,
West Virginia
(vi) With respect to Directory Assistance calls from the continental United
States to
Canada, the Domestic Transport Charge will be comprised of the applicable
originating Tier Charge and the terminating Tier Charge which will be
deemed to
be Tier A.
(B) EXTENDED LOCATION TRANSPORT CHARGES.
(i) With respect to 1+ calls terminating to an Extended Location,
the following
"Extended Location Transport Charges" will apply
in addition to. any applicable
Domestic Transport Charge as described in
Subsection 1.(A) above. [Note: Egress
Charges associated with calls to an Extended
Location are included in the
Extended Location Transport Charges.
Extended Location Extended Location Transport Charge
Alaska $0.1300
Hawaii $0.1200
Puerto Rico $0.1300
US Virgin Islands $0,1300
(ii) With respect to Toll Free calls (and 1+ calls from Hawaii only)
originating from an
Extended Location, the following Extended Location
Transport Charges will apply
in addition to any applicable Domestic Transport Charge
as described in
Subsection I.(A) above. [Note: Access Charges associated
with calls from an
Extended Location are included in the Extended Location
Transport Charges.]
[NOT SUBJECT TO DISCOUNT]
Extended Location Extended Location Transport Charge
Alaska $0.1600
Hawaii $0.0840
Puerto Rico $0.1100
US Virgin Islands $0.1400
(c) CANADA AND MEXICO TRANSPORT CHARGES [NOT SUBJECT TO DISCOUNT].
(i) With respect to 1+ calls terminating to Canada and Mexico (including
directory
assistance calls to Canada), the
following "Canada and Mexico Transport
Charges" will apply in addition to
any applicable Domestic Transport Charge as
described in Subsection I.(A) above.
[Note: Egress Charges associated with calls
to Canada and Mexico calls are
included in the Canada and Mexico Transport
Charge.)
Location
Canada
Mexico (Band 1 and 2)
Mexico (Bands 3, 4 and 5)
Mexico (Bands 6, 7 and 8)
Canada and Mexico
Transport Charge
$0.0597
$0.1600
$0.2200
$0.3700
(ii) With respect to Toll Free calls originating from Canada, the
following Canada
Transport Charges will apply in addition to any
applicable Domestic Transport
<PAGE>
Charge as described in Subsection 1.(A) above. [Note: Access Charges
associated with calls from Canada, are included in the Canada Transport
Charge.]
Location
Canada
Canada
Transport Charge
$0.1850
(D) INTERNATIONAL TRANSPORT CHARGES [NOT SUBJECT TO DISCOUNT].
Commencing with the Effective Date described in Section
1 of the PET, with respect to calls
terminating to an International location, the
"International Transport Charges" will be deemed to correspond
with the level of applicable charges shown on Schedule
"2" attached hereto and incorporated herein by
reference based on Customers Commitment described in the
PET (rounded down to the nearest
International Revenue Level) which International
Transport Charge will apply in addition to any
applicable Domestic Transport Charge as described in
Subsection I.(A) above. [Note: Egress charges
associated with calls to International Locations are
included in the International Transport Charges.]
(E) lEC CHARGES.
(i) "LEC Charges" include Access Charges (as defined herein), Egress
Charges (as
defined herein), SMS 800 queries, and presubscribed
interexchange carrier
charges ("PICC Charge") assessed by a local exchange carrier
("LEC") relating
to Customer's traffic but only if WorldCom is directly billed
by the LEC for such
PICC Charge. "Access Charges" and "Egress Charges" are per
minute costs
determined by WorldCom between the applicable WorldCorn point
of presence
and the terminating or originating point, and rated at the
applicable end office
(NPA-NXX) level using switched tandem access or direct end
office trunking rates
and charges (excluding TRAVEL CARD Service). WorldCorn may also
charge
Customer for other charges it is assessed by any LEC or the SMS
800 database
administrator for 800 number service (e.g., National Exchange
Carrier Association
(NECK) charges, etc.). Directory Assistance calls will only be
assessed the
applicable Access Charge. Customer will also pay WorldCom a
five percent (5%)
administrative charge (the "Administrative Fee") which is
assessed on the total
of Customer's monthly LEC Charges. The NPA-NXX is generally
identified by the
end user's automated number identification ("ANI"); provided,
however, in the
event there is not an identified originating ANI, the NPA-NXX
will be assigned
based on WorldCom's originating trunk group. The terminating
NPA-NXX will be
identified by the dialed number; provided, however, in the
event there is not an
identified dialed number, the NPA-NXX will be assigned based
on WorldCom's
terminating trunk group.
(ii) The per minute rates utilized by WorldCom in
determining the applicable Access
Charges and Egress Charges are described in the LEC's
applicable tariffs, are
based on WorldCom's determination of end user ownership
and type, and are
exclusive of any discounts based on minute or term
commitments. The Access
Charges and Egress Charges as determined by WorldCom
are set forth in the
"LEC Tariff Database". The LEC Tariff Database will be
updated periodically to
take into account any tariff changes by the various LECs
("Tariff Changes").
Tariff Changes received by WorldCom on or before the
fifteenth (15th) day of a
month and effective as of the first day of the following
month or thereafter, will be
<PAGE>
incorporated into the LEC Tariff Database by the first
day of the month following
WorldCom's receipt thereof or the date such Tariff Changes are effective,
whichever is later.
(iii) The Access Charges and Egress Charges may include, without
limitation, the
components and elements described below; provided,
however, the terminology
with respect to these components and elements may vary
among LECs. The
Access Charges and Egress Charges will be calculated
taking into effect whether
the call is interstate, intrastate or intraLATA, the
direction of the call (i.e., whether
originating or terminating), whether the call is
premium or nonpremium (if
applicable), the mileage, the meet point (if
applicable) and the call type (i.e., 1+ or
800). WorldCom may also apply any other rating
elements which are assessed by
the LECs or third parties (e.g., regulatory fee
assessments, standard or non
standard LEC access components) whether such charges
are based per access
line, per business line, per market share, per call,
etc. (e.g., the Arkansas Carrier
Common Line charge which is assessed by a regulatory
body and allocated to the
LECs). With respect to those LECs utilizing a "time of
day" differential (i.e.,
Day/Nonday, Day/Evening/Night, etc.), WorldCom will
only use the "Day" rate
provided by the LECs.
Component Elements
Carrier Common Line Obligating
Terminating
End Office Local Switching
Equal Access Recovery
Local Transport Termination
Tandem Switching
Facility
Interconnection
Entrance Facility DS-3 (month-to-month electrical)
Multiplexer (3/1 month-to-month)
(iv) The Access Charges and Egress Charges are generally applied on a per
minute
basis except for (i) the Local Transport Facility
charge which is based on minutes
and mileage, and (ii) the Entrance Facility rate and
Multiplexer rate which are flat
monthly rates which are converted by WorldCom to a cost
per minute basis by
dividing the applicable DS-3 flat rate or the
multiplexer rate as found in the
applicable LEC tariff by 6,160,000. WorldCom reserves
the right to convert any
other flat rates assessed by the LECs into per minute
charges.
Example: Assume the applicable LEC tariffed rate (i)
for entrance facility charges is $2,350 per DS-3,
and (ii) for muxing is $500 per 3/1 mux. The Entrance
Facility rate will be $.00038149 [$2,350/6,160,000]
and the Multiplexer rate will be $.00008117
[$500/6,160,000].
<PAGE>
(v) Access Charges will commence when the call is
originated and will end when the call is
disconnected. Customer will be assessed Access Charges
even if a call is not completed. Egress
Charges will commence when the call is answered and
will end when the call is disconnected. Access
Charges and Egress Charges will not apply with respect
to dedicated access originations or
terminations, respectively.
(F) TRANSCENDENT TM MANAGER.
WorldCom agrees to provide Customer, at no cost to
Customer, a windows-based software
program entitled "TranscendTm Manager" which will allow
the Customer to "query" the LEC Tariff
Database described in Subpart (ii) above.
(G) DIRECTORY ASSISTANCE SURCHARGE:
I Directory assistance calls in the continental United
States will be assessed a surcharge of $0.4300 in
addition to any applicable Domestic Transport Charge as
described in Subsection I.(A) above. Directory
assistance calls to Canada will be assessed a surcharge
of $0.6000 in addition to any applicable
Domestic Transport Charge as described in Subsection
I.(A) above and the Canada Transport Charge as
described in Subsection I.(C) above.
(H) TRAVEL CARD SERVICE RATES:
JURISDICTION RATE PER MINUTE
BASIC INTERSTATE
Within the contiguous United States $0.1200 Day/Nonday
BASIC INTERSTATE Extended
* 48 contiguous United States to Alaska, Hawaii $0.1450 Day/Nonday
Puerto Rico and the United States Virgin Islands
*Hawaii to 48 contiguous United States $0.1550 Day$0.1470 Nonday
*Alaska to 48 contiguous United States $0.2728 Day$0.2651 Nonday
*Puerto Rico to contiguous United States $0.1830 Day$0.1783 Nonday
BASIC INTERNATIONAL*
48 contiguous United States to Internationallocations
SEE Schedule 4* (SWITCHED
(excluding Canada and Mexico)
ACCESS Service Rates)
* 48 contiguous United States to Canada
$0.1300 Day/Nonday
* 48 contiguous United States to Mexico
SEE Schedule 5 (SWITCHED
ACCESS Service Rates)
* Canada to 48 contiguous United States
$0.2450 Day/Nonday
ENHANCED SEE Schedule 6
* Based on Customer's Minimum Revenue Commitment
described in Section 2 of the PET rounded down to the
nearest level.
<PAGE>
TRAVEL CARD Service Discount Schedule(a):
<TABLE>
SERVICE TERM(b)
<S> <C> <C> <C> <C>
Monthly Revenue MTM 1-YR 2-YR 3-YR
$ 0-$ 49,999 0.0% 0.5% 1.0% 1.5%
$ 50,000 - $ 99,999 1.0% 1.5% 2.0% 3.0%
$100,000 - $249,999 1.5% 2.0% 2.5% 4.0%
$250,000 - $499,999 2.0% 2.5% 3.0% 5.0%
$500,000 - $749,999 3.5% 4.0% 6.0% 8.0%
S750,000 - $999,999 4.5% 5.5% 8.0% 10.0%
$1,000,000+ 5.5% 7.0% 10.0% 12.0%
</TABLE>
(a) If Customer's Minimum Commitment as
described in Section 2 of the PET is
at least S50,000, all of the
percentages shown in the TRAVEL CARD Service
Discount Schedule above will be
increased by the following amounts based
on Customers Minimum Commitment.
If Customers Minimum Revenue
Commitment is at least
$ 50,000
$ 100,000
$ 250,000
$ 500,000
$ 750,000
$1,000,000
The applicable percentages
will be increased by
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
(b) For purposes of this Section (H), the
applicable Discount column is based on the
number of months contained in the Service Term
divided by 12. If the number of months is less
than 12, the month-to-month (MTM) Discounts
shall apply. If the product of the division is
equal to or greater than 1 but less than 2, the
1-Year Discounts apply; if the product of the
division is equal to or greater than 2 but less
than 3, the 2-Year Discounts apply; and, if the
product of the division is equal to or greater
than 3, the 3-Year Discounts apply.
11. DISCOUNTS
(A) For purposes of this Agreement, Customer's
"Monthly Revenue" will be
comprised of Customers gross
(i.e., prior to the application of any discounts)
(i) Transport Charges (i.e.,Domestic,
Extended, Canada, Mexico and International);
(ii) LEC Charges plus the Administrative
Fee described in Subsection 1.(E)(i) above;
(iii) Directory Assistance surcharges
described in Subsection l.(G) above;
(iv) TRAVEL CARD Service charges
described in Subsection L(H) above;
(v) Customer's measured usage charges for
International Toll Free Service (ITFS)
and Universal International Free
Phone Number Service (UIFN) from WorldCom;
(vi) three. (3) times Customer's first
$300,000 of monthly recurring private line
interexchange service charges
(including both domestic and
international) from WorldCom, two
(2) times Customer's second $300,000 of
monthly recurring private line
interexchange service charges (including both
domestic and international) from
WorldCom, and Customer's monthly recurring
private line interexchange service
charges (including both domestic and
international) from WorldCom in
excess of $600,000; and, (iv) Monthly Port
Charges, Monthly CIR Charges and
Monthly NNI Charges, if any, as are
specifically described in an
agreement for FrameRelay Services between
WorldCom and Customer. Customer's
Monthly Revenue will not
include any pro rata charges,
ancillary or special feature charges, such as,
Authorizationcodes or CDR Tapes, or
any other charges other than those
identified by the relevant WorldCom
invoice as monthly recurring private line
interexchange service charges or
the switched service charges specifically
mentioned in this Subsection (A).
<PAGE>
(B) Commencing with the Effective Date and
continuing through the end of the
Service Term (including any
applicable extensions thereto), Customer's discount
percentage (the "Discount") will be
determined by the applicable Discount
Schedules shown in Subsections (C)
and (D) below taking into account any
increase as described in
Subsection (E) below. Throughout the Service Term,
Customer will automatically receive
the next higher (or lower) Discount when
Customer's eligible Monthly Revenue
reaches the next level (or falls below a level
which in no event shall be less
than Customer's Minimum Revenue
Commitment, if any, described in
the PET). Customer will receive the
percentage shown in the applicable
Discount Schedule associated with
Customer's Minimum Revenue
Commitment commencing with the Effective
Date regardless of Customer's
actual Monthly Revenue.
(C) DISCOUNT SCHEDULE - (i) TERMINATION
Service,
(ii) TOLL FREE ORIGINATION Service, and
(iii) SWITCHED ACCESS
Service and DEDICATED ACCESS
Service to Extended Locations.
<TABLE>
SERVICE TERM(a)
Monthly Revenue MTM 1-YR 2-YR 3-YR
<S> <C> <C> <C> <C>
$ 0-$ 49,999 0.0% 1.0% 2.0% 3.0%
$ 50,000 - $ 99,999 2.0% 3.0% 4.0% 5.0%
$100,000 - $249,999 3.0% 5.0% 7.0% 9.0%
$250,000 - $499,999 4.0% 7.0% 10.0% 13.0%
$500,000 - $749,999 6.0% 10.0% 13.0% 17.0%
$750,000 - $999,999 8.0% 12.0% 16.0% 21.0%
$1,000,000+ 10.0% 15.0% 20.0% 25.0%
</TABLE>
(a) For purposes of this Subsection (C), the
applicable Discount column is
based on the number of months contained in
the Service Term divided by 12.
If the number of months is less than 12,
the month-to-month (MTM) Discounts
shall apply. If the product of the
division is equal to or greater than 1 but less
than 2, the 1 -Year Discounts apply; if
the product of the division is equal to or
greater than 2 but less than 3, the 2-Year
Discounts apply; and, if the product of the
division is equal to or greater than 3,
the 3-Year Discounts apply.
(D) DISCOUNT- SCHEDULE -__SWIT - CHED ACCESS
Service (1+ and Toll Free) and
DEDICATED ACCESS Service (1+ and Toll Free)
within the continental United
States.
SERVICE TERM(a)
<TABLE>
Monthly Revenue MTM 1-YR 2-YR 3-YR
<S> <C> <C> <C> <C>
$ 0-$ 49,999 0.0% 1.0% 2.0% 4.0%
$ 50,000 - $ 99,999 2.0% 3.0% 4.0% 8.0%
$100,000 - $249,999 4.0% 6.0% 8.0% 12.0%
$250,000 - $499,999 6.0% 8.0% 12.0% 16.0%
$500,000 - $749,999 10.0% 12.0% 16.0% 20.0%
$750,000 - $999,999 13.0% 16.0% 20.0% 24.0%
$1,000,000+ 16.0% 20.0% 24.0% 29.0%
</TABLE>
(a) For purposes of this Subsection (D), the
applicable Discount column is based
on the number of months contained in the
Service Term divided by 12. If
the number of months is less than 12, the
month-to-month (MTM) Discounts
shall apply. If the product of the
division is equal to or greater than 1 but less
than 2, the 1 -Year Discounts apply; if
the product of the division is equal to
or greater than 2 but less than 3, the
2-Year Discounts apply; and, if the product of
the division is equal to or greater than
3, the 3-Year Discounts apply.
(E) If Customer's Minimum Commitment (as described
in the PET) is at least the
amount shown in the Schedule below, all of the
respective percentages in the
applicable Discount
<PAGE>
Schedules (depending on the Service Term
selected by Customer) will be increased
by the respective amounts shown below. Customer
will receive the percentage
shown in the Discount Schedule associated with
Customer's Minimum Commitment
and Service Term commencing with the Effective
Date regardless of Customer's
actual Monthly Revenue Level.
EXAMPLE: Assume Customers Minimum Commitment is
$750,000 and the
Service Term is thirty-six (36) months.
Commencing with the Effective
Date and continuing through the end of the
Service Term (including any applicable
extensions thereto), Customer's applicable
Discount percentage (i) for the Services
described in Subsection (C) above will be 25%
(21% + 4%) if Customers actual
Monthly Revenue is between $750,000 and
$999,999, inclusive; and 29%
(25% + 4%) if Customer's actual Monthly Revenue
is equal to or greater than
$1,000,000, and (ii) for the Services described
in Subsection (D) above will be 29%
(24% + 5%) if Customer's actual Monthly Revenue
is between $750,000 and
$999,999, inclusive; and 35% (29% + 6%) if
Customers actual Monthly Revenue is
equal to or greater than $1,000,000.
(1) -DISCOUNT SCHEDULE - (i) TERMINATION Service,
(ii) TOLL FREE
ORIGINATION Service, and (iii) SWITCHED ACCESS
Service and DEDICATED
ACCESS Service to Extended Locations only.
If Customers Minimum
Commitment is at least
$ 50,000
$ 100,000
$ 250,000
$ 500,000
$ 750,000
$1,000,000
The applicable percentages
will be increased by
0.5%
1.0%
2.0%
3.0%
4.0%
5.0%
(2) DISCOUNT SCHEDULE - SWITCHED ACCESS Service (1+
and Toll Free) and
DEDICATED ACCESS Service (1+ and Toll Free).
If Customer's Minimum
Commitment is at least
$ 50,000
$ 100,000
$ 250,000
$ 500,000
$ 750,000
$1,000,000
The applicable percentages
will be increased by
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Ill. APPLICATION OF DISCOUNTS
(A) The Discount will only be applied to Customer's
Domestic Transport Charges as
described in Subsection 1.(A) above and
Customer's Extended Transport
Charges to Extended Locations
unless otherwise noted herein.
(B) During the Service Term, accumulated credits
derived from the applicable
Discount will beapplied in arrears
commencing with the first day of the
month following the Effective
Date, that is, the Discount will be applied to
Customer's measured usage charges
for the preceding month (the
"Discount Period"). The initial
Discount Period shall include any
<PAGE>
partial calendar month following
Start of Service, or such other
time basis as may be mutually
determined by the parties.
(C) Each Discount will result in the
application of a credit obtained during the
Discount Period to the WorldCom
invoice to Customer relevant to the
billed measured Switched Service
for the calendar month next following the
completion of each Discount
Period, provided Customer has paid undisputed
charges (including any late fees,
if applicable) for that month and has not
otherwise been subject to a
Suspension Notice in accordance with the
TSA. Failure of Customer to
comply with the foregoing provision shall
entitle WorldCom to withhold any
credit due Customer for the Discount Period
in question until such charges
(including late fees) have been paid in full.
IN WITNESS WHEREOF, Customer has
initialed this TRANSCEND
TM SWITCHED SERVICES Rate and
Discount Schedule on the date first
written above.
GENEX, LLC/DBA: PREFERRED DISCOUNT PLAN
Customer's initials -
ATTACHMENTS:
Shedule 1 TIER A, TIER B and TIER C LATAs
Schedule 2 International Transport Charges
Schedule 3 Intrastate TRAVEL CARD Service Rates
Schedule 4 TRAVEL CARD Service International Rates
Schedule 5 TRAVEL CARD Service - Mexico Rate
Schedule 6 ENHANCED TRAVEL CARD Service Rates
WORLDCOM NETWORK SERVICES, INC.
CLASSIC/TRANSCENDTM SWITCHED SERVICES
SERVICE SCHEDULE
This Service Schedule is made by and between WorldCom Network Services, Inc.
("WorldCom") and GENX, LLC/DBA:PREFERRED DISCOUNT ("Customer') and is a part
of their Telecommunication Services Agreement for Switched Services. Neither
Customer nor WorldCom shall be obligated with respect to the Switched
Services described below, nor any other condition of such Switched Services
until Customer has submitted and WorldCom has accepted a Service Request
with respect to the particular Switched Service. Capitalized terms not
defined herein shall have the meaning ascribed to them in the TSA, the PET
or the applicable Rate and Discount Schedule.
1. SWITCHED SERVICES: During the Service Term of the Agreement, WorldCom
will provide the following Switched Services (all as more particularly
described herein), (i) to and from the locations below, and (ii) for the
charges and applicable discounts set forth in the applicable Rate and
Discount Schedule attached herewith:
(a) TERMINATION Service" which is WorldCom's termination of calls
received from Customer's Service Interconnection(s).
(b) "TOLL FREE ORIGINATION Service" which is the origination of Toll
Free calls by WorldCom and the termination of such calls to Customer's
Service Interconnection(s).
(C) "SWITCHED ACCESS Service" which is the origination (via individual
telephone access lines) and termination of calls solely over facilities
comprising the WorldCom network.
(d) "DEDICATED ACCESS Service" which is the origination and termination
of calls solely over facilities comprising the WorldCom network which
origination or termination is via dedicated access lines.
(e) "TRAVEL CARD Service" which is the origination (via Travel Card
Toll Free number access) and termination of calls solely over facilities
comprising the WorldCom network.
2. SERVICE INTERCONNECTIONS:
(a) In order to utilize (i) TERMINATION Service and TOLL FREE ORIGINATION
Service, one or more full time dedicated connections between Customer's
network and the WorldCom network at one or more WorldCom designated
locations ("WorldCom POP") must be established ("Carrier Service
Interconnections"), and (ii) DEDICATED ACCESS Service, one or more full time
dedicated connections between an End User's private branch exchange ("PBX")
or other customer premise equipment and the WorldCom network at one or more
WorldCom POP(s) must be established ("Dedicated Service Interconnections").
Each Carrier Service Interconnection and Dedicated Service Interconnection
shall be comprised of
<PAGE>
one or more dedicated access circuits, as the case may be. Carrier Service
Interconnections and Dedicated Service Interconnections are collectively
referred to as "Service Interconnections".
(b) The circuit(s) comprising each Service Interconnection to a WorldCom POP
shall be requested by Customer on the appropriate WorldCom Service Request.
Each Service Request will describe (among other things) the WorldCom POP to
which a Service Interconnection is to be established, the Requested Service
Date therefor, the type and quantity of circuits comprising the Service
Interconnection and any charges and other information relevant thereto, such
as, Customer's terminating or originating switch location, as the case may
be. Such additional information may be obtained from Customer or gathered by
WorldCom and recorded in Technical Information Sheets provided by WorldCom.
(c) Once ordered, and unless otherwise provided for in this TSA, Service
Interconnections or the circuits comprising each Service Interconnection may
only be canceled by Customer upon not less than thirty (30) days prior
written notice to WorldCom.
(d) With respect to a Carrier Service Interconnection, absent the automatic
number identification ("ANI") of the calling party, Customer shall provide
WorldCom with a written certification (the "Certification") of the
percentage of interstate (including international) and intrastate minutes of
use relevant to the minutes of traffic to be terminated in the same state in
which the WorldCom POP is located to which the Carrier Service
Interconnection is made. This Certification shall be provided by Customer
prior to Start of Service for any. Carrier Service Interconnection and may
be modified from time to time by Customer and subject to recertification
upon the request of WorldCom which requests shall not be made unilaterally
by WorldCom more than once each calendar quarter. Any such modification(s)
or Certification(s) shall be effective as of the first day of any calendar
month and following at least forty-five (45) days notice from Customer. In
the event Customer fails to make such Certification, the relevant minutes of
use will be deemed to be subject to the Intrastate Rates described in the
applicable Rate and Discount Schedule. In the event WorldCom or any other
third party requires an audit of WorldCom's interstate/intrastate minutes of
traffic, Customer agrees to cooperate in such audit at its expense and make
its call detail records, billing systems and other necessary information
reasonably available to WorldCom or any third party solely for the purpose
of verifying Customer's interstate/intrastate minutes of traffic. Customer
agrees to indemnify WorldCom for any liability WorldCom incurs in the event
Customers Certification is different than that determined by the audit.
(e) With respect to Carrier Service Interconnections, Customer shall be
solely responsible for establishing and maintaining each Carrier Service
Interconnection over facilities subject to WorldCom's approval. With respect
to Dedicated Service Interconnections, WorldCom will provision and maintain
local access facilities between the End User location (i.e., PBX) and the
WorldCom POP, subject to any LEC charges plus other applicable terms and
charges set forth in WorldCom's F.C.C. Tariff No. 5, however, Customer may
elect to be responsible for establishing each Dedicated Service
Interconnection over facilities subject to WorldCom's approval. Service
Interconnections shall only be comprised of DS-1 facilities unless otherwise
provided for in the Service Request and agreed to in writing by WorldCom. If
a Service Interconnection is proposed to be made via a local exchange
carrier, WorldCom will have the authority to direct Customer to utilize
WorldCom's entrance facilities or local serving arrangement ("LSA") with the
relevant local telephone operating company, and Customer will be subject to
a non-discriminatory charge therefor from WorldCom. The monthly recurring
<PAGE>
charge relevant to Customer's use of LSA capacity shall be subject to upward
adjustment by WorldCom from time to time which adjustment, if any, shall not
exceed the rate that otherwise would be charged for the equivalent switched
access capacity between the same points by the relevant local telephone
operating company pursuant to its published charges for the type of service
in question.
(f) If other private line interexchange facilities are necessary to
establish a Service Interconnection, and such facilities are requested from
WorldCom, such facilities will be provided on an individual case basis.
(g) Commencing with the second full calendar month following Start of
Service for each circuit comprising a Service Interconnection (i.e., both
Carrier Service Interconnections and Dedicated Service Interconnections) and
thereafter, Customer will maintain Switched Services measured usage charges
per DS-1 (or DS-1 equivalent circuit) of not less than $1,500 per calendar
month/billing period ("Minimum Monthly Usage"). In the event Customer fails
to obtain the required Minimum Monthly Usage for the circuits comprising
each Service Interconnection, WorldCom will charge and Customer will pay the
difference between the number of DS-1s times the Minimum Monthly Usage
(i.e., $1,500) and Customer's total Switched Services measured usage charges
for the circuit(s) comprising the Service Interconnection in question
("Minimum Usage Charge"). WorldCom TERMINATION Service and TOLL FREE
ORIGINATION Service minutes carried over the same Service Interconnection,
if any, shall be included in determining if Customer has met the Minimum
Monthly Usage requirement.
Example: Assume Customers actual Switched Services measured usage charges
for 2 DS-1s comprising a Carrier Service Interconnection at WorldCom POP A
is $3,500, Customers actual Switched Services measured usage charges for 2
DS-1s comprising a Carrier Service Interconnection at WorldCom POP B is
$4,500, and Customer's End User's actual Switched Services measured usage
charges for 1 DS-1 comprising a Dedicated Service Interconnection at
WorldCom POP C is $600. Customer would not be subject to a Minimum Usage
Charge since Customer's actual Minimum Monthly Usage is $8,600 which exceeds
Customer's Minimum Monthly Usage of $7,500 [5 x $1,500].
(h) DS-1 circuits comprising all Service Interconnections will be subject to
a nonrecurring $400 per DS-1 switch port installation charge, and DS-3
circuits comprising all Service Interconnections will be subject to a
nonrecurring per DS-3 switch port installation charge as determined on an
individual case basis.
3. FORECASTS: Before Customer's initial order for Switched Services,
Customer shall provide WorldCom with a forecast regarding the number of
minutes expected to be terminated or originated in various LATAs and/or
Tandems, so as to enable WorldCom to configure optimum network arrangements.
In the event Customer's Switched Service traffic volumes result in a lower
than industry standard completion rate or otherwise adversely affect the
WorldCom Network, WorldCom reserves the right to block the source of such
adverse traffic at any time. Customer will provide WorldCom with additional
forecasts from time to time upon WorldCom's request which shall not be more
frequent than once every three (3) months.
<PAGE>
4. START OF SERVICE: Start of Service for the various Switched Services will
occur as described below:
<TABLE>
<S> <C>
SERVICE START OF SERVICE
TERMINATION Service Concurrently with the activation of
each circuit
comprising Carrier Service
Interconnections relevant
to TERMINATION Service
TOLL FREE ORIGINATION Concurrently with the activation of
Service each circuit
comprising Carrier Service
Interconnections relevant
to TOLL FREE ORIGINATION Service
SWITCHED ACCESS Service ANI by ANI basis concurrently with
the activation of
each ANI to be served, and a TOLL FREE
Number by
TOLL FREE Number basis concurrently
activation of each TOLL FREE Number
DEDICATED ACCESS Service Concurrently with the activation of
each circuit
comprising Dedicated Service
TRAVEL CARD Service Code by Code basis concurrently with
the activation of
each Code
</TABLE>
5. LIMITATION OF ORIGINATION OR TERMINATION LOCATIONS:
<TABLE>
<S> <C> <C>
SWITCHED SERVICE ORIGINATION FROM TERMINATION TO
TERMINATION Service Any WorldCom POP Any direct dialable
worldwide
TOLL FREE ORIGINATION Locations in the 48 Any Customer
contiguous designated Carrier
Service United States, Service
Hawaii, Alaska, the Interconnection
US Virgin Islands,
Puerto Rico and
Canada
SWITCHED ACCESS (1+) All equal access Any direct dialable
Service exchanges in the location
48 contiguous worldwide
United States
(except in LATA
Island, New York)
and Hawaii
SWITCHED ACCESS Locations in the 48 Locations in the 48
(Toll Free) contiguous contiguous
Service United States, United States and
Hawaii, Alaska, the Hawaii
US Virgin Islands,
Puerto Rico
DEDICATED ACCESS (1 Locations in the 48 Any direct dialable
Service United States worldwide
DEDICATED ACCESS Locations in the 48 Any Customer
(Toll Free) contiguous designated
Service United States, Dedicated Service
Hawaii, Alaska, the Interconnection
US Virgin Islands,
Puerto Rico
BASIC TRAVEL CARD Locations in the 48 Locations in the 48
Service contiguous United contiguous United
States, Hawaii,
Alaska, the US
Islands, Puerto
Rico and Canada
BASIC TRAVEL CARD Locations in Locations in the 48
Services Hawaii, Alaska, the contiguous United
Virgin Islands,
Puerto Rico and
BASIC TRAVEL CARD Select Locations in the 48
Service International contiguous United
States
TRAVEL CARD Service SEE Schedule 6 to SEE Schedule 6 to
- - Enhanced the applicable Rate the applicable Rate
Features and Discount and Discount
Schedule. Schedule.
</TABLE>
6. BILLING INCREMENTS:
(A) Classic Service - (i) all calls (excluding California IntraLATA and
California intrastate calls and calls to International Locations, Canada and
Mexico) will be billed in six (6) second increments and subject to a six (6)
second minimum charge, (ii) California
<PAGE>
Intra ATA and California intrastate calls will be billed in six (6) second
increments and subject to an eighteen (18) second minimum, and (ii) calls to
International Locations, Canada and Mexico will be billed in six (6) second
increments and subject to a thirty (30) second minimum charge.
(B) TRANSCENDTM Service - (i) all calls (excluding calls to International
Locations, Canada and Mexico and calls from Canada) will be billed in six
(6) second increments and subject to a six (6) second minimum charge, and
(iii) calls to International Locations, Canada and Mexico and calls from
Canada will be billed in six (6) second increments and subject to a thirty
(30) second minimum charge.
(C) All calls will be billed (i) utilizing Hardware Answer Supervision where
available, and with respect to TOLL FREE Services, commencing with
Customer's switch wink or answer back. If Customer is found to be
non-compliant in passing back appropriate answer supervision, i.e., answer
back, WorldCom reserves the right to suspend TOLL FREE Service or deny
requests by Customer for additional Service until appropriate compliance is
established.
7. CDR MEDIA: WorldCom will provide Call Detail Records (CDRs) for
WorldCom's Switched Services in machine readable form in one of several
magnetic tape formats (selected by Customer on Customer's Service Request)
("CDR Media"). CDR Media provided under this Section (i) monthly is provided
at no charge, (ii) weekly is subject to a recurring monthly charge of $150,
and (iii) daily is subject to the applicable non-recurring Installation
Charge as described below (plus all leased-line and equipment costs
necessary to implement Daily CDR Media which will be determined on an
individual case basis depending on Customer's specific configuration).
<TABLE>
TYPE Total Contract Non-Recurring
Value Installation Charge
<S> <C> <C>
Daily CDR Media-Customer <$1,000,000 $1,000
provided hardware and software $1,000,000+ $1,000
Daily CDR Media-PC Solution <$1,000,000 $5,000
$1,000,000+ $2,500
Sub-Daily CDR Media-Customer <$1,000,000 $1,000
provided hardware and software $1,000,000+ $1,000
Sub-Daily CDR Media-PC <$1,000,000 $5,000
Solution $1,000,000+ $2,500
</TABLE>
8. TOLL FREE NUMBERS:
(a) TOLL FREE numbers will be issued to Customer (i.e., issuance equates to
activation or reservation, whichever occurs first) on a random basis.
Customer requests for specific numbers will be considered by WorldCom, and
if provided, will be subject to additional charges as set forth below and
WorldCom's then current reservation policy which shall also apply to any
randomly selected and reserved TOLL FREE number. At any time preceding three
(3) months from the scheduled expiration of the Service Term, Customer may
only reserve TOLL FREE numbers in an amount equal to the greater of (i) 50,
or (ii) fifteen percent (15%) of the total number of TOLL FREE numbers
activated by WorldCom for Customer. Customer requests for TOLL FREE numbers
inconsistent with the above stated conditions may be considered by WorldCom
on an individual case basis. TOLL FREE numbers reserved for Customer will be
activated upon Customer's request,
<PAGE>
however, with respect to TRANSCENDTM Service, WorldCom may charge Customer
an SMS Storage fee for each TOLL FREE number.
(b) Customer Request for Specific Numbers - $25 per individual TOLL FREE
number.
(c) Customer specifically agrees that regardless of the method in which a
TOLL FREE number is reserved for or otherwise assigned to Customer, that
Customer will not seek any remedy from WorldCom under a theory of
detrimental reliance or otherwise that such TOLL FREE number(s) are found
not to be available for Customer's use until such TOLL FREE number is put in
service for the benefit of Customer, and that such TOLL FREE number(s) shall
not be sold, bartered, brokered or otherwise released by Customer for a fee
("TOLL FREE Number Trafficking"). Any attempt by Customer to engage in TOLL
FREE Number Trafficking shall be grounds for reclamation by WorldCom for
reassignment of the TOLL FREE number(s) reserved for or assigned to Customer.
9. ENHANCED TOLL FREE SERVICES: The following TOLL FREE identification
services and routing options (collectively, "Enhanced TOLL FREE Services")
are available from WorldCom:
IDENTIFICATION SERVICES:
i. Dialed Number Identification Service - identification of specific TOLL
FREE number dialed.
ii. Real-Time ANI - receipt of telephone number of calling party.
TOLL FREE ROUTING OPTIONS:
i. Message Referral - recording (up to six (6) months) that informs callers
that the TOLL FREE number has been disconnected or refers callers to new
number:
ii. Call Area Selection - selection or blockage of locations from which TOLL
FREE numbers can be received (i.e., State, NPA, LATA or NXX level).
iii. Call Distributor Routing - distribution of TOLL FREE traffic evenly
over dedicated access lines in a trunk group (e.g., ascending, descending,
most idle, least idle).
iv. Route Completion (Overflow) - overflow of TOLL FREE dedicated access
traffic only to up to five (5) pre-defined alternate routing groups (e.g.,
dedicated access, WATs access lines or switched access lines).
V. Geographic Routing - termination of calls to a single TOLL FREE number
from two or more originating routing groups to different locations.
vi. Time-of-Day Routing - routing of calls to single TOLL FREE number based
on time of day (up to forty-eight (48) time slots of 15-minute increments in
a 24-hour period).
<PAGE>
Day-of-Week Routing - routing of calls to single TOLL FREE number based on
each day of the week.
viii. Day-of-Year Routing - routing of calls to single TOLL FREE number
based on up to fifteen (15) customer-specified holidays.
ix. Percent Allocation Routing - routing of calls for each originating
routing group to two (2) or more terminating locations based on
customer-specified percentage.
Customer will receive the Identification Services described above at no
charge. The minutes of use rates for TOLL FREE Routing Options described
above (in addition to the TOLL FREE Routing Option Feature Charges described
below) will be the same rates for SWITCHED ACCESS Service (TOLL FREE) and
DEDICATED ACCESS Service (TOLL FREE), whichever is applicable, as described
in the applicable Rate and Discount Schedule excluding Route Completion
(Overflow). If Customer selects Route Completion (Overflow) and Customers
traffic overflows from DEDICATED ACCESS Service (TOLL FREE) to SWITCHED
ACCESS Service,(TOLL FREE), Customers minute of use rate will be the rate
associated with SWITCHED ACCESS Service (TOLL FREE). The TOLL FREE Routing
Option Feature Charges are as follows:
Installation Charge: $50.00 per feature; maximum of $250.00 per TOLL FREE
number.
Change Order Charge: $50.00 per feature; maximum of $250.00 per TOLL FREE
number.
Monthly Recurring Charge $25.00 per feature; maximum of $150.00 per TOLL
FREE number.
Expedite Charge: $500.00 (i.e., outside normal interval time of four (4)
business days).
Note: More than ten (10) points of termination for a single feature will be
treated as two (2) features. Further, every additional ten (10) points of
termination will be treated as a separate feature.
10. RESPORG SERVICES: Responsible Organization Services (relevant to TOLL
FREE Numbers) if provided by WorldCom will be provided by WorldCom pursuant
to WorldCom's F.C.C. Tariff No. 5.
11. AUTHORIZATION CODES FOR TRAVEL CARD SERVICE: WorldCom will supply
Customer with authorization codes ("Codes") containing nine (9) or fourteen
(14) digits for use with a corresponding TOLL FREE Service number for
origination and termination of TRAVEL CARD Service calls. The Codes may be
obtained by Customer in blocks of ten (10) not to exceed a total of 1000
Codes at any one time. WorldCom reserves the right to deny access to any
Code at any time.
12. INBOUND PORTION OF TRAVEL CARD SERVICE CALL: The inbound service portion
of a TRAVEL CARD Service call (i.e., the TOLL FREE Service) must be provided
by WorldCom.
<PAGE>
13. ACCOUNTING CODES: For every billed telephone number (BTN) requested by
Customer, whether verified or non-verified, Customer shall pay a monthly
recurring charge of $15.
14. PAY PHONE SURCHARGE: In the event WorldCom is required to compensate
payphone service providers (PSPs) for toll-free or access code calls which
originate from payphones (including without limitation, any Order adopted by
the FCC) ("Payphone Surcharge"), WorldCom will charge and Customer agrees to
pay WorldCom the amount of the Payphone Surcharge which is required to be
paid by WorldCom.
15. RBOC TERMINATION/ORIGINATION: With respect to Classic Switched Services,
following Start of Service for TERMINATION SERVICE, TOLL FREE ORIGINATION
Service and/or DEDICATED ACCESS Service, Customer will maintain at least 80%
of the minutes of traffic (during any calendar month or pro rata portion
thereof) comprising Customer's TERMINATION Service, TOLL FREE ORIGINATION
Service and DEDICATED ACCESS Service for termination or origination in a
Tandem owned and operated by a Regional Bell Operating Company ("RBOC
Terminations/Originations") and subject to such RBOC's tariffed access
charges. WorldCom shall have the right to apply a ($.015) per minute
surcharge to the number of minutes by which Non-RBOC
Terminations/Originations exceed 20% of total monthly TERMINATION Service,
TOLL FREE ORIGINATION Service and DEDICATED ACCESS Service minutes.
16. PRESUBSCRIBED INTEREXCHANGE CARRIER CHARGE (PICC): With respect to
Classic Switched Services, WorldCom will charge Customer for any
LEC-assessed presubscribed interexchange carrier charge ("PICC Charge")
which PICC Charge will be reasonably determined by WorldCom as of a date
certain each month (the "PICC Charge Determination Date") but only if
WorldCom is directly billed by the LEC for such PICC Charge. Customer's PICC
Charge will be determined as of the PICC Charge Determination Date and will
be based on the same criteria for which WorldCom is assessed such charge by
the LEC (e.g., number and type of Customer's End Users (i.e., residential or
business) as well as the type of line associated with each such End User
(i.e., single line, secondary line or multi-line). This-Section 16 will be
deemed to include any other similar additional charges assessed by a LEC
after the date of this Agreement. (i.e., charges for which WorldCom is not
currently being assessed).
IN WITNESS WHEREOF, Customer has initialed this CLASSIC/TRANSCENDTM SWITCHED
SERVICES Service Schedule on the date first written above.
GENEX, LLC/DBA: PREFERRED DISCOUNT PLAN
Customer's Initials /s/
<PAGE>
WORLDCOM NETWORK SERVICES, INC.
CLASSIC/TRANSCENDTM SWITCHED SERVICES
TELECOMMUNICATIONS SERVICES AGREEMENT
This Telecommunications Services Agreement (the "TSA") is entered into
as of the 10th day of August, 1998, by and between WORLDCOM NETWORK
SERVICES, INC., a Delaware corporation, with its principal office at One
Williams Center, Tulsa, Oklahoma 74172 ("WorldCom") and GENX, LLC/DBA:
PREFERRED DISCOUNT PLAN , a COLORADO corporation, with its principal office
at 3151 AIRWAY AVE., BLDG. P-3 COSTA MESA, CA 92626 ("Customer").
In consideration of good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Switched Services; Other Documents; Start of Service.
(A) Services WorldCom agrees to provide and Customer agrees to accept and
pay for switched telecommunications services and other associated services
(collectively the "Switched Services") as further described in the "Service
Schedule" attached hereto and incorporated herein by reference, which
describes the particular services, specific terms and other information
necessary or appropriate for WorldCom to provide the Service to Customer.
The Switched Services provided by WorldCom are subject to (i) the terms and
conditions contained in this TSA and the Program Enrollment Terms (the
"PET") which are attached hereto and incorporated herein by reference, (ii)
the rates and discounts set forth in the applicable Rate and Discount
Schedule (the "Rate Schedule") attached hereto and incorporated herein by
reference, and (iii) each Service Request (described below) which is
accepted hereunder. The PET, as subscribed to by the parties, shall set
forth the Effective Date, the Service Term, Customer's minimum monthly
commitment, if any, and other information necessary to provide the Switched
Services under this TSA. In the event of a conflict between the terms of
this TSA, the PET, the Service Schedule, the Rate Schedule and the Service
Request(s), the following order of precedence will prevail: (1) the PET, (2)
the Rate Schedule, (3) the Service Schedule, (4) this TSA, and (5) Service
Request(s). This TSA, the PET, the Service Schedule and the applicable Rate
and Discount Schedule are sometimes collectively referred to as the
"Agreement".
(B) Service Requests Customer's requests to initiate or cancel Switched
Services shall be described in an appropriate WorldCom Service Request
("Service Request"). A Service Request may consist of machine readable
tapes, facsimiles or other means approved by WorldCom. Further, Service
Requests shall specify all reasonable information, as determined by
WorldCom, necessary or appropriate for WorldCom to provide the Switched
Service(s) in question, which shall include without limitation, the type,
quantity and end point(s) (when necessary) of circuits comprising a Service
Interconnection as described in the applicable Service Schedules, or
automatic number identification ("ANI") information relevant to the Switched
Service(s), the Requested Service Date, and charges, if any, relevant to the
Switched Services described in the Service Request. After WorldCom's receipt
and verification of a valid Service Request for SWITCHED ACCESS Service (as
defined in the Service Schedule) requiring a change in the primary
interexchange carrier ("PIC"), WorldCom agrees to (i) submit the ANI(s)
relevant to such Service Requests to the following local exchange carriers
("LECs") (with which
<PAGE>
WorldCom currently has electronic interface capabilities) within ten (10)
days: Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Bell, Southwestern
Bell, US West, GTE and United, and (ii) submit the ANI(s) relevant to such
Service Requests to those LECs with which WorldCom does not have electronic
interface capabilities within a reasonable time.
(C) Start of Service WorldCom's obligation to provide and Customer's
obligation to accept and pay for non-usage sensitive charges for Switched
Services shall be binding to the extent provided for in this Agreement upon
the submission of an acceptable Service Request to WorldCom by Customer.
Customer's obligation to pay for usage sensitive charges for Switched
Services shall commence with respect to any Switched Service as of the date
the Switched Service in question is made available to and used by Customer
("Start of Service"), but in no event later than the "Requested Service
Date" if such Switched Service is available for Customer's use as of such
Requested Service Date. Start of Service for particular Services shall be
further described in the Service Schedule relevant to the Switched Services
in question.
2. Cancellation.
(A) Cancellation Charge At any time after the Effective Date, Customer may
cancel this Agreement if Customer provides written notification thereof to
WorldCom not less than thirty (30) days prior to the effective date of
cancellation. In such case (or in the event WorldCom terminates this
Agreement as provided in Section 7), Customer shall pay to WorldCom all
charges for Services provided through the effective date of such
cancellation plus a cancellation charge (the "Cancellation Charge") equal to
one hundred percent (100%) of Customer's commitment(s), if any, (as
described in the PET) that would have become due for the unexpired portion
of the Service Term.
(B) Liquidated Damages It is agreed that WorldCom's damages in the event
Customer cancels this Agreement shall be difficult or impossible to
ascertain. The provision for a cancellation charge in Subsection 2(A) above
is intended, therefore, to establish liquidated damages in the event of a
cancellation and is not intended as a penalty.
(C) Cancellation Without Charge Notwithstanding anything to the contrary
contained in Subsection 2(A) above, Customer may cancel this Agreement
without incurring any cancellation charge if (i) WorldCom fails to provide a
network as warranted in Section 8 below; (ii) WorldCom fails to deliver call
detail records promptly based on the frequency selected by Customer (i.e.,
monthly, weekly or daily); or (iii) WorldCom fails to submit ANI(s) relevant
to such Service Requests to the LECs within the time period described in
Subsection 1(B) above. Provided, however, Customer must give WorldCom
written notice of any such default and an opportunity to cure such default
within five (5) days of the notice. In the event WorldCom fails to cure any
such default within the five-day period on more than three (3) occasions
within any six (6) month period, Customer may cancel this Agreement without
incurring any cancellation charge.
3. Customer's End Users.
(A) End Users Customer will obtain and upon WorldCom's request provide
WorldCom (within two (2) business days of the date of the request) a written
Letter of Agency ("LOA") acceptable to WorldCom [or with any other means
approved by the Federal Communications Commission ("FCC") or any applicable
public utility commission ("PUC")], for each ANI indicating the consent of
such end user of Customer ("End User") to be served by Customer and
transferred (by way of change of such End User's designated PIC) to the
WorldCom network prior to order processing.
<PAGE>
Each LOA will provide, among other things, that the End User has consented
to the transfer being performed by Customer or Customer's designee. When
applicable, Customer will be responsible for notifying its End Users, in
writing (or by any other means approved by the FCC) that (i) a transfer
charge will be reflected on their LEC bill for effecting a change in their
PIC, (ii) the entity name under which their interstate, intrastate and/or
operator services will be billed (if different from Customer), and (iii) the
"primary" telephone number(s) to be used for maintenance and questions
concerning their long distance service and/or billing. Customer agrees to
send WorldCom a copy of the documentation Customer uses to satisfy the above
requirements promptly upon request of WorldCom. WorldCom may change the
foregoing requirements for Customer's confirming orders and/or for notifying
End Users regarding the transfer charge at any time in order to conform with
applicable FCC and state regulations. Provided, however, Customer will be
solely responsible for ensuring that the transfer of End Users to the
WorldCom network conforms with applicable FCC and state regulations,
including without limitation, the regulations established by the FCC with
respect to verification of orders for long distance service generated by
telemarketing as promulgated in 47 C.F.R., Part 64, Subpart K,
Section64.1100 or any successor regulation(s).
(B) Transfer Charges/Disputed Transfers Customer agrees that it is
responsible for (i) all charges incurred by WorldCom to change the PIC of
End Users to the WorldCom network, (ii) all charges incurred by WorldCom to
change End Users back to their previous PIC arising from disputed transfers
to the WorldCom network plus, at WorldCom's option, an administrative charge
equal to twenty percent (20%) of such charges, and (iii) any other damages
suffered by or awards against WorldCom resulting from disputed transfers.
(C) Excluded ANIs WorldCom has the right to reject any ANI supplied by
Customer for any of the following reasons: (i) WorldCom is not authorized to
provide or does not provide long distance services in the particular
jurisdiction in which the ANI is located, (ii) a particular ANI submitted by
Customer is not in proper form, (iii) Customer is not certified to provide
long distance services in the jurisdiction in which the ANI is located, (iv)
Customer is in material default of this Agreement, (v) Customer fails to
cooperate with WorldCom in implementing reasonable verification processes
determined by WorldCom to be necessary or appropriate in the conduct of
business, or (vi) any other circumstance reasonably determined by WorldCom
which could adversely affect WorldCom's performance under this Agreement or
WorldCom's general ability to transfer its other customers or other end
users to the WorldCom network, including without limitation, WorldCom's
ability to electronically effect PIC changes with the LECs. In the event
WorldCom rejects an ANI, WorldCom will notify Customer of its decision
specifically describing the rejected ANI and the reason(s) for rejecting
that ANI, and will not incur any further liability under this Agreement with
regard to that ANI. Further, any ANI requested by Customer for Switched
Services may be deactivated by WorldCom if no Switched Services billings
relevant thereto are generated in any three (3) consecutive calendar
month/billing periods. WorldCom will be under no obligation to accept ANIs
within the last full calendar month period preceding the scheduled
expiration of the Service Term.
(D) Records Customer will maintain documents and records ("Records")
supporting Customer's re-sale of Switched Services, including, but not
limited to, appropriate and valid LOAs from End Users for a period of not
less than (twelve) 12 months or such longer period as may be required by
applicable law, rule or regulation. Customer shall indemnify WorldCom for
any costs, charges or expenses incurred by WorldCom arising from disputed
PIC selections involving Switched Services to be provided to Customer for
which Customer cannot produce an appropriate LOA relevant to the ANI and PIC
charge in question, or when WorldCom is not reasonably satisfied that the
validity of a disputed LOA has been resolved.
<PAGE>
(E) Customer Service Customer will be solely responsible for billing its
End Users and providing such End Users with customer service. Customer
agrees to notify WorldCom as soon as reasonably possible in the event an End
User notifies Customer of problems associated with the Switched Services,
including without limitation, excess noise, echo, or loss of service.
4. Customer's Responsibilities.
(A) Expedite Charges In the event Customer requests expedited services
and/or changes to Service Requests and WorldCom agrees to such request,
WorldCom will pass through the charges assessed by any supplying parties
(e.g., local access providers) for such expedited charges and/or changes to
Service Requests involved at the same rate to Customer. WorldCom may further
condition its performance of such request upon Customer's payment of such
additional charges to WorldCom.
(B) Fraudulent Calls Customer shall indemnify and hold WorldCom harmless
from all costs, expenses, claims or actions arising from fraudulent calls of
any nature which may comprise a portion of the Switched Services to the
extent that the party claiming the call(s) in question to be fraudulent is
(or had been at the time of the call) an End User of such Switched Services
through Customer or an end user of the Switched Services through Customer's
distribution channels. Customer shall not be excused from paying WorldCom
for Switched Services provided to Customer or any portion thereof on the
basis that fraudulent calls comprised a corresponding portion of the
Switched Services. In the event WorldCom discovers fraudulent calls being
made (or reasonably believes fraudulent calls are being made), nothing
contained herein shall prohibit WorldCom from taking immediate action
(without notice to Customer) that is reasonably necessary to prevent such
fraudulent calls from taking place, including without limitation, denying
Switched Services to particular ANIs or terminating Switched Services to or
from specific locations.
5. Charges and Payment Terms.
(A) Payment WorldCom billings for Switched Services hereunder are made on a
monthly basis (or such other basis as may be mutually agreed to by the
parties) following Start of Service. Subject to Subsection 5(C) below,
Switched Services shall be billed at the rates set forth in the applicable
Rate and Discount Schedule attached hereto. Customer will be notified of
WorldCom's time of day rate periods (including WorldCom Recognized National
Holidays). Discounts, if any, applicable to the rates for certain Services
are set forth in the Rate and Discount Schedule. Customer will pay all
undisputed charges relative to each WorldCom invoice for Switched Services
within thirty (30) days of the invoice date set forth on each WorldCom
invoice to Customer ("Due Date"). If payment is not received by WorldCom on
or before the Due Date, Customer shall also pay a late fee in the amount of
the lesser of one and one-half percent (1 1/2 %) of the unpaid balance of
the charges for Switched Services rendered per month or the maximum lawful
rate under applicable state law.
(B) Taxes Customer acknowledges and understands that WorldCom computes all
charges herein exclusive of any applicable federal, state or local use,
excise, gross receipts, sales and privilege taxes, duties, fees or similar
liabilities (other than general income or property taxes), whether charged
to or against WorldCom or Customer because of the Switched Services
furnished to Customer ("Additional Charges"). Customer shall pay such
Additional Charges in
<PAGE>
addition to all other charges provided for herein. Customer will not be
liable for certain Additional Charges if Customer provides WorldCom with an
appropriate exemption certificate.
(C) Modification of Charges WorldCom reserves the right to eliminate
particular Switched Services and/or modify charges for particular Switched
Services (which charge modifications shall not exceed then-current generally
available WorldCom charges for comparable services), upon not less than
sixty (60) days prior notice to Customer, which notice will state the
effective date for the charge modification. In the event WorldCom notifies
Customer of the elimination of a particular Switched Service and/or an
increase in the charges, Customer may terminate this Agreement without
incurring a cancellation charge only with respect to the Switched Service(s)
affected by the increase in charges. In order to cancel such Switched
Service(s), Customer must notify WorldCom, in writing, at least thirty (30)
days prior to the effective date of the increase in charges. In the event
Customer cancels its subscription to a particular Switched Service as
described in this Subsection 5(C), WorldCom and Customer agree to negotiate
in good faith concerning Customer's minimum monthly commitment, if any,
described in the PET.
(D) Billing Disputes Notwithstanding the foregoing, amounts reasonably
disputed by Customer (along with late fees attributable to such amounts)
shall apply but shall not be due and payable for a period of sixty (60) days
following the Due Date therefor, provided Customer: (i) pays all undisputed
charges on or before the Due Date, (ii) presents a written statement of any
billing discrepancies to WorldCom in reasonable detail on or before the Due
Date of the invoice in question, and (iii) negotiates in good faith with
WorldCom for the purpose of resolving such dispute within said sixty (60)
day period. In the event such dispute is mutually agreed upon and resolved
in favor of WorldCom, Customer agrees to pay WorldCom the disputed amounts
together with any applicable late fees within ten (10) days of the
resolution (the "Alternate Due Date"). In the event such dispute is mutually
agreed upon and resolved in favor of Customer, Customer will receive a
credit for the disputed charges in question and the applicable late fees. In
the event WorldCom has responded to Customer's dispute in writing and the
parties fail to mutually resolve or settle the dispute within such sixty
(60) day period (unless WorldCom has agreed in writing to extend such
period) all disputed amounts together with late fees shall become due and
payable, and this provision shall not be construed to prevent Customer from
pursuing any available legal remedies. WorldCom shall not be obligated to
consider any Customer notice of billing discrepancies which are received by
WorldCom more than sixty (60) days following the Due Date of the invoice in
question.
6. Credit; Creditworthiness:
(A) Credit Customer's execution of this Agreement signifies Customer's
acceptance o WorldCom's initial and continuing credit approval procedures
and policies. WorldCom reserves the right to withhold initiation or full
implementation of any or all Switched Services under this Agreement pending
WorldCom's initial satisfactory credit review and approval thereof which may
be conditioned upon terms specified by WorldCom, including, but not limited
to, security for payments due hereunder in the form of a cash deposit or
other means. WorldCom reserves the right to modify its requirements, if any,
with respect to any security or other assurance provided by Customer for
payments due hereunder in light of Customer's actual usage when compared to
projected usage levels upon which any security or assurance requirement was
based.
(B) Creditworthiness If at any time there is a material adverse change in
Customer's creditworthiness, then in addition to any other remedies
available to WorldCom, WorldCom may elect, in its sole discretion, to
exercise one or more of the following remedies: (i) cause Start of
<PAGE>
Service for Switched Services described in a previously executed Service
Request to be withheld; (ii) cease providing Switched Services pursuant to a
Suspension Notice in accordance with Section 7(A); (iii) decline to accept a
Service Request or other requests from Customer to provide Switched Services
which WorldCom may otherwise be obligated to accept and/or (iv) condition
its provision of Switched Services or acceptance of a Service Request on
Customer's assurance of payment which shall be a deposit or such other means
to establish reasonable assurance of payment. An adverse material change in
Customer's creditworthiness shall include, but not be limited to: (i)
Customer's material default of its obligations to WorldCom under this or any
other agreement with WorldCom; (ii) failure of Customer to make full payment
of all undisputed charges due hereunder on or before the Due Date (or
disputed charges on or before the Alternate Due Date) on three (3) or more
occasions during any period of twelve (12) or fewer months or Customer's
failure to make such payment on or before the Due Date (or the Alternate Due
Date, if applicable) in any two (2) consecutive months; (iii) acquisition of
Customer (whether in whole or by majority or controlling interest) by an
entity which is insolvent, which is subject to bankruptcy or insolvency
proceedings, which owes past due amounts to WorldCom or any entity
affiliated with WorldCom or which is a materially greater credit risk than
Customer; or, (iv) Customer's being subject to or having filed for
bankruptcy or-insolvency proceedings or the legal insolvency of Customer.
7. Remedies for Breach.
(A) Suspension of Service In the event all undisputed charges due pursuant
to WorldCom's invoice are not paid in full by the Due Date or disputed
charges owed by Customer, if any, are not paid in full by the Alternate Due
Date, WorldCom shall have the right, after giving Customer at least ten (10)
days prior notice and opportunity to pay such charges within such 10-day
period, to suspend all or any portion of the Switched Services to Customer
("Suspension Notice") until such time (designated by WorldCom in its
Suspension Notice) as Customer has paid in full all undisputed charges then
due to WorldCom, including any late fees. Following such payment, WorldCom
shall reinstitute Switched Services to Customer only when Customer provides
WorldCom with satisfactory assurance of Customer's ability to pay for such
Switched Services (i.e., a deposit, letter of credit or other means
acceptable to WorldCom) and Customer's advance payment of the cost of
reinstituting such Switched Services. If Customer fails to make the required
payment by the date set forth in the Suspension Notice, Customer will be
deemed to have canceled the Services suspended effective as of the date of
suspension which cancellation shall not relieve Customer for payment of
applicable cancellation charges as described in Section 2.
(B) Disconnection of Service In the event Customer is in material breach of
this Agreement, including without limitation, failure to pay all undisputed
charges due hereunder by the date stated in the Suspension Notice described
in Subsection 7(A) above, WorldCom shall have the right, after giving
Customer at least five (5) days prior written notice and opportunity to cure
(which notice may be given instead of or in conjunction with the Suspension
Notice described in Subsection 7(A) above), and in addition to foreclosing
any security interest WorldCom may have, to (i) disconnect all or any
portion the Switched Services being provided hereunder and/or terminate this
Agreement; (ii) withhold billing information from Customer; and/or (iii)
contact the End Users (for whom calls are originated and terminated solely
over facilities comprising the WorldCom network) directly and bill such End
Users directly until such time as WorldCom has been paid in full for the
amount owed by Customer. If Customer fails to make payment by the date
stated in the Suspension Notice and WorldCom, after giving Customer five (5)
days prior
<PAGE>
written notice, terminates this Agreement as provided in this Section 7,
such termination shall not relieve Customer for payment of applicable
cancellation charges as described in Section 2 above.
8. Warranty. WorldCom will use reasonable efforts under the circumstances
to maintain its overall network quality. The quality of Switched Services
provided hereunder shall be consistent with telecommunications common
carrier industry standards, government regulations and sound business
practices. WORLDCOM MAKES NO OTHER WARRANTIES ABOUT THE SWITCHED SERVICES
PROVIDED HEREUNDER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
9. Liability; General Indemnity; Reimbursement.
(A) Limited Liability IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE TO THE
OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR
CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS
AGREEMENT AND THE PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER.
(B) General Indemnity In the event parties other than Customer (e.g.,
Customer's End Users) shall have use of the Switched Services through
Customer, then Customer agrees to forever indemnify and hold WorldCom, its
affiliated companies and any third-party provider or operator of facilities
employed in provision of the Switched Services harmless from and against any
and all claims, demands, suits, actions, losses, damages, assessments or
payments which those parties may assert arising out of or relating to any
defect in the Switched Services.
(C) Reimbursement Customer agrees to reimburse WorldCom for all reasonable
costs and expenses incurred by WorldCom due to WorldCom's direct
participation (either as a party or witness) in any administrative,
regulatory or criminal proceeding concerning Customer if WorldCom's
involvement in said proceeding is based solely on WorldCom's provision of
Switched Services to Customer.
10. Force Majeure. If WorldCom's performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by causes
beyond its reasonable control including, but not limited to, acts of God,
fire, explosion, vandalism, cable cut, storm or other similar occurrence,
any law, order, regulation, direction, action or request of the United
States government, or state or local governments, or of any department,
agency, commission, court, bureau, corporation or other instrumentality of
any one or more such governments, or of any civil or military authority, or
by national emergency, insurrection, riot, war, strike, lockout or work
stoppage or other labor difficulties, or supplier failure, shortage, breach
or delay, then WorldCom shall be excused from such performance on a
day-to-day basis to the extent of such restriction or interference. WorldCom
shall use reasonable efforts under the circumstances to avoid or remove such
causes or nonperformance and shall proceed to perform with reasonable
dispatch whenever such causes are removed or cease.
11. State Certification. Customer warrants that in all jurisdictions in
which it provides long distance services that require certification, it has
obtained the necessary certification from the appropriate governmental
authority and, if required by WorldCom, agrees to provide proof of such
certification acceptable to WorldCom. In the event Customer is prohibited,
either on a temporary or permanent basis, from continuing to conduct its
telecommunications operations in a given state, Customer shall (i)
<PAGE>
immediately notify WorldCoM by facsimile, and (ii) send written notice to
WorldCom within twenty-four (24) hours of such prohibition.
12. Interstate/intrastate Service. Except with respect to Services
specifically designated as intrastate Services or international Services,
the rates provided to Customer in the Service Schedule are applicable only
to switched Services if such Switched Services are used for carrying
interstate telecommunications (i.e., Switched Services subject to FCC
jurisdiction). WorldCom shall not be obligated to provide Switched Services
with end points within a single state or Switched Services which
originate/terminate at points both of which are situated within a single
state. In those states where WorldCom is authorized to provide intrastate
service (i.e., telecommunications transmission services subject to the
jurisdiction of state regulatory authorities), WorldCom will, at its option,
provide intrastate Switched Services pursuant to applicable state laws,
regulations and applicable tariff, if any, filed by WorldCom with state
regulatory authorities as required by applicable law.
13. Authorized Use of WorldCom Name: Press Releases. Without WorldCom's
prior written consent, Customer shall not (i) refer to itself as an
authorized representative of WorldCom whenever it refers to the Switched
Services in promotional, advertising or other materials, or (ii) use
WorldCom's logos, trade marks, service marks, or any variations thereof in
any of its promotional, advertising or other materials. Additionally,
Customer shall provide to WorldCom for its prior review and written
approval, all promotions, advertising or other materials or activity using
or displaying WorldCom's name or the Services to be provided by WorldCom.
Customer agrees to change or correct, at Customer's expense, any such
material or activity which WorldCom, in its sole judgment, determines to be
inaccurate, misleading or otherwise objectionable. Customer is explicitly
authorized to only use the following statements in its sales literature or
if in response to an inquiry by Customer's end user: (i) "Customer utilizes
the WorldCom network", (ii) "Customer utilizes WorldCom's facilities", (iii)
"WorldCom provides only the network facilities", and (iv) "WorldCom is our
network services provider". Except as specifically provided in this Section
13, the parties further agree that any press release, advertisement or
publication generated by a party regarding this Agreement, the Services
provided hereunder or in which a party desires to mention the name of the
other party or the other party's parent or affiliated company(ies), will be
submitted to the non-publishing party for its written approval prior to
publication.
14. Notices. Notices under this Agreement shall be in writing and delivered
to the person identified below at the offices of the parties as they appear
below or as otherwise provided for by proper notice hereunder. Customer
shall notify WorldCom in writing if Customer's billing address is different
than the address shown below. The effective date for any notice under this
Agreement shall be the date of actual receipt of such notice by the
appropriate party, notwithstanding the date of mailing or transmittal via
hand delivery or facsimile.
If to WorldCom: WorldCom Network Services, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attn: Carrier Sales Dept.
If to Customer: GENX, LLC/DBA: PREFERRED DISCOUNT PLAN
3151 AIRWAY AVE., BLDG. P-3
COSTA MESA, CA 92626
Attn: PAUL SANDHU
Telephone No.: 714 549-7700
Fax No.: 714- 549L 7707
<PAGE>
15. No-Waiver. No term or provision of this Agreement shall be deemed waived
and no breach or default shall be deemed excused unless such waiver or
consent shall be in writing and signed by the party claimed to have waived
or consented. A consent to waiver of or excuse for a breach or default by
either party, whether express or implied, shall not constitute a consent to,
waiver of, or excuse for any different or subsequent breach or default.
16. Partial Invalidity: Government Action.
(A) Partial Invalidity If any part of any provision of this Agreement or
any other agreement, document or writing given pursuant to or in connection
with this Agreement shall be invalid or unenforceable under applicable law,
rule or regulation, that part shall be ineffective to the extent of such
invalidity only, without in any way affecting the remaining parts of that
provision or the remaining provisions of this Agreement. In such event,
Customer and WorldCom will negotiate in good faith with respect to any such
invalid or unenforceable part to the extent necessary to render such part
valid and enforceable.
(B) Government Action Upon thirty (30) days prior notice, either party
shall have the right, without liability to the other, to cancel an affected
portion of the Switched Service if any material rate or term contained
herein and relevant to the affected Switched Service is substantially
changed (to the detriment of the terminating party) or found to be unlawful
or the relationship between the parties hereunder is found to be unlawful by
order of the highest court of competent jurisdiction to which the matter is
appealed, the FCC, or other local, state or federal government authority of
competent jurisdiction.
17. Exclusive Remedies. Except as otherwise specifically provided for
herein, the remedies set forth in this Agreement comprise the exclusive
remedies available to either party at law or in equity.
18. Use of Service. Upon WorldCom's acceptance of a Service Request
hereunder, WorldCom will provide the Switched Services specified therein to
Customer upon condition that such Switched Services shall not be used for
any unlawful purpose. The provision of Switched Services will not create a
partnership or joint venture between the parties or result in a joint
communications service offering to any third parties, and WorldCom and
Customer agree that this Agreement, to the extent it is subject to FCC
regulation, is an inter-carrier agreement which is not subject to the filing
requirements of Section 211 (a) of the Communications Act of 1934 (47 U.S.C.
Section 211 (a)) as implemented in 47 C.F.R. Section 43.51.
19. Choice of Law; Forum.
(A) Law This Agreement shall be construed under the laws of the State of
Oklahoma without regard to choice of law principles.
(B) Forum Any legal action or proceeding with respect to this Agreement may
be brought in the Courts of the State of Oklahoma in and for the County of
Tulsa or the United States of America for the Northern District of Oklahoma.
By execution of this Agreement, both Customer and WorldCom hereby submit to
such jurisdiction, hereby expressly waiving whatever rights may correspond
to either of them by reason of their present or future domicile. In
furtherance of the foregoing, Customer and WorldCom hereby agree to service
by U.S. Mail at the notice addresses referenced in Section 14. Such service
shall be deemed effective upon the earlier of actual receipt or seven (7)
days following the date of posting.
<PAGE>
20. Proprietary Information.
(A) Confidential Information The parties understand and agree that the
terms and conditions of this Agreement (but not the existence thereof), all
documents referenced herein (including invoices to Customer for Switched
Services provided hereunder), communications between the parties regarding
this Agreement or the Switched Services to be provided hereunder (including
price quotes to Customer for any services proposed to be provided or
actually provided hereunder), as well as such information relevant to any
other agreement between the parties (collectively "Confidential
Information"), are confidential as between Customer and WorldCom.
(B) Limited Disclosure A party shall not disclose Confidential Information
(unless subject to discovery or disclosure pursuant to legal process), to
any other party other than the directors, officers, and employees of a party
or a party's agents including their respective attorneys, consultants,
brokers, lenders, insurance carriers or bona fide prospective purchasers who
have specifically agreed in writing to non-disclosure of the terms and
conditions hereof. Any disclosure hereof required by legal process shall
only be made after providing the non-disclosing party with notice thereof in
order to permit the non-disclosing party to seek an appropriate protective
order or exemption. Violation by a party or its agents of the foregoing
provisions shall entitle the non-disclosing party, at its option, to obtain
injunctive relief without a showing of irreparable harm or injury and
without bond.
(C) Survival of Confidentiality The provisions of this Section 20 will be
effective as of the date of this Agreement and remain in full force and
effect for a period which will be the longer of (i) one (1) year following
the date of this Agreement, or (ii) one (1) year from the termination of all
Services hereunder.
21. Successors and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
or assigns, provided, however, that Customer shall not assign or transfer
its rights or obligations under this Agreement without the prior written
consent of WorldCom, which consent shall not be unreasonably withheld or
delayed, and further provided that any assignment or transfer without such
consent shall be void.
22. General.
(A) Survival of Terms The terms and provisions contained in this Agreement
that by their sense and context are intended to survive the performance
thereof by the parties hereto shall so survive the completion of performance
and termination of this Agreement, including, without limitation, provisions
for indemnification and the making of any and all payments due hereunder.
(B) Headings Descriptive headings in this Agreement are for convenience only
and shall not affect the construction of this Agreement.
(C) Industry Terms Words having well-known technical or trade meanings shall
be so construed, and all listings of items shall not be taken to be
exclusive, but shall include other items, whether similar or dissimilar to
those listed, as the context reasonably requires.
(D) Rule of Construction No rule of construction requiring interpretation
against the drafting party hereof shall apply in the interpretation of this
Agreement.
<PAGE>
23. Entire Agreement. This Agreement consists of (i) all the terms and
conditions contained herein, and (ii) all documents incorporated herein
specifically by reference. This TSA constitutes the complete and exclusive
statement of the understandings between the parties and supersedes all
proposals and prior agreements (oral or written) between the parties
relating to the Switched Services provided hereunder. No subsequent
agreement between the parties concerning the Switched Services shall be
effective or binding unless it is made in writing and subscribed to by
Customer and WorldCom.
24. Other Agreements. Customer acknowledges and agrees that this Agreement
and the Switched Services described herein may not be combined with any
other switched services products or services offered by WorldCom, WorldCom's
parent company or WorldCom's affiliates. Additionally, Customer acknowledges
and agrees that:
(A) Current Services As of the Effective Date of this Agreement, (i) all
switched telecommunications services ("Current Services") offered by
WorldCom (formerly WilTel, Inc.), WorldCom's parent company, WorldCom, Inc.
(formerly LDDS Communications, Inc.) or any of WorldCom's affiliates,
including without limitation, IDB WorldCom Services, Inc. (hereinafter
referred to as the "WorldCom Group"), which are currently being provided
Customer (which for purposes of this Section 24 will include Customers
parent company, Customers subsidiaries and any other entities under common
control with Customer; hereinafter referred to as the "Customer Group")
pursuant to existing service agreements ("Existing Agreements") will be
canceled and no longer in force or effect except for charges or credits due
for Current Services rendered as of the Effective Date of this Agreement and
provisions intended to survive termination, such as limitation of liability,
indemnification and confidentiality, and (ii) all Current Services provided
a member of the Customer Group by a member of the WorldCom Group will be
provisioned under the terms and conditions of this TSA. Simultaneous with
the execution of this Agreement, if applicable, Customer shall cause all
members of the Customer Group to agree to the cancellation of such Existing
Agreements and the provision of Current Services under the terms and
conditions of this Agreement and Customer agrees to provide WorldCom with
reasonable documentation evidencing such agreement.
(B) Third Party Agreements If Customer acquires or merges or combines with
a third party after the Effective Date of this Agreement, and such third
party has existing agreement(s) with a member of the WorldCom Group
(collectively referred to as the "Third Party Agreements") for the provision
of switched telecommunications services ("Third Party Existing Services"),
then ninety (90) days following the date of such acquisition, merger or
combination (or such earlier date contained in a written notice from
Customer to WorldCom) (the "Transfer Date"), (i) the Third Party Agreements
will be canceled and no longer in force or effect except for commitments, if
any, contained in such Third Party Agreements and charges and credits due
for Services rendered prior to the Transfer Date, (ii) Third Party Existing
Services will be provisioned under this Agreement, and (iii) the aggregate
commitment(s) (e.g., revenue, volume, minute, etc.) remaining under such
Third Party Agreements, if any, shall be added on a pro rata basis to the
commitment(s), if any, existing under this Agreement. Simultaneous with the
closing of such acquisition, combination or merger, Customer will cause such
third party and all of its affiliates who are parties to such Third Party
Agreements, to agree to the cancellation of such Third Party Agreements and
the provision of Third Party Existing Services under the terms and
conditions of this Agreement and Customer agrees to provide WorldCom with
reasonable documentation evidencing such agreement. In the event any Third
Party Agreement(s) have a provision similar to the provision contained
herein, the parties agree to negotiate in good faith concerning which
agreement (i.e., this Agreement or any Third Party Agreement) shall survive
and which agreement(s) shall be terminated.
<PAGE>
Example: Assume (i) Customer's Commitment is $500,000, (ii) there are
twenty-four (24) months remaining in the Service Term of this Agreement, and
(iii) Customer acquires a third party who has an existing switched
telecommunications services agreement with a member of the WorldCom Group
which contains a minimum monthly revenue commitment of $250,000 and has ten.
(10) months remaining in the term of such agreement. Customer's "new"
Commitment will be $604,166 for the remaining twenty-four (24) months in the
Service Term ($500,000 + [($250,000 x 10)/24]}.
IN WITNESS WHEREOF, the parties have executed this Telecommunications
Services Agreement as of the dates set forth below which Agreement will be
effective as described in the PET attached hereto.
WORLDCOM NETWORK SERVICES, INC. GENX, LLC/DBA: PREFERRED DISCOUNT PLAN
By: /s/ Mitch L. Lindner By: /s/ Paul Sandhu
(Signature) (Signature)
Mitch L. Lindner PAUL SANDHU
(Print Name) (Print Name)
Director, Western Region PRESIDENT & CHIEF EXECUTIVE OFFICER
(Title) (Title)
8-10-98
(Date) (Date)
<PAGE>
INVESTMENT BANKING AGREEMENT
Agreement made as of November 19, 1998, by and between
TRANSGLOBAL CAPITAL CORPORATION, ("TCC"), whose address is 21700
Oxnard Street, Suite 540, Woodland Hills, CA 91367 and GTC
Telecom ("Client"), whose address is 3151 Airway Ave. Suite P-3,
Costa Mesa, CA 92626.
WITNESSETH
WHEREAS, Client requires expertise in the area of investment
banking to support its business and growth; and
WHEREAS, TCC has substantial contacts among the members of
the investment community, investment banking expertise, and
desires to act as a consultant to provide investment banking and
advisory services.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein and subject
specifically to the conditions hereof, and intending to be
legally bound thereby, the parties agree as follows:
1. Certain Definitions. When used in this Agreement, the
following terms shall have the meanings set forth below:
1.1 Affiliate shall mean any persons or entities holding
more
than a 51% interest in either party to this Agreement.
1.2 Client shall mean the Client's contractors, contacts or
associates.
1.3 Contact Person shall refer to the person who shall be
primarily responsible for carrying out the duties of the parties
hereunder. Client and TCC shall each appoint a Contact Person to
be responsible for their respective duties. In the event that
one party gives notice to the other party in writing that in
their reasonable opinion, the other party's Contact Person is not
able to fulfill their duties and responsibilities hereunder, both
parties shall mutually agree upon a replacement Contact Person
within 10 days of said notice.
1.4 Extraordinary Expenses shall mean expenses that are
beyond those expenses that are usual, regular, or customary in
the conduct of Client's investment banking consulting activities
in fulfillment of the scope of this Agreement.
1.5 Equity shall mean cash, securities or liquid assets,
specifically excluding real property.
1.6 Payment or Payable in Kind shall refer to distribution
of the proceeds of a transaction in the same type and form as was
given as valuable consideration for the transaction.
<PAGE>
2. Contact Persons. The Contact Person for TCC is Wendell
Baker. The Contact Person for Client is Eric Clemons.
3. Services to be Rendered by TCC. Services to be rendered by
TCC are as follows:
3.1 Advice and Counsel. TCC will provide advice and counsel
regarding Client's strategic business and financial plans,
strategy and negotiations with potential lenders/investors,
market timing advice, merger/acquisition candidates, joint
venturers, corporate partners, primary or secondary market
funding sources, and others involving financial and financially
related transactions.
3.2 Introduction to the Securities Brokerage Community. TCC
has a close association with numerous broker/dealers and
investment professionals across the country and will enable
contact between Client and/or Clients to facilitate business
transactions among them. TCC shall use its contacts in the
brokerage community to assist Client in establishing
relationships with securities dealers and to provide the most
recent corporate information to interested securities dealers on
a regular and continuous basis. TCC understands that this is in
keeping with Client's business objective to establish a
nationwide network of securities dealers who have an
interest in Client and/or Clients.
3.3 Market-Timing Information. TCC will monitor and react
to sensitive market information on a timely basis and provide
advice, counsel and proprietary intelligence (including but not
limited to, information on price, volume and the identification
of market-makers, buyers and sellers) to Client in a timely
fashion with respect to securities of Client or in which Client
has an interest. Client understands that this information is
available from other sources but acknowledges that TCC can
provide it in a more timely fashion and with substantial
value-added interpretation of such information. The foregoing
notwithstanding, no information will be provided to Client with
respect to the activities of any other TCC customers or TCC
customer accounts without such customer's prior consent.
3.4 Client and/or ClientsTransaction Due Diligence. TCC
will undertake due diligence on all proposed financial
transactions affecting the Client, including investigation and
advice on the financial, dilutive, valuation and stock price
implications thereof.
3.5 Additional Duties. Client and TCC shall mutually agree
upon any additional duties, which TCC may provide for
compensation paid or payable by Client under this Agreement.
Such additional agreement(s) may from time to time, although
there is no requirement to do so, be attached hereto and made a
part hereof as Exhibits beginning with Exhibit A.
3.6 Best Efforts. TCC shall devote such time and best
efforts as may be reasonable necessary to perform its services
hereunder. TCC is not responsible for the performance of any
services, which may be rendered hereunder without the Client
providing the necessary information prior thereto. TCC cannot
guarantee results on behalf of Client, but shall pursue all
avenues available through its network of financial contacts. At
such time as an interest is expressed in Client's needs, TCC
shall notify Client and advise it as to the source of such
interest and any terms and conditions of
<PAGE>
such interest. The acceptance and consummation of any
transaction is subject to acceptance of the terms and conditions
by Client. It is understood that a portion of the compensation
to be paid hereunder is being paid by Client to have TCC remain
available to assist it with transactions on an as needed basis.
4. Compensation to TCC.
4.1 Initial Fee. Client shall pay TCC an initial fee of
[50,000 SHARES OF CLIENT'S RESTRICTED COMMON STOCK] for TCC's
initial setup activities, which are necessary for TCC to provide
the services herein. This fee shall be considered in arrears if
not received by the tenth (10th) business day following execution
of this Agreement. Client shall register those 50,000 shares
upon demand of TCC.
4.2 Completion of Financing Tranche. Upon receipt of the
first tranche of $100,000., Client agrees to pay TCC an
investment banking fee in an amount equal to 13% of the
gross proceeds received plus 100,000 FIVE YEAR OPTIONS
AT $.01 TO PURCHASE CLIENT'S RESTRICTED COMMON STOCK.
4.2.1 TCC agrees not to short sell, pledge, or
hypothecate in any manner any of the GTC stock it
receives and TCC agrees, that in the event if it
is a requirement by GTC Investment Banker in the
future, to enter into a lockup
agreement to
provide financing, TCC will lockup under the same
terms that either GTC Management or The Michelson
Group agrees to at TCC's choice.
4.2.2 Additional Stock.
4.2.2.1 If TCC funds a total of $250,000 by
December 31, 1998, TCC will receive an
option to purchase an additional 100,000
shares of stock.
4.2.2.2 And if TCC raises an additional
$250,000 by January 15th (bringing total
raised $500,000), TCC will receive an
option to
purchase an additional 100,000 shares
(bringing total to 350,000 shares).
4.2.2.3 And if TCC raises an additional
$500,000 by February 15th, 1999, TCC will
receive an option to purchase an
additional 300,000 shares, bringing total
to 650,000 shares to TCC and $1,000,000 to
GTC.
4.3 Client hereby directs and authorizes such funding
source(s) or underwriter(s) to pay said investment banking fee
directly to, or to direct a third party escrow, if applicable, to
make payment directly to TCC.
4.4 TCC may, at its sole option, elect to receive all or a
portion of said investment banking fees as payment in kind, i.e.,
prorata in the same form and type of securities, equity, or
<PAGE>
financing instruments issued to the funding source or underwriter
by Client. In the event the exercise of this option results in
additional expense over and above the expenses of the funding
and/or underwriting then the additional expenses shall be borne
by TCC. In addition, the exercise of this option by TCC shall
not impede or otherwise have a negative effect on the funding or
underwriting.
4.5 Interest on Unpaid Investment Banking Fees. Client
shall pay interest on all payments in arrears due to TCC at the
rate of 10% per annum.
4.6 Additional Fees. Client and TCC shall mutually agree
upon any additional fees, which Client may, pay in the future for
services rendered by TCC under this Agreement. Such additional
agreement(s) may, although there is no requirement to do so, be
attached hereto and made a part hereof as Exhibits beginning with
Exhibit A.
4.6 Optional Form of Payment. TCC may, at the time for
each payment and its' sole option, elect to receive all or a
portion of said fees in the form of securities equity, or
financing instruments issued by Client or Client's Clients to TCC
on terms agreed upon by Client in writing.
4.7 Extraordinary Expenses. Extraordinary expenses of TCC,
including, but not limited to, air travel, lodging, meals,
website creation, printing expenses or car rental shall be
submitted to Client for approval prior to expenditure and shall
be paid by Client, within ten (10) business days of receipt of
TCC's request or payment.
5. Indemnification. Each party shall hold the other party
harmless from and against, and shall indemnify the other party,
for any liability, loss, and costs, expenses or damages howsoever
caused by reason of any injury (whether to body, property,
personal or business character or reputation) sustained by any
person or to any person or property by reason of any act,
neglect, default or omission of it or any of its agents,
employees, or other representatives arising out of or in relation
to this Agreement. Nothing herein is intended to nor shall it
relieve either party from liability for its own act, omission or
negligence. All remedies provided by law or in equity shall be
cumulative and not in the alternative.
6. Client Representations. Client hereby represents, covenants
and warrants to TCC as follows:
6.1 Authorization. Client and it's signatories herein have
full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. Client shall
provide TCC with a certified copy of the resolutions of Client's
Board of Directors authorizing the entry into this Agreement and
the payment terms included herein.
6.2 No Violation. Neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will violate any provision of the charter or
by-laws of Client or, violate, or be in conflict with, or
constitute a default under, any agreement or commitment to which
Client is a party, or violate any status or law or any judgment,
decree, order, regulation or rule of any court or governmental
authority.
6.3 Validity of Information. All business plans,
registration statements, contracts, agreements, plans, leases,
policies and licenses submitted to TCC as part of Client's due
diligence or to which Client is a party are valid and in full
force and effect.
<PAGE>
6.4 Litigation. Except as set forth below, there is no
action, suit, inquiry, proceeding or investigation by or before
any court or governmental or other regulatory or administrative
agency or commission pending or, to the best knowledge of Client
threatened against or involving Contract, or which questions or
challenges the validity of this Agreement and its subject matter,
and Client does not know or have any reason to know of any valid
basis for any such action, proceeding or investigation.
6.5 Consents. No consent of any person, other than the
signatories hereto, is necessary to the consummation of the
transactions contemplated hereby, including, without limitation,
consents from parties to loans, contracts, leases or other
agreements and consents from government agencies, whether
federal, state, or local.
6.6 TCC Reliance. That TCC has and will rely upon the
documents, instruments and written information furnished to TCC
by the Client's officers, or designated employees; and:
6.6.1 Client Material. That all representations
and statements provided about the Client are
true and complete and accurate. Client
agrees to indemnify, hold harmless, and defend
TCC, its officers, directors, agents and employees, at Client's
expense for any proceeding or suit which may arise out of any
inaccuracy or incompleteness of any such material or written
information supplied to TCC; and,
6.6.2 Client and Other Material. That all
representations and statements provided, other than about the
Client, are, to the best of its knowledge, true and complete and
accurate.
6.7 Services Not Expressed or Implied.
6.7.1 That TCC has not agreed with Client, in this
Agreement or any other agreement, verbal or written, to obtain
market makers, or to become a market-maker in any specific
securities that Client or Clients has an interest; and,
6.7.2 That any payments made herein to TCC are not,
and shall not be construed as, compensation
to TCC for the purposes of making a market,
to cover TCC's out-of-pocket expenses for
making a market, or for the submission by TCC
of an application to make a market in any
securities; and,
6.7.3 That no payments made herein to TCC are for
the purposes of affecting the price of any
security or influencing any market-making
functions, including but
not limited to,
bid/ask quotations, initiation and
termination of quotations, retail
securities activities, or for the submission
of any application to make a market.
7. Confidentiality. TCC and Client each agree to provide
reasonable security measures to keep information confidential
whose release may be detrimental to the business. TCC and Client
shall each require their employees, agents, affiliates,
subClients, other licensees, and others who will properly have
access to the information through TCC and Client respectively, to
first enter into
<PAGE>
appropriate non-disclosure agreements requiring the
confidentiality contemplated by this Agreement in perpetuity.
8. Miscellaneous Provisions.
8.1 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented by
written agreement of TCC and Client or by their duly authorized
respective officers.
8.2 Waiver of Compliance. Any failure of TCC, on the one
hand, or Client, on the other, to comply with any obligation,
agreement or condition herein may be expressly waived in writing,
but such waiver of failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other
failure.
8.3 Expenses; Transfer Taxes, Etc. Whether or not the
transaction contemplated by this Agreement shall be consummated,
TCC agrees that all fees and expenses incurred by TCC in
connection with this Agreement, shall be borne by TCC and Client
agrees that all fees and expenses incurred by Client in
connection with this Agreement shall be borne by Client,
including, without limitation as to TCC or Client, all fees of
counsel and accountants.
8.4 Other Business Opportunities. Except as expressly
provided in this Agreement, each party hereto shall have the
right independently to engage in and receive full benefits from
business activities. In the case of business activities which
would be competitive with the other party, notice shall be given
prior to this Agreement or, if such activities are proposed,
within 10 days prior to engagement herein. The doctrines of
"corporate opportunity" or "business opportunity" shall not be
applied to any other activity, venture, or operation of either
party.
8.5 Compliance with Regulatory Agencies. Each party
represents to the other party that all actions, direct or
indirect, taken by it and its respective agents, employees and
affiliates in connection with this Agreement and any financing or
underwriting hereunder shall conform to all applicable Federal
and state securities laws.
8.6 Notices. Any notices to be given hereunder by any part
to the other may be effected by personal delivery in writing or
by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the
parties at the addresses appearing on the introductory paragraph
of this Agreement, but any party may change his address by
written notice in accordance with this subsection. Notices
delivered personally shall be deemed communicated as of actual
receipt, mailed notices shall be deemed communicated as of three
(3) days after mailing.
8.7 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other
party.
<PAGE>
8.8 Delegation. Neither party shall delegate the
performance of its duties under this Agreement without the prior
written consent of the other party.
8.9 Publicity. Neither TCC nor Client shall make or issue,
or cause to be made or issued, any announcement or written
statement concerning this Agreement or the transactions
contemplated hereby for dissemination to the general public
without the prior consent of the other party. This provision
shall not apply, however, to any announcement or written
statement required to be made by law or the
regulations of any federal or state governmental agency, except
that the party required to make such announcement shall, whenever
practicable, consult with the other party concerning the timing
and consent of such announcement before such announcement is
made.
8.10 Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in
accordance with the laws of the State of California, without
regard to its conflict of law doctrine. Client and TCC agree
that if action is instituted to enforce or interpret any
provision of this
Agreement then jurisdiction and venue shall be Orange County,
California.
8.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but of which together shall constitute one
and the same instrument.
8.12 Headings. The headings of the Sections of this
Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
8.13 Entire Agreement. This Agreement, including any
Exhibits hereto, and any other documents and certificates
delivered pursuant to the terms hereof, set forth the entire
agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersedes all prior
agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto.
8.14 Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or corporation other than the parties hereto and their
successors or assigns, any rights or remedies
8.15 Attorneys' Fees and Costs. If any action is necessary
to enforce and collect upon the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees
and costs, in addition to any other relief to which that party
may be entitled. This provision shall be construed as applicable
to the entire agreement.
<PAGE>
8.16 Survivability. If any part of this Agreement is found,
or deemed by a court of competent jurisdiction, to be invalid or
unenforceable, that part shall be severable from the remainder of
this Agreement.
8.17 Further Assurances. Each of the parties agrees that it
shall from time to time take such actions and execute such
additional instruments as may be reasonably necessary or
convenient to implement and carry out the intent and purpose of
this Agreement.
8.18 Right to Data After Termination. After termination of
this Agreement each party shall be entitled to copies of all
information acquired hereunder as of the date of termination and
not previously furnished to it.
8.19 Relationship of the Parties. Nothing contained in this
Agreement shall be deemed to constitute either party the partner
of the other, nor, except as otherwise herein expressly provided,
to constitute either party the agent or legal representative of
the other, nor to create any fiduciary relationship between them.
It is not the intention of the parties to create, nor shall this
Agreement be construed to create any commercial or other
partnership. Neither party shall have any authority to act for
or to assume any obligation or responsibility on behalf of the
other party, except as otherwise expressly provided herein. The
rights, duties, obligations and liabilities of the parties shall
be several and not joint or collective. Each party hereto shall
be responsible only for its obligations as herein set out and
shall be liable only for its share of the costs and expenses as
provided herein. Each party shall indemnify, defend and hold
harmless the other party, its directors, officers, and employees
from and against any and all losses, claims, damages and
liabilities arising out of any act or any assumption of liability
by the indemnifying party, or any of its directors, officers or
employees, done or undertaken, or apparently done or undertaken,
on behalf of the other party, except pursuant to the authority
expressly granted herein or otherwise agreed in writing between
the parties. Each party shall be responsible for the acts of its
agent and affiliates.
9. Terms of Agreement and Termination. This Agreement shall be
effective upon execution, and shall continue for one year unless
terminated sooner, by either party, upon giving to the other
party 30 days written notice, after which time this Agreement is
terminated. TCC shall be entitled to any investment banking fees
for fundings, mergers, or underwriting commitments entered into
within one year after the termination of this Agreement if said
funding, merger or underwriting was the result of TCC's
consulting and introduction efforts prior to the termination of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
Client: GTC TELECOM
By: /s/ Paul Sandhu
Name: Paul Sandhu
Title: President
TCC:
TRANSGLOBAL CAPITAL CORPORATION
a California corporation
By: /s/ Wendall Baker
Wendell Baker, Managing Director
<PAGE>
AT-WILL EMPLOYMENT AGREEMENT
This AT-WILL EMPLOYMENT AGREEMENT ("Agreement") is made,
entered into, and effective as of October 14, 1998 ("Effective
Date"), by and between GTC Telecom, Inc., a Nevada corporation (the
"Company") and Mark Fleming ("Fleming").
RECITALS
WHEREAS, COMPANY desires to benefit from Fleming's expertise
and employ Fleming on an "at will" basis as Executive Vice-President
and Fleming is willing to accept such employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The parties agree that this Agreement constitutes an At-Will
Employment Agreement which may be terminated by either party at any
time ("Termination Date"), with or without cause. The Company
hereby employs Fleming as Executive Vice-President ("V.P.") as of
the Effective Date and Fleming agrees to enter into and remain in
the employ of the Company until this Agreement is terminated.
Fleming shall faithfully and diligently perform all professional
duties and acts as V.P. as may be reasonably requested of Fleming by
the Company or its officers consistent with the function of a V.P.
of a similar telecommunications company.
2. Duties.
2.1 Fleming agrees to perform Fleming's services to the best
of Fleming's ability. Fleming agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, the Company shall compensate Fleming for his services
hereunder at an annual salary ("Salary") of Seventy Thousand Dollars
($70,000.00), payable in semi-monthly installments in accordance
with the Company's practices, less normal payroll deductions.
Provided however, that Fleming's annual Salary shall increase to One
Hundred and Seven Thousand Dollars ($107,000) upon the happening of
either of the following events:
<PAGE>
a. The Company's gross revenues, actually received for
two consecutive calendar months, exceed all gross
expenditures actually paid for the same period; or
b. The Company successfully completes a Form SB-2
registered offering of its securities.
In the event that neither the events described in paragraphs
3.1(a) or 3.1(b) occur by March 31, 1999, the Company agrees to meet
with Fleming for the purposes of reviewing Fleming's Salary under
this Agreement.
3.2 In addition to the Salary as defined above, the Company
agrees to grant to Fleming One Hundred Thousand Stock Purchase
(100,000) Options as follows:
a. 10,000 Options to vest six (6) months from the date
of this Agreement, provided that Fleming is then
employed by the Company, exercisable at a price of
$.01 per share, for a period of thirty-six (36)
months from the date of vesting. If the Company at
any time proposes to register any of its securities
under the Securities Act of 1933 (the "Act"),
including under an SB-2 Registration Statement or
otherwise, it will use its best efforts to cause all
the Shares into which said Options are exercisable to
be registered under the Act, as amended, with the
other securities which the Company at the time
propose to register.
b. The remaining 90,000 Options to vest in 1/3
increments each following year, provided that Fleming
is then employed by the Company, over the subsequent
three years at an exercise price of $4.00, for a
period of thirty-six (36) months from the date of
vesting. The Company is not required to cause the
Shares into which said Options are exercisable to be
registered under the Act.
c. Notwithstanding the above, in the event that this
Agreement is terminated, for any reason, Fleming
shall have ninety (90)
days from the
Termination Date in
which to exercise those
Options already vested.
All Options not
exercised within ninety
(90) days of the
Termination Date and
those not yet vested on
the Termination Date,
shall be forfeited by
Fleming and deemed null
and void.
3.3 In addition to the compensation set forth above, the
Company shall periodically review Fleming's performance and services
rendered with a view to paying discretionary bonuses based upon
above-average or outstanding performance for a prior period. Any
such bonuses approved by the Company shall be paid to Fleming within
30 days of the grant thereof.
<PAGE>
3.4 In addition to the Salary and bonuses stated above,
commencing with the Effective Date, Fleming shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company. Fleming shall also be entitled
to participate, fully and on a reasonable basis comparable to other
officers, in any and all stock option, stock purchase, stock
appreciation (or the like) plans, programs or arrangements
heretofore or hereafter adopted or amended by the Company, and in
all individual or group insurance, retirement, disability, salary
continuation and other employee benefit plans, programs or
arrangements or any equivalent successor plans, programs or
arrangements that may now exist or hereafter be adopted by the
Company. Fleming shall be entitled to participate in any and all
group life, workers' compensation, health plan, or accidental
insurance plans which are adopted by the Company for the benefit of
officers or employees. Fleming shall be entitled to such sick leave
and paid holidays and to such other perquisites of employment, as
customarily are extended by the Company to officers or employees.
In addition, Fleming shall be entitled to such other benefits as the
Company may elect to provide generally, from time to time, to
officers or employees.
4. Expenses.
The Company shall reimburse Fleming for all reasonable business
related expenses incurred by Fleming in the course of his normal
duties on behalf of the Company. In reimbursing Fleming for
expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Fleming.
5. Severance.
5.1 If, and only if, this Agreement is terminated as set forth
in Section 5.2 herein, the Company shall pay to Fleming severance in
the amount equal to one-fourth (1/4) of the Salary then payable
pursuant to Section 3.1 herein, at the date of Fleming's termination
(the "Termination Salary"). The Company shall pay the Termination
Salary to Fleming upon the same payment schedule and subject to all
state, federal, and local tax withholdings, as though Fleming were
still employed by the Company.
5.2 Upon the occurrence of any of the following events Fleming
shall be entitled to terminate his employment hereunder and the
Company shall be obligated to pay Fleming the Termination Salary:
Fleming resigns or is terminated for a reason other than
voluntarily or for Cause. The following shall constitute
"Cause" for purposes of this Agreement:
1. A willful act of dishonesty by Fleming involving
theft of funds or assets;
2. The conviction of Fleming of a felony; or
<PAGE>
3. Willful failure or refusal of Fleming to
properly perform Fleming's duties under this
Agreement, other than any such failure resulting
from Fleming's exercise of business judgment or
incapacity due to physical or mental illness;
For purposes of this paragraph 5.2 no act, or failure to act,
on Fleming's part shall be considered "willful" or "intentional"
unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omissions was in the
best interest of the Company.
6. Vacation.
Fleming shall be entitled to four (4) weeks of paid vacation
for each year of service, which vacation shall be used by Fleming
during the ensuing year as approved by the Company. Vacation dates
shall be approved by the Company and shall be those most convenient
to the Company's business. Fleming shall also be entitled to sick
days to the extent otherwise granted generally to employees and/or
officers of the Company.
7. Arbitration.
If a dispute or claim shall arise between the parties with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this
Agreement, then the parties agree that the dispute shall be
arbitrated in Orange County, California, before a single arbitrator,
in accordance with the rules of either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and
JAMS/Endispute rules shall be made by the claimant first demanding
arbitration. The arbitrator shall have no power to alter or modify
any express provisions of this Agreement or to render any award
which by its terms affects any such alteration or modification. The
parties to the arbitration may agree in writing to use different
rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with the California Code of Civil
Procedure, or equivalent. The parties agree that the judgment award
rendered by the arbitrator shall be considered binding and may be
entered in any court having jurisdiction as stated in Paragraph 11
of this Agreement. The provisions of this Paragraph shall survive
the termination of this Agreement.
8. Notices.
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or delivered via facsimile, or
Forty-Eight (48) hours after deposit in the United States mail,
postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the
parties indicated below or at such other address as such party shall
in writing have advised the other party.
<PAGE>
If to the Company:
GTC Telecom, Inc.
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
Attn: Paul Sandhu, President
With a copy to:
M. Richard Cutler, Esq.
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Facsimile No.: 949-719-1988
If to Fleming:
Mark Fleming
____________________
____________________
9. Assignment.
Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Court of the
State of California in and for the County of Orange, for the
resolution of all legal disputes arising under the terms of this
Agreement, including, but not limited to, enforcement of any
arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or
<PAGE>
written, between and among the parties hereto relating to the
subject matter of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty or
default of this Agreement by any party shall be considered to be a
waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall
<PAGE>
furnish to the party receiving such payment all documentation
necessary to prove the proper amount to withhold of such taxes and
to prove payment to the tax authority of such required withholding.
20. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the Effective Date.
"Company" "Fleming"
GTC Telecom, Inc. Mark Fleming
/s/Paul Sandhu /s/Mark Fleming
By: Paul Sandhu, President
AT-WILL EMPLOYMENT AGREEMENT
This AT-WILL EMPLOYMENT AGREEMENT ("Agreement") is made,
entered into, and effective as of December 1, 1998 ("Effective
Date"), by and between GTC Telecom, Inc., a Nevada corporation (the
"Company") and Eric Clemons ("Clemons").
RECITALS
WHEREAS, COMPANY desires to benefit from Clemons's expertise
and employ Clemons on an "at will" basis as Chief Operating Officer
and Clemons is willing to accept such employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The parties agree that this Agreement constitutes an At-Will
Employment Agreement which may be terminated by either party at any
time ("Termination Date"), with or without cause. The Company
hereby employs Clemons as Chief Operating Officer ("C.O.O.") as of
the Effective Date and Clemons agrees to enter into and remain in
the employ of the Company until this Agreement is terminated.
Clemons shall faithfully and diligently perform all professional
duties and acts as C.O.O. as may be reasonably requested of Clemons
by the Company or its officers consistent with the function of a
C.O.O of a similar telecommunications company.
2. Duties.
2.1 Clemons agrees to perform Clemons's services to the best
of Clemons's ability. Clemons agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, the Company shall compensate Clemons for his services
hereunder at an annual salary ("Salary") of Seventy-Six Thousand
Dollars ($76,000.00), payable in semi-monthly installments in
accordance with the Company's practices, less normal payroll
deductions. Provided however, that Clemons's annual Salary shall
increase to One Hundred and Fifty-Two Thousand Dollars ($152,000)
upon the happening of either of the following events:
<PAGE>
a. The Company's gross revenues, actually received for
two consecutive calendar months, exceed all gross
expenditures actually paid for the same period; or
b. The Company successfully completes a Form SB-2
registered offering of its securities.
3.2 In addition to the Salary as defined above, the Company
agrees to grant to Clemons One Hundred (100,000) Thousand Stock
Purchase Options as follows:
a. All 100,000 Options to vest immediately upon the
Effective Date of this Agreement, exercisable at a
price of $.01 per share for a period of thirty-six
(36) months from the Effective Date. If the Company
at any time proposes to register any of its
securities under the Securities Act of 1933 (the
"Act"), including under an SB-2 Registration
Statement or otherwise, it will use its best efforts
to cause all the Shares into which said Options are
exercisable to be registered under the Act, as
amended, with the other securities which the Company
at the time propose to register.
b. Notwithstanding the above, in the event that this
Agreement is terminated, for any reason, Clemons
shall have ninety (90) days from the Termination Date
in which to exercise those Options already vested.
All Options not exercised within ninety (90) days of
the Termination Date and those not yet vested on the
Termination Date, shall be forfeited by Clemons and
deemed null and void.
3.3 In addition to the compensation set forth above, the
Company shall periodically review Clemons's performance and services
rendered with a view to paying discretionary bonuses based upon
above-average or outstanding performance for a prior period. Any
such bonuses approved by the Company shall be paid to Clemons within
30 days of the grant thereof.
3.4 In addition to the Salary and bonuses stated above,
commencing with the Effective Date, Clemons shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company. Clemons shall also be entitled
to participate, fully and on a reasonable basis comparable to other
officers, in any and all stock option, stock purchase, stock
appreciation (or the like) plans, programs or arrangements
heretofore or hereafter adopted or amended by the Company, and in
all individual or group insurance, retirement, disability, salary
continuation and other employee benefit plans, programs or
arrangements or any equivalent successor plans, programs or
arrangements that may now exist or hereafter be adopted by the
Company. Clemons shall be entitled to participate in any and all
group life, workers' compensation, health plan, or accidental
insurance plans which are adopted by the Company for the benefit of
officers or employees. Clemons shall be entitled to such sick leave
and paid holidays and to such other perquisites of employment, as
customarily are extended by the Company to officers or employees.
In addition, Clemons shall be entitled to such other benefits as the
Company may elect to provide generally, from time to time, to
officers or employees.
<PAGE>
4. Expenses.
The Company shall reimburse Clemons for all reasonable business
related expenses incurred by Clemons in the course of his normal
duties on behalf of the Company. In reimbursing Clemons for
expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Clemons.
5. Severance.
5.1 If, and only if, this Agreement is terminated as set forth
in Section 5.2 herein, the Company shall pay to Clemons severance in
the amount equal to one-fourth (1/4) of the Salary then payable
pursuant to Section 3.1 herein, at the date of Clemons's termination
(the "Termination Salary"). The Company shall pay the Termination
Salary to Clemons upon the same payment schedule and subject to all
state, federal, and local tax withholdings, as though Clemons were
still employed by the Company.
5.2 Upon the occurrence of any of the following events Clemons
shall be entitled to terminate his employment hereunder and the
Company shall be obligated to pay Clemons the Termination Salary:
Clemons resigns or is terminated for a reason other than
voluntarily or for Cause. The following shall constitute
"Cause" for purposes of this Agreement:
1. A willful act of dishonesty by Clemons involving
theft of funds or assets;
2. The conviction of Clemons of a felony; or
3. Willful failure or refusal of Clemons to
properly perform Clemons's duties under this
Agreement, other than any such failure resulting
from Clemons's exercise of business judgment or
incapacity due to physical or mental illness;
For purposes of this paragraph 5.2 no act, or failure to act,
on Clemons's part shall be considered "willful" or "intentional"
unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omissions was in the
best interest of the Company.
6. Vacation.
Clemons shall be entitled to four (4) weeks of paid vacation
for each year of service, which vacation shall be used by Clemons
during the ensuing year as approved by the Company. Vacation dates
shall be approved by the Company and shall be those most convenient
to the Company's business. Clemons shall also be entitled to sick
days to the extent otherwise granted generally to employees and/or
officers of the Company.
<PAGE>
7. Arbitration.
If a dispute or claim shall arise between the parties with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this
Agreement, then the parties agree that the dispute shall be
arbitrated in Orange County, California, before a single arbitrator,
in accordance with the rules of either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and
JAMS/Endispute rules shall be made by the claimant first demanding
arbitration. The arbitrator shall have no power to alter or modify
any express provisions of this Agreement or to render any award
which by its terms affects any such alteration or modification. The
parties to the arbitration may agree in writing to use different
rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with the California Code of Civil
Procedure, or equivalent. The parties agree that the judgment award
rendered by the arbitrator shall be considered binding and may be
entered in any court having jurisdiction as stated in Paragraph 11
of this Agreement. The provisions of this Paragraph shall survive
the termination of this Agreement.
8. Notices.
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or delivered via facsimile, or
Forty-Eight (48) hours after deposit in the United States mail,
postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the
parties indicated below or at such other address as such party shall
in writing have advised the other party.
If to the Company:
GTC Telecom, Inc.
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
Attn: Paul Clemons, President
With a copy to:
M. Richard Cutler, Esq.
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Facsimile No.: 949-719-1988
If to Clemons:
Eric Clemons
____________________
____________________
<PAGE>
9. Assignment.
Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Court of the
State of California in and for the County of Orange, for the
resolution of all legal disputes arising under the terms of this
Agreement, including, but not limited to, enforcement of any
arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
<PAGE>
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty or
default of this Agreement by any party shall be considered to be a
waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
20. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the Effective Date.
"Company" "Clemons"
GTC Telecom, Inc. Eric Clemons
/s/Paul Sandhu /s/Eric Clemons
By: Paul Sandhu, President
AT-WILL EMPLOYMENT AGREEMENT
This AT-WILL EMPLOYMENT AGREEMENT ("Agreement") is made,
entered into, and effective as of December 1, 1998 ("Effective
Date"), by and between GTC Telecom, Inc., a Nevada corporation ("the
"Company") and Jerry Deciccio ("Deciccio").
RECITALS
WHEREAS, COMPANY desires to benefit from Deciccio's expertise
and employ Deciccio on an "at will" basis as Chief Financial Officer
and Deciccio is willing to accept such employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The parties agree that this Agreement constitutes an At-Will
Employment Agreement which may be terminated by either party at any
time ("Termination Date"), with or without cause. The Company
hereby employs Deciccio as Chief Financial Officer ("CFO") as of the
Effective Date and Deciccio agrees to enter into and remain in the
employ of the Company until this Agreement is terminated. Deciccio
shall faithfully and diligently perform all professional duties and
acts as CFO as may be reasonably requested of Deciccio by the
Company or its officers consistent with the function of a CFO of a
similar telecommunications company.
2. Duties.
2.1 Deciccio agrees to perform Deciccio's services to the best
of Deciccio's ability. Deciccio agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, the Company shall compensate Deciccio for his services
hereunder at an annual salary ("Salary") of One Hundred and Five
Thousand Dollars ($105,000.00), payable in semi-monthly installments
in accordance with the Company's practices, less normal payroll
deductions. Provided however, that Deciccio's annual Salary shall
increase to One Hundred and Twenty-Five Thousand Dollars ($144,000)
upon the happening of either of the following events:
<PAGE>
a. The Company's gross revenues, actually received for
two consecutive calendar months, exceed all gross
expenditures actually paid for the same period; or
b. The Company successfully completes a Form SB-2
registered offering of its securities.
3.2 In addition to the Salary as defined above, the Company
agrees to grant to Deciccio One Hundred and Fifty Thousand Stock
Purchase Options as follows:
a. 25,000 Options to vest six (6) months from the date
of this Agreement, provided that Deciccio is then
employed by the Company, exercisable at a price of
$.01 per share for a period of thirty-six (36) months
from the date of vesting. If the Company at any time
proposes to register any of its securities under the
Securities Act of 1933 (the "Act"), including under
an SB-2 Registration Statement or otherwise, it will
use its best efforts to cause all the Shares into
which said Options are exercisable to be registered
under the Act, as amended, with the other securities
which the Company at the time propose to register.
b. The remaining 125,000 Options to vest in 1/3
increments each following year, provided that
Deciccio is then employed by the Company, over the
subsequent three years at an exercise price of $4.00,
for a period of thirty-six (36) months from the date
of vesting. The Company is not required to cause the
Shares into which said Options are exercisable to be
registered under the Act.
c. Notwithstanding the above, in the event that this
Agreement is terminated, for any reason, Deciccio
shall have ninety (90)
days from the
Termination Date in
which to exercise those
Options already vested.
All Options not
exercised within ninety
(90) days of the
Termination Date and
those not yet vested on
the Termination Date,
shall be forfeited by
Deciccio and deemed
null and void.
3.3 In addition to the compensation set forth above, the
Company shall periodically review Deciccio's performance and
services rendered with a view to paying discretionary bonuses based
upon above-average or outstanding performance for a prior period.
Any such bonuses approved by the Company shall be paid to Deciccio
within 30 days of the grant thereof.
3.4 In addition to the Salary and bonuses stated above,
commencing with the Effective Date, Deciccio shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company. Deciccio shall also be entitled
to participate, fully and on a reasonable basis comparable to other
officers, in any and all stock option, stock purchase, stock
appreciation (or the like) plans, programs or arrangements
heretofore or hereafter adopted or amended by the Company, and in
all individual or group insurance, retirement, disability, salary
<PAGE>
continuation and other employee benefit plans, programs or
arrangements or any equivalent successor plans, programs or
arrangements that may now exist or hereafter be adopted by the
Company. Deciccio shall be entitled to participate in any and all
group life, workers' compensation, health plan, or accidental
insurance plans which are adopted by the Company for the benefit of
officers or employees. Deciccio shall be entitled to such sick
leave and paid holidays and to such other perquisites of employment,
as customarily are extended by the Company to officers or employees.
In addition, Deciccio shall be entitled to such other benefits as
the Company may elect to provide generally, from time to time, to
officers or employees.
4. Expenses.
The Company shall reimburse Deciccio for all reasonable
business related expenses incurred by Deciccio in the course of his
normal duties on behalf of the Company. In reimbursing Deciccio
for expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Deciccio.
5. Severance.
5.1 If, and only if, this Agreement is terminated as set forth
in Section 5.2 herein, the Company shall pay to Deciccio severance
in the amount equal to one-fourth (1/4) of the Salary then payable
pursuant to Section 3.1 herein, at the date of Deciccio's
termination (the "Termination Salary"). The Company shall pay the
Termination Salary to Deciccio upon the same payment schedule and
subject to all state, federal, and local tax withholdings, as though
Deciccio were still employed by the Company.
5.2 Upon the occurrence of any of the following events
Deciccio shall be entitled to terminate his employment hereunder and
the Company shall be obligated to pay Deciccio the Termination Salary:
Deciccio resigns or is terminated for a reason other than
voluntarily or for Cause. The following shall constitute
"Cause" for purposes of this Agreement:
1. A willful act of dishonesty by Deciccio
involving theft of funds or assets;
2. The conviction of Deciccio of a felony; or
3. Willful failure or refusal of Deciccio to
properly perform Deciccio's duties under this
Agreement, other than any such failure resulting
from Deciccio's exercise of business judgment or
incapacity due to physical or mental illness;
<PAGE>
For purposes of this paragraph 5.2 no act, or failure to act,
on Deciccio's part shall be considered "willful" or "intentional"
unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omissions was in the
best interest of the Company.
6. Vacation.
Deciccio shall be entitled to four (4) weeks of paid vacation
for each year of service, which vacation shall be used by Deciccio
during the ensuing year as approved by the Company. Vacation dates
shall be approved by the Company and shall be those most convenient
to the Company's business. Deciccio shall also be entitled to sick
days to the extent otherwise granted generally to employees and/or
officers of the Company.
7. Arbitration.
If a dispute or claim shall arise between the parties with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this
Agreement, then the parties agree that the dispute shall be
arbitrated in Orange County, California, before a single arbitrator,
in accordance with the rules of either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and
JAMS/Endispute rules shall be made by the claimant first demanding
arbitration. The arbitrator shall have no power to alter or modify
any express provisions of this Agreement or to render any award
which by its terms affects any such alteration or modification. The
parties to the arbitration may agree in writing to use different
rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with the California Code of Civil
Procedure, or equivalent. The parties agree that the judgment award
rendered by the arbitrator shall be considered binding and may be
entered in any court having jurisdiction as stated in Paragraph 11
of this Agreement. The provisions of this Paragraph shall survive
the termination of this Agreement.
8. Notices.
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or delivered via facsimile, or
Forty-Eight (48) hours after deposit in the United States mail,
postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the
parties indicated below or at such other address as such party shall
in writing have advised the other party.
If to the Company:
GTC Telecom, Inc.
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
<PAGE>
With a copy to:
M. Richard Cutler, Esq.
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Facsimile No.: 949-719-1988
If to Deciccio:
Jerry Deciccio
26731 Anadale Dr.
Laguna Hills, CA 92653.
9. Assignment.
Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Court of the
State of California in and for the County of Orange, for the
resolution of all legal disputes arising under the terms of this
Agreement, including, but not limited to, enforcement of any
arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
13. Severability.
<PAGE>
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty or
default of this Agreement by any party shall be considered to be a
waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
20. Not for the Benefit of Creditors or Third Parties.
<PAGE>
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the Effective Date.
"Company" "Deciccio"
GTC Telecom, Inc. Jerry Deciccio
/s/Paul Sandhu /s/Jerry Deciccio
By: Paul Sandhu, President
AT-WILL EMPLOYMENT AGREEMENT
This AT-WILL EMPLOYMENT AGREEMENT ("Agreement") is made,
entered into, and effective as of December 1, 1998 ("Effective
Date"), by and between GTC Telecom, Inc., a Nevada corporation (the
"Company") and Paul Sandhu ("Sandhu").
RECITALS
WHEREAS, COMPANY desires to benefit from Sandhu's expertise and
employ Sandhu on an "at will" basis as President and Chief Executive
Officer and Sandhu is willing to accept such employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The parties agree that this Agreement constitutes an At-Will
Employment Agreement which may be terminated by either party at any
time ("Termination Date"), with or without cause. The Company
hereby employs Sandhu as President and Chief Executive Officer
("C.E.O.") as of the Effective Date and Sandhu agrees to enter into
and remain in the employ of the Company until this Agreement is
terminated. Sandhu shall faithfully and diligently perform all
professional duties and acts as President and C.E.O as may be
reasonably requested of Sandhu by the Company or its officers
consistent with the function of a President and C.E.O of a similar
telecommunications company.
2. Duties.
2.1 Sandhu agrees to perform Sandhu's services to the best of
Sandhu's ability. Sandhu agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, the Company shall compensate Sandhu for his services
hereunder at an annual salary ("Salary") of Eighty-Four Thousand
Dollars ($84,000.00), payable in semi-monthly installments in
accordance with the Company's practices, less normal payroll
deductions. Provided however, that Sandhu's annual Salary shall
increase to One Hundred and Sixty-Eight Thousand Dollars ($168,000)
upon the happening of either of the following events:
<PAGE>
a. The Company's gross revenues, actually received for two
consecutive calendar months, exceed all gross expenditures
actually paid for the same period; or
b. The Company successfully completes a Form SB-2 registered
offering of its securities.
3.2 In addition to the Salary as defined above, the Company
agrees to grant to Sandhu Two Hundred Thousand (200,000) Stock
Purchase Options as follows:
a. All 200,000 Options to vest immediately upon the
Effective Date of this Agreement, exercisable at a
price of $.01 per share, for a period of thirty-six
(36) months from the Effective Date. If the Company
at any time proposes to register any of its
securities under the Securities Act of 1933 (the
"Act"), including under an SB-2 Registration
Statement or otherwise, it will use its best efforts
to cause all the Shares into which said Options are
exercisable to be registered under the Act, as
amended, with the other securities which the Company
at the time propose to register.
b. Notwithstanding the above, in the event that this
Agreement is terminated, for any reason, Sandhu shall
have ninety (90) days from the Termination Date in
which to exercise those Options already vested. All
Options not exercised within ninety (90) days of the
Termination Date and those not yet vested on the
Termination Date, shall be forfeited by Sandhu and
deemed null and void.
3.3 In addition to the compensation set forth above, the
Company shall periodically review Sandhu's performance and services
rendered with a view to paying discretionary bonuses based upon
above-average or outstanding performance for a prior period. Any
such bonuses approved by the Company shall be paid to Sandhu within
30 days of the grant thereof.
3.4 In addition to the Salary and bonuses stated above,
commencing with the Effective Date, Sandhu shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company. Sandhu shall also be entitled to
participate, fully and on a reasonable basis comparable to other
officers, in any and all stock option, stock purchase, stock
appreciation (or the like) plans, programs or arrangements
heretofore or hereafter adopted or amended by the Company, and in
all individual or group insurance, retirement, disability, salary
continuation and other employee benefit plans, programs or
arrangements or any equivalent successor plans, programs or
arrangements that may now exist or hereafter be adopted by the
Company. Sandhu shall be entitled to participate in any and all
group life, workers' compensation, health plan, or accidental
insurance plans which are adopted by the Company for the benefit of
officers or employees. Sandhu shall be entitled to such sick leave
and paid holidays and to such other perquisites of employment, as
customarily are extended by the Company to officers or employees.
In addition, Sandhu shall be entitled to such other benefits as the
Company may elect to provide generally, from time to time, to
officers or employees.
<PAGE>
4. Expenses.
The Company shall reimburse Sandhu for all reasonable business
related expenses incurred by Sandhu in the course of his normal
duties on behalf of the Company. In reimbursing Sandhu for
expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Sandhu.
5. Severance.
5.1 If, and only if, this Agreement is terminated as set forth
in Section 5.2 herein, the Company shall pay to Sandhu severance in
the amount equal to one-fourth (1/4) of the Salary then payable
pursuant to Section 3.1 herein, at the date of Sandhu's termination
(the "Termination Salary"). The Company shall pay the Termination
Salary to Sandhu upon the same payment schedule and subject to all
state, federal, and local tax withholdings, as though Sandhu were
still employed by the Company.
5.2 Upon the occurrence of any of the following events Sandhu
shall be entitled to terminate his employment hereunder and the
Company shall be obligated to pay Sandhu the Termination Salary:
Sandhu resigns or is terminated for a reason other than
voluntarily or for Cause. The following shall constitute
"Cause" for purposes of this Agreement:
1. A willful act of dishonesty by Sandhu involving
theft of funds or assets;
2. The conviction of Sandhu of a felony; or
3. Willful failure or refusal of Sandhu to properly
perform Sandhu's duties under this Agreement,
other than any such failure resulting from
Sandhu's exercise of business judgment or
incapacity due to physical or mental illness;
For purposes of this paragraph 5.2 no act, or failure to act,
on Sandhu's part shall be considered "willful" or "intentional"
unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omissions was in the
best interest of the Company.
6. Vacation.
Sandhu shall be entitled to four (4) weeks of paid vacation for
each year of service, which vacation shall be used by Sandhu during
the ensuing year as approved by the Company. Vacation dates shall
be approved by the Company and shall be those most convenient to the
Company's business. Sandhu shall also be entitled to sick days to
the extent otherwise granted generally to employees and/or officers
of the Company.
<PAGE>
7. Arbitration.
If a dispute or claim shall arise between the parties with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this
Agreement, then the parties agree that the dispute shall be
arbitrated in Orange County, California, before a single arbitrator,
in accordance with the rules of either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and
JAMS/Endispute rules shall be made by the claimant first demanding
/arbitration. The arbitrator shall have no power to alter or modify
any express provisions of this Agreement or to render any award
which by its terms affects any such alteration or modification. The
parties to the arbitration may agree in writing to use different
rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with the California Code of Civil
Procedure, or equivalent. The parties agree that the judgment award
rendered by the arbitrator shall be considered binding and may be
entered in any court having jurisdiction as stated in Paragraph 11
of this Agreement. The provisions of this Paragraph shall survive
the termination of this Agreement.
8. Notices.
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or delivered via facsimile, or
Forty-Eight (48) hours after deposit in the United States mail,
postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the
parties indicated below or at such other address as such party shall
in writing have advised the other party.
If to the Company:
GTC Telecom, Inc.
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
Attn: Paul Sandhu, President
With a copy to:
M. Richard Cutler, Esq.
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Facsimile No.: 949-719-1988
If to Sandhu:
Paul Sandhu
____________________
____________________
<PAGE>
9. Assignment.
Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Court of the
State of California in and for the County of Orange, for the
resolution of all legal disputes arising under the terms of this
Agreement, including, but not limited to, enforcement of any
arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
<PAGE>
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty or
default of this Agreement by any party shall be considered to be a
waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
20. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the Effective Date.
"Company" "Sandhu"
GTC Telecom, Inc. Paul Sandhu
/s/Paul Sandhu /s/Paul Sandhu
By: Paul Sandhu, President
AT-WILL EMPLOYMENT AGREEMENT
This AT-WILL EMPLOYMENT AGREEMENT ("Agreement") is made,
entered into, and effective as of March 3, 1999 ("Effective Date"),
by and between GTC Telecom, Inc., a Nevada corporation (the
"Company") and Frank Naccarelli ("Naccarelli").
RECITALS
WHEREAS, COMPANY desires to benefit from Naccarelli's expertise
and employ Naccarelli on an "at will" basis as Vice-President of
Sales and Naccarelli is willing to accept such employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The parties agree that this Agreement constitutes an At-Will
Employment Agreement which may be terminated by either party at any
time ("Termination Date"), with or without cause. The Company
hereby employs Naccarelli as Vice-President Sales ("V.P. Sales") as
of the Effective Date and Naccarelli agrees to enter into and remain
in the employ of the Company until this Agreement is terminated.
Naccarelli shall faithfully and diligently perform all professional
duties and acts as V.P. Sales as may be reasonably requested of
Naccarelli by the Company or its officers consistent with the
function of a V.P. Sales of a similar telecommunications company.
2. Duties.
2.1 Naccarelli agrees to perform Naccarelli's services to the
best of Naccarelli's ability. Naccarelli agrees throughout the term
of this Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, the Company shall compensate Naccarelli for his services
hereunder at an annual salary ("Salary") of Eighty-Five Thousand
Dollars ($85,000.00), payable in semi-monthly installments in
accordance with the Company's practices, less normal payroll
deductions.
<PAGE>
3.2 In addition to the Salary as defined above, the Company
agrees to grant to Naccarelli One Hundred Thousand Stock Purchase
(45,000) Options as follows:
a. 15,000 Options to vest each year, for three years
beginning one year from the date of this Agreement,
provided that Naccarelli is then employed by the
Company, exercisable at a price of $5.50 per share,
for a period of thirty-six (36 months from the date
of vesting. If the Company at any time proposes to
register any of its securities under the Securities
Act of 1933 (the "Act"), including under an SB-2
Registration Statement or otherwise, it will use its
best efforts to cause all the Shares into which said
Options are exercisable to be registered under the
Act, as amended, with the other securities which the
Company at the time propose to register.
b. Notwithstanding the above, in the event that this
Agreement is terminated, for any reason, Naccarelli
shall have ninety (90) days from the Termination Date in
which to exercise those Options already vested.
All Options not exercised within (90) days of the
Termination Date and those not yet vested on the Termination Date,
shall be forfeited by Naccarelli and deemed null and void.
3.3 In addition to the compensation set forth above, and
subject to the termination of this Agreement, the Company hereby
agrees to reimburse Naccarelli for 50% of his housing expenses,
reasonably incurred as a result of maintaining a residence in
Southern California, up to a maximum of $1,000 per month.
3.4 In addition to the compensation set forth above, and
subject to the termination of this Agreement, the Company hereby
agrees to reimburse Naccarelli for air fare reasonably incurred for
travel to Naccarelli's Pennsylvania residence, one time per month.
The Company's compensation for air fare shall be limited to
reimbursement of normally scheduled coach class air travel reserved
at least 15 days in advance of travel. Naccarelli shall provide the
Company with at least 15 days notice of his desire to invoke this
Section 3.4. Failure to invoke this Section 3.4 on any particular
month shall not constitute a credit towards future air travel on any
subsequent month.
3.5 In addition to the compensation set forth above, the
Company hereby agrees to reimburse Naccarelli, on a one time basis,
for costs reasonably incurred in the shipping of his automobile from
his Pennsylvania residence to Southern California.
3.6 In addition to the compensation set forth above, the
Company shall periodically review Naccarelli's performance and
services rendered with a view to paying discretionary bonuses based
upon above-average or outstanding performance for a prior period.
Any such bonuses approved by the Company shall be paid to Naccarelli
within 30 days of the grant thereof.
3.7 In addition to the Salary and bonuses stated above,
commencing with the Effective Date, Naccarelli shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company. Naccarelli shall also be
entitled to participate, fully and on a
<PAGE>
reasonable basis comparable to other officers, in any and all stock
option, stock purchase, stock appreciation (or the like) plans,
programs or arrangements heretofore or hereafter adopted or amended
by the Company, and in all individual or group insurance,
retirement, disability, salary continuation and other employee
benefit plans, programs or arrangements or any equivalent successor
plans, programs or arrangements that may now exist or hereafter be
adopted by the Company. Naccarelli shall be entitled to participate
in any and all group life, workers' compensation, health plan, or
accidental insurance plans which are adopted by the Company for the
benefit of officers or employees. Naccarelli shall be entitled to
such sick leave and paid holidays and to such other perquisites of
employment, as customarily are extended by the Company to officers
or employees. In addition, Naccarelli shall be entitled to such
other benefits as the Company may elect to provide generally, from
time to time, to officers or employees.
4. Expenses.
The Company shall reimburse Naccarelli for all reasonable
business related expenses incurred by Naccarelli in the course of
his normal duties on behalf of the Company. In reimbursing
Naccarelli for expenses, the ordinary and usual business guidelines
and documentation requirements shall be adhered to by the Company
and Naccarelli.
5. Severance.
5.1 If, and only if, this Agreement is terminated as set forth
in Section 5.2 herein, the Company shall pay to Naccarelli severance
in the amount equal to one-fourth (1/4) of the Salary then payable
pursuant to Section 3.1 herein, at the date of Naccarelli's
termination (the "Termination Salary"). The Company shall pay the
Termination Salary to Naccarelli upon the same payment schedule and
subject to all state, federal, and local tax withholdings, as though
Naccarelli were still employed by the Company.
5.2 Upon the occurrence of any of the following events
Naccarelli shall be entitled to terminate his employment hereunder
and the Company shall be obligated to pay Naccarelli the Termination
Salary:
Naccarelli resigns or is terminated for a reason other than
voluntarily or for Cause. The following shall constitute
"Cause" for purposes of this Agreement:
1. A willful act of dishonesty by Naccarelli
involving theft of funds or assets;
2. The conviction of Naccarelli of a felony; or
3. Willful failure or refusal of Naccarelli to
properly perform Naccarelli's duties under this
Agreement, other than any such failure resulting
from Naccarelli's exercise of business judgment
or incapacity due to physical or mental illness;
<PAGE>
For purposes of this paragraph 5.2 no act, or failure to act,
on Naccarelli's part shall be considered "willful" or "intentional"
unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omissions was in the
best interest of the Company.
6. Vacation.
Naccarelli shall be entitled to three (3) weeks of paid
vacation for each year of service, which vacation shall be used by
Naccarelli during the ensuing year as approved by the Company.
Vacation dates shall be approved by the Company and shall be those
most convenient to the Company's business. Naccarelli shall also be
entitled to sick days to the extent otherwise granted generally to
employees and/or officers of the Company.
7. Arbitration.
If a dispute or claim shall arise between the parties with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this
Agreement, then the parties agree that the dispute shall be
arbitrated in Orange County, California, before a single arbitrator,
in accordance with the rules of either the American Arbitration
Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and
JAMS/Endispute rules shall be made by the claimant first demanding
arbitration. The arbitrator shall have no power to alter or modify
any express provisions of this Agreement or to render any award
which by its terms affects any such alteration or modification. The
parties to the arbitration may agree in writing to use different
rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with the California Code of Civil
Procedure, or equivalent. The parties agree that the judgment award
rendered by the arbitrator shall be considered binding and may be
entered in any court having jurisdiction as stated in Paragraph 11
of this Agreement. The provisions of this Paragraph shall survive
the termination of this Agreement.
8. Notices.
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or delivered via facsimile, or
Forty-Eight (48) hours after deposit in the United States mail,
postage prepaid, and sent certified or registered mail, return
receipt requested, correctly addressed to the addresses of the
parties indicated below or at such other address as such party shall
in writing have advised the other party.
If to the Company:
GTC Telecom, Inc.
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
Attn: Paul Sandhu, President
<PAGE>
With a copy to:
M. Richard Cutler, Esq.
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Facsimile No.: 949-719-1988
If to Naccarelli:
Frank Naccarelli
____________________
____________________
9. Assignment.
Subject to all other provisions of this Agreement, any attempt
to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Court of the
State of California in and for the County of Orange, for the
resolution of all legal disputes arising under the terms of this
Agreement, including, but not limited to, enforcement of any
arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
<PAGE>
13. Severability.
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty or
default of this Agreement by any party shall be considered to be a
waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
<PAGE>
20. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the Effective Date.
"Company" "Naccarelli"
GTC Telecom, Inc. Frank Naccarelli
/s/Paul Sandhu /s/Frank Naccarelli
By: Paul Sandhu, President
LEASE
dated as of February 5, 1999
between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC.,
as Landlord ("Landlord")
and
GTC TELECOM, a Nevada corporation;
ERIC CLEMONS; and PAUL SANDHU
Jointly and Severally
as Tenant ("Tenant")
relating to premises at
Suite K-104
THE JOHN WAYNE EXECUTIVE GUILD CENTER
3151 Airway Avenue
Costa Mesa, California 92626
<PAGE>
Lease Summary
This page is for the convenience of the parties and summarizes the
principal terms of the lease. It does not alter or define any of
the terms of this lease.
Project: The project in which the Premises is located
is THE JOHN WAYNE EXECUTIVE GUILD CENTER,
located at 3151 Airway Avenue, Costa Mesa,
California.
Tenant: The Tenant is GTC TELECOM, a Nevada
corporation; ERIC CLEMONS; and PAUL SANDHU,
Jointly and Severally
Term: This Lease applies to a month-to-month tenancy for a
maximum term of twelve (12) months and a minimum term
of three (3) months.
Commencement
Date: This lease shall commence on February 8, 1999.
Termination
Date: This Lease applies to a month-to-month tenancy, for a
maximum period of twelve (12) months, terminating no
later than February 7, 2000, subject to early
termination as specified herein. However, in no
event shall the lease term be less than a minimum
period of three (3) months (i.e., May 7, 1999).
Early
Termination: This Lease may be terminated by either party by
providing written notice of intention to terminate,
one party to the other, no less than thirty (30) days
prior to the date of intended termination.
Premises: The Premises consist of ground floor office
space located within THE JOHN WAYNE EXECUTIVE
GUILD, Building K and further referenced as
"Suite K-104", and further outlined in Exhibit
"C" to the lease.
Net rentable area of the Premises:
Approximately 1,987 rentable square feet as
per calculations provided by DARYL MALMBERG
ASSOCIATES INTERIOR PLANNING & DESIGN in
accordance with industry guidelines and
procedures.
Base
Year Rent: Effective Base Rental Rate for the period of
occupancy is approximately $1.85 per square foot.
Year 1 $3,675.95 per month ($1.85 per
sq. ft.)
Security Deposit: $4,000.00
<PAGE>
TABLE OF CONTENTS
1. TERM/PREMISES/USE ..................................................1
1.1 Leasing Clause and Premises ...................................1
1.2 Term ..........................................................1
1.3 Use ...........................................................1
2. RENT ...............................................................1
2.1 Base Rent .....................................................1
2.2 Initial Base Rent .............................................1
2.3 Adjustments in Base Rent ......................................1
2.4 Partial Payment of Rent........................................2
2.5 Additional Rent ...............................................2
2.6 Additional Rent ...............................................2
3. SERVICES TO BE FURNISHED BY Landlord ...............................2
3.1 General .......................................................2
3.2 Electricity/HVAC ..............................................2
3.3 Limits re Air-Conditioning ....................................2
3.4 Landlord Not to Be Liable .....................................3
4. PREPARATION AND ACCEPTANCE OF PREMISES .............................3
4.1 Condition of Premises on Delivery .............................3
4.2 Tenant Improvements ...........................................3
5. QUIET ENJOYMENT ....................................................3
6. REPAIRS AND RE-ENTRY ...............................................4
6.1 Tenant's Obligations ..........................................4
6.2 Landlord's Obligations ........................................4
6.3 Re-Entry by Landlord ..........................................4
7. ALTERATIONS BY TENANT AND TENANT FIXTURES ..........................4
7.1 Tenant Alterations ............................................4
7.2 Tenant Fixtures and Other Property ............................4
8. ASSIGNMENT AND SUBLETTING ..........................................5
8.1 Prohibition of Assignment and Other Transfers .................5
8.2 Proposed Assignment and Sublease...............................5
8.3 Tenant to Remain Liable .......................................5
8.4 Landlord's Assignment .........................................5
9. USE OF THE PREMISES ................................................5
9.1 Legal Use and Violations of Insurance Coverage ................5
9.2 Nuisance; Rules and Regulations ...............................6
10. INDEMNITY/LIABILITY ................................................6
10.1 Indemnity By Tenant ...........................................6
10.2 Landlord Not To Have Liability ................................6
10.3 Mutual Release and Waiver of Subrogation ......................7
10.4 Transfer of Ownership .........................................7
10.5 Express Agreement .............................................7
11. ACCESS FOR REPAIRS AND INSPECTION ..................................7
<PAGE>
12. FIRE OR OTHER CASUALTY .............................................7
12.1 Major Casualty ................................................7
12.2 Repairable Casualty ...........................................8
12.3 Landlord's Election ...........................................8
13. CONDEMNATION .......................................................8
13.1 Condemnation ..................................................8
13.2 Restoration After Partial Taking ..............................9
14. LIEN FOR RENT ......................................................9
15. HOLDOVER ...........................................................9
16. INSURANCE ..........................................................9
16.1 Landlord's Insurance ..........................................9
16.2 Tenant's Insurance - Liability ...............................10
16.3 Tenant's Insurance - Other ...................................10
16.4 Evidence of Insurance ........................................10
16.5 No Representation of Adequate Coverage .......................10
17. DEFAULT ...........................................................10
17.1 Non-Payment of Rent ..........................................10
17.2 Breach .......................................................10
17.3 Insolvency ...................................................10
17.4 Abandonment ..................................................10
17.5 Remedies .....................................................11
17.6 Late Charges .................................................11
18. OPERATING EXPENSES ................................................11
18.1 Operating Expenses Defined ...................................11
18.2 Personal Property Taxes ......................................12
19. SECURITY DEPOSIT ..................................................13
20. UNDERLYING MORTGAGES ..............................................13
20.1 Subordination ................................................13
20.2 Attornment to Mortgage .......................................13
20.3 Landlord's Default ...........................................13
20.4 Non-Disturbance ..............................................14
20.5 Estoppel Certificates ........................................14
21. PARKING PROVISIONS ................................................14
21.1 Unassigned Parking ...........................................14
21.2 Landlord Not To Be Liable ....................................14
22. HAZARDOUS MATERIALS ...............................................14
22.1 Landlord's Representations and Indemnity as to
Hazardous Materials .........................................14
22.2 Tenant's Representations and Indemnity as to
Hazardous Materials .........................................14
<PAGE>
22.3 Freon ........................................................14
22.4 Hazardous Materials Defined ..................................14
23. RELOCATION; PROJECT NAME ..........................................15
23.1 Relocation ...................................................15
23.2 Project Name .................................................15
24. NOTICES ...........................................................15
25. BROKER'S OR AGENT'S COMMISSION ....................................16
26. GENERAL ...........................................................16
26.1 Equal Employment Opportunity .................................16
26.2 Place of Performance - Governing Law .........................16
26.3 Severability ................................................16
26.4 Inurement ...................................................16
26.5 Integration .................................................17
26.6 No Waiver ...................................................17
26.7 Attorney's Fees and Arbitration ..............................17
26.8 Captions ....................................................17
26.9 Authority ...................................................17
26.10 Submission of Lease ........................................17
26.11 Exhibits ....................................................19
<PAGE>
STATE OF CALIFORNIA
COUNTY OF ORANGE
OFFICE LEASE
THIS LEASE ("Lease"), made and entered into by and between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC. ("SCSD"), and
GTC TELECOM, INC., a Nevada corporation; ERIC CLEMONS;
and PAUL SANDHU, jointly and severally ("Tenant"), and
dated, February 5, 1999 for reference purposes only.
1.
TERM/PREMISES/USE
1.1 Leasing Clause and Premises. Subject to the terms and
conditions of this Lease, Landlord hereby leases
premises to Tenant, and Tenant hereby rents and accepts
premises from Landlord pursuant to the terms of this
Lease. The "Premises" are approximately 1,987 rentable
square feet (as per calculations provided by DARYL
MALMBERG ASSOCIATES INTERIOR PLANNING & DESIGN in
accordance with industry guidelines and procedures)
situated on the ground floor of Building K at THE JOHN
WAYNE EXECUTIVE GUILD CENTER, located at 3151 Airway
Avenue, Costa Mesa, California (the "Project"),
designated suite number K-104 and more fully described
on a floor plans attached hereto and marked Exhibits "D".
1.2 Term. This Lease applies to a month-to-month tenancy,
for a maximum term of twelve (12) months, commencing
February 8, 1999, and terminating no later than February
7, 2000, subject to early termination as specified
herein. However, in no event shall the lease term be
less than a minimum period of three (3) months (i.e.,
May 7, 1999). This Lease may be terminated by either
party by providing written notice of intention to
terminate, one party to the other, no less than thirty
(30) days prior to the date of intended termination.
1.3 Use. Tenant shall use the Premises for general
business offices uses and shall not occupy or use, or
permit any portion of the Premises to be occupied or
used for any other purpose whatsoever. This Lease
covers no other part of the Project or the ground upon
which it is located, except the nonexclusive rights
granted by Landlord to Tenant, its agents, employees,
customers, business invitees and visitors to use the
public corridors, the elevators, stairways and similar
common areas within the Project, and the ground level
parking area.
2.
RENT
2.1 Base Rent. Tenant shall pay Landlord a monthly base
rent ("Base Rent"), without offset or deduction, as set
forth in this Section. Base Rent shall be payable
commencing on the Commencement Date. The first payment
shall be made, in advance, upon execution of this Lease.
The second and subsequent payments shall be made in
monthly installments in advance for the following month,
on the first day of each and every month until the end
of the Term, to the following address:
SCSD EXECUTIVE GUILD J.W.A.
3230 East Imperial Hwy., Suite 200
Brea, California 92821
2.2 Initial Base Rent. Tenant shall pay a Base Rent of
$3,675.95 per month until adjusted pursuant to Section 2.3.
2.3 Base Rent. Base Rent shall be:
Lease Yr Base Rent/Monthly
Annual Base Rent
Year 1 $3,675.95 per month ($1.85 per sq. ft.) $44,111.40
<PAGE>
2.4 Partial Payment of Rent. Tenant shall make all
rental payments in full. Payment or receipt of a rental
payment of less than the amount stated in the lease
shall be deemed to be nothing more than partial payment
on that month's account. Under no circumstances shall
Landlord's acceptance of a partial payment constitute
accord and satisfaction. Nor will Landlord's acceptance
of a partial payment forfeit Landlord's right to collect
the balance due on the account, despite any endorsement,
stipulation, or other statement on any check. The
Landlord may accept any partial payment check with any
conditional endorsement without prejudice to its right
to recover the balance remaining due, or to pursue any
other remedy available under this lease.
2.5 Additional Rent. All other sums of money required
under this Lease to be paid by Tenant to Landlord, other
than Base Rent, are designated "Additional Rent". The
term "Rent" in this Lease means Base Rent and Additional
Rent.
2.6 Tenant's pro rata share of Operating Expenses shall be
determined in proportion to the part of the total square
footage of the Project which is usable and used by
Tenant in the reasonable conduct of its business or
profession, and shall be paid as Additional Rent, in the
manner set forth in Section 18. Landlord and Tenant
agree that Tenant's pro rata share is a fraction, the
numerator of which is the number of rental square feet
of the Premises, and the denominator of which is the
total rentable square feet contained in the Project.
Tenant's share is approximately 2.5% (Tenant's Share")
in an amount not to exceed four (4) Index points per
annum nor less than one Index point per annum, times the
then current Rent amount.
3.
SERVICES TO BE FURNISHED BY LANDLORD
3.1 General. Landlord shall furnish or cause to be
furnished to the Premises the following services: (a)
electricity for lighting the Premises and operating
ordinary 110-volt portable desk top office equipment of
the type normally used in general business offices,
subject to paragraph 3.2 of this Lease, (b) heat and
air-conditioning as may reasonably be required for the
comfortable use and occupancy of the Premises during
Project Operating Hours, (c) janitor and cleaning
services limited to emptying and removal of general
office refuse, dusting and light vacuuming of floors as
needed, Monday through Friday, and such window washing
as may in the reasonable judgment of Landlord be
required, (d) replacement of fluorescent tubes and light
bulbs, (e) domestic water for the operation of
lavatories, drinking fountains and coffee bars and (f)
toilet room supplies.
3.2 Electricity/HVAC. There will be no additional cost
to Tenant for Tenant's use of electrical service unless
and until Tenant's use of electrical power exceeds
electrical allowance of $.12 (twelve cents) per square
foot per month. The electric usage shall be reviewed on
a quarterly basis and any amount in excess of said
allowance shall be billed to Tenant which is immediately
due and payable to Landlord as "additional rent".
3.3 Limits re Air-Conditioning. In the event that Tenant
requires equipment or machines, generating heat
substantially in excess of what is generally considered
standard equipment for professional and clerical office
use, which affect the temperature of the Premises
maintained by the air-conditioning system, Landlord
reserves the right to provide supplementary
air-conditioning equipment. Prior to installation of
any additional air-conditioning equipment, Landlord
will review with Tenant the cost,
<PAGE>
installation and maintenance cost of said equipment and
said cost shall be paid by Tenant upon demand.
3.4 Landlord Not To Be Liable. Landlord shall not be
liable for failure to furnish or cause to be furnished
any of the foregoing services when such failure is
caused by accidents or conditions beyond the control of
the Landlord, or by necessary repairs, labor
disturbances or labor disputes of any character, whether
resulting from or caused by acts of Landlord or
otherwise; provided, however, that in any such events,
Landlord shall make a prompt and diligent effort to
cause the resumption of such services. Landlord shall
not be liable under any circumstances for loss of or
injury to property, however occurring, through or in
connection with or incidental to the furnishing of any
of the foregoing, nor shall any failure relieve Tenant
from the duty to pay the full amount of rent herein
reserved, or constitute or be construed as a
constructive or other eviction of Tenant. If Tenant is
in default under this Lease, Landlord shall have the
right, at Landlord's option, to suspend or discontinue
the foregoing services, or any thereof, during the
continuance of any such default, and any such suspension
or discontinuance shall not be deemed to be an eviction
or ejection of Tenant.
4.
PREPARATION AND ACCEPTANCE OF PREMISES
4.1 Condition of Premises on Delivery. The
Premises are rented "as-is", without any additional
services or improvements to be provided by Landlord
unless otherwise specified in Exhibit "E" attached
hereto. Taking possession of the Premises by Tenant
shall be conclusive evidence as against Tenant that the
Premises and the Project were in good and satisfactory
condition when possession was taken.
4.2 Tenant Improvements. Prior to the commencement of the
term of this Lease, Landlord shall substantially
complete the work, if any, as may be required to be done
as specified in attached Exhibit "E" and/or Lease
Summary Page. Landlord's time to complete such work, if
any be specified in attached Exhibit "E" and/or Lease
Summary Page, shall be extended by one day for each day
of delay resulting from interference with or hindrance
of such work by Tenant, or any of Tenant's employees,
servants, or agents, for changes in such work requested
by Tenant and agreed to by Landlord and for delays
caused by the failure of Tenant or Tenant's contractor
to timely and properly complete any of Tenant's work in
the Premises. Neither such delays or any other delay
shall make this Lease void or voidable or alter or
affect any of the terms hereof and Tenant shall not be
entitled to any abatement of rent therefor; and all
claims for damages arising out of any delay are waived
and released by Tenant.
5.
QUIET ENJOYMENT
Tenant, upon keeping, observing and performing all of
the covenants and agreements of this Lease on its part
to be kept, observed and performed, shall lawfully and
quietly hold, occupy and enjoy the Premises during the
term of this Lease, subject, however, to the covenants,
agreements, terms, provisions and conditions of this
Lease and to underlying mortgages to which this Lease is
subject and subordinate.
<PAGE>
6.
REPAIRS AND RE-ENTRY
6.1 Tenant's Obligations. Tenant will, at Tenant's own cost
and expense, repair or replace any damage done to the
Project or any part thereof, caused by Tenant or
Tenant's agents, employees, invitees, or visitors. If
Tenant fails to promptly make such repairs or
replacements within fifteen (15) days of the occurrence
of the event causing such damage, Landlord may, at its
option, make such repairs and replacements itself, and
Tenant shall repay the cost thereof to Landlord on
demand as Additional Rent. Tenant shall take good care
of the Premises and the fixtures and improvements
therein and shall not commit or allow any waste or
damage to be committed on any portion of the Premises,
and shall, upon termination of this Lease, deliver up
the Premises (except as otherwise herein provided) in
substantially the same condition as accepted by Tenant
on commencement date, reasonable wear and tear excepted,
and shall deliver to Landlord all keys to the Premises.
6.2 Landlord's Obligations. Landlord shall make
repairs, restorations and replacements as and when
needed to the Premises which are not the requirement of
the Tenant or other Tenants of the Project.
6.3 Re-Entry by Landlord. Upon termination of this Lease,
Landlord shall have the right to re-enter and assume
possession of the Premises, and the cost and expense of
any repairs necessary to restore the condition of the
Premises to the condition in which they are to be
delivered to Landlord shall be borne by Tenant.
7.
ALTERATIONS BY TENANT AND TENANT FIXTURES
7.1 Tenant Alterations. Tenant will not make or allow to
be made any alterations, additions or improvements
("Tenant Alterations") in or to the Premises without the
prior written consent of Landlord, which will not be
unreasonably withheld. Tenant shall pay or cause to be
paid all costs for work done by it or caused to be done
by it on the Premises of a character which will or may
result in liens on Landlord's interest therein and
Tenant will keep the Premises free and clear of all
mechanic's liens, and other liens on account of work
done for Tenant or persons claiming under it. Tenant
shall indemnify and hold Landlord harmless against any
liability, loss, damage, costs or expenses, including
attorneys fees, on account of any claims of any natures
whatsoever relating to Tenant Alterations, including
claims of liens of laborers or materialmen or others for
work performed for, or materials or supplies furnished
to Tenant or persons claiming under Tenant. All Tenant
Alterations (whether temporary or permanent in
character) made in or upon the Premises, either by
Landlord or Tenant, shall be Landlord's property on
termination of this Lease and shall remain on the
Premises, without compensation to Tenant.
7.2 Tenant Fixtures and Other Property. All built-in
furniture, cabinetwork, movable business and trade
fixtures and equipment installed by Tenant shall be
removed by Tenant at the termination of this Lease if
Tenant so elects, and shall be so removed if required by
Landlord, or if not so removed, shall, at the option of
Landlord, become the property of Landlord. All such
removals and restoration shall be accomplished in good
and workmanlike manner so as not to damage the Premises
or the Project. Any damage to the Premises caused by
installation, alteration or removal of Tenant's fixtures
or equipment shall be repaired at the expense of Tenant.
<PAGE>
8.
ASSIGNMENT AND SUBLETTING
8.1 Prohibition of Assignment and Other Transfers.
Tenant shall not, except as otherwise provided herein,
without the prior written consent of Landlord: (a)
assign, mortgage, pledge, encumber or otherwise transfer
this Lease or any interest under the Lease; or (b)
sublease all or any part of the Premises. The consent
of Landlord to any assignment, other transfer or
sublease of this Lease and the term and estate hereby
granted shall not relieve Tenant of the obligation to
obtain such consent to any further assignment or other
transfer.
8.2 Proposed Assignment and Subleases. If Tenant desires
to assign or sublease this Lease or any part hereof,
then at least thirty (30) days, but not more than one
hundred eighty (180) days, prior to the date, when
Tenant desires the assignment or sublease to be
effective (the "Transfer Date"), Tenant shall give
Landlord a Notice (the "Assignment Notice") which shall
set forth the name, address and business of the proposed
assignee or sublessee, the Transfer Date, information
(including references) on the credits and financial
condition of the proposed assignee or sublessee and such
other material as Landlord shall reasonably require.
Landlord shall within thirty (30) days following the
Assignment Notice notify Tenant in writing that Landlord
elects to (a) either disapprove the proposed assignee or
sublessor; (b) terminate this Lease as to the space so
affected as of the date so specified by Tenant, in which
event Tenant will be relieved of all further obligation
hereunder as to such space; or (c) permit Tenant to
assign or sublet such space to the proposed assignee or
sublessee. If Landlord shall fail to notify Tenant in
writing of such election within said thirty (30) day
period, Landlord shall be deemed to have elected to
approved the proposed assignee or sublessee. If the
Rent agreed to by Tenant and its subtenant and assignee
is greater than the rent payable under this Lease, such
excess Rent shall be paid to Landlord at the same time
and in the same manner as the Basic Rent.
8.3 Tenant to Remain Liable. Notwithstanding any
assignment or subletting, Tenant and any guarantor of
Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of
all Rent under this Lease and for compliance with all of
Tenant's other obligations under this Lease.
8.4 Landlord's Assignment. Landlord may sell,
transfer, mortgage, encumber or assign the Project or
this Lease. Within ten (10) days after request by
Landlord, upon such sale, transfer, mortgage,
encumbrances or assignment, by Landlord, Tenant shall
execute, acknowledge and deliver a certificate
("Estoppel Certificate") in recordable form certifying:
the capacity of the person executing such certificate
and that such person is duly authorized to execute it on
behalf of Tenant; the commencement date of this Lease
and the date upon which the Term expires; that this
Lease is unmodified and in full force and effect (or if
modified, in full force and effect as modified); that
Landlord is not in default thereunder, that there are no
defenses or offsets thereto known to Tenant (if such be
the case); and the date to which Rent has been paid.
9.
USE OF THE PREMISES
9.1 Legal Use and violations of Insurance Coverage.
Tenant shall use the Premises in a careful, safe and
proper manner and shall not occupy or use, or permit any
portion of the Premises to be occupied or used, for any
business or purpose which is unlawful or deemed to be
disreputable in any manner, nor shall Tenant permit
anything to
<PAGE>
be done which will in any way increase the risk of fire,
any hazard, loss of rent, casualty or other loss of
value to the Project, and/or its contents, and in the
event that, by reason and acts of Tenant, there shall be
any increase in the rate of any insurance policy on the
Project or its contents, created by Tenant's acts or
conduct of business, then Tenant hereby agrees, upon
documentation of such increase by Landlord, to pay such
increases as Additional Rent.
9.2 Nuisance; Rules and Regulations. Tenant shall
conduct its business in such manner as not to create any
nuisance, or interfere with, or disturb any other
Tenant, or Landlord in its management of the Project.
Tenant shall observe and comply with the Rules and
Regulations set forth in attached Exhibit A and such
other and further reasonable Rules and Regulations which
Landlord at any time may make and communicate to Tenant
and apply to Tenants and occupants of the Project
generally and which, in the reasonable judgment of
Landlord, shall be necessary for the operation,
maintenance, reputation or appearance of the Project.
10.
INDEMNITY/LIABILITY
10.1 Indemnity By Tenant. Tenant shall indemnify, defend,
protect, and hold harmless Landlord from and against any
and all claims, losses, proceedings, damages, causes of
action, liability, costs and expenses (including
attorney's fees) arising from or in connection with, or
caused by any act, omission or negligence of Tenant or
any sublessee of Tenant, or their respective
contractors, licensees, invitees, agents, servants or
employees, on or about the Premises or the Project, to
the extent permitted by law; and if any action or
proceeding be brought against Landlord by reason of any
such claim, Tenant upon notice from Landlord, shall
defend the same at Tenant's expense by counsel
satisfactory to Landlord. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk
of damage to property or injury to persons in, upon or
about the Premises arising from any cause other than
Landlord's gross negligence or wilful misconduct, and
Tenant hereby waives all claims in respect thereof
against Landlord. These provisions are in addition to,
and not in lieu of, the insurance required to be
provided elsewhere in this Lease.
10.2 Landlord Not To Have Liability. Tenant hereby
assumes all risks and liabilities of a landowner in the
possession, use or operation of the Premises. Tenant
hereby agrees that Landlord shall not be liable for
injury to Tenant's business or any loss of income
therefrom or for damages to the goods, wares,
merchandise or other property of Tenant, Tenant's
employees, invitees, customers, contractors, workers, or
any other person in or about the Premises, nor shall
Landlord be liable for injury to the person of Tenant,
Tenant's employees, agents or contractors, where such
damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing,
air-conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from
conditions arising upon the Premises or from other
sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same
is inaccessible to Tenant. Landlord shall not be liable
or responsible for any injury, loss or damage to any
property or person occasioned by theft, fire, act of
God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, or order of
governmental body of authority, or other matter beyond
the control of Landlord. Nothing contained herein shall
be construed as excusing Landlord from liability for its
gross negligence or intentional misconduct.
<PAGE>
10.3 Mutual Release and Waiver of Subrogation. Landlord
and Tenant each hereby waives, and releases the other
from any claim or liability for damage to such party's
property occurring during the Term which is covered by
insurance. Each party shall cause the property hazard
insurance carried by it, with respect to the Project,
the Premises or such party's other property located
therein, to be endorsed, if necessary, to prevent any
invalidation of such insurance by reason of the waivers
and releases contained in this Section, provided such
endorsement can be obtained at no cost. If additional
costs are involved, the party carrying such insurance
shall give the other party the opportunity to apply for
such endorsement.
10.4 Transfer of Ownership. Upon the sale or transfer of the
Project, the obligations and duties, of the Landlord
selling or transferring the Project under the Lease
shall terminate, except as to liabilities that shall
have accrued prior to the transfer or which are the
result of the conduct of that Landlord.
10.5 Express Agreement. This Lease shall be considered an
express agreement governing any case of damage to or
destruction of the Project or the Premises by fire or
other casualty, and any law which purports to govern the
rights of Landlord and Tenant in such a contingency in
the absence of express agreement, and any successor or
other law of like import shall have no application.
11.
ACCESS FOR REPAIRS AND INSPECTION
Landlord and Landlord's agents shall have the right to
enter the Premises at all reasonable hours to examine
them, to show them to prospective purchasers, mortgagees
or Tenants, and to make and perform such cleaning,
maintenance, repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable
for the safety, improvement, or preservation of the
Premises or of other portions of the Project, without
such acts constituting an eviction of Tenant in whole or
in part or entitling Tenant to any abatement of rent by
reason of loss or interruption of business of Tenant, or
otherwise. If Tenant shall not be personally present to
open and permit an entry in the Premises, at any time
when for any reason an entry therein shall be necessary
or permissible, Landlord or Landlord's agents may enter
the Premises by use of a master key, or in any emergency
may forcibly enter the Premises, without rendering
Landlord or Landlord's agents liable therefor (provided
that during such entry Landlord or Landlord's agents
shall accord reasonable care to Tenant's property), and
without in any manner affecting the obligations and
covenants of this Lease. Landlord shall have the right
to erect, build, use and maintain unexposed pipes, ducts
and conduits in and through the Premises.
12.
FIRE AND OTHER CASUALTY
12.1 Major Casualty. If the Premises, or the Project, shall
be so damaged by fire or other casualty as to render the
Premises untenantable, and if such damage shall be so
great that an architect selected by Landlord shall
certify in writing to Landlord that the Premises, with
the exercise of reasonable diligence, but without the
payment of overtime or other premiums, cannot be made
Tenantable within one hundred twenty (120) days from the
happening of the fire or other casualty, or if insurance
proceeds are not made available to Landlord for repair
of such damages, then, in either event, this Lease may
be terminated by Landlord as of the date of the
occurrence of the fire or other casualty by giving
thirty (30) days written notice to Tenant of such
termination. Upon such notice of termination, Tenant
shall surrender to Landlord
<PAGE>
the Premises and all interest therein under this Lease,
and Landlord may re-enter and take possession of the
Premises and remove Tenant therefrom. Landlord and
Tenant shall be free and discharged from all obligations
arising under this Lease after the date of such
termination. If, however, the damages shall be such
that Landlord's architect shall certify that the
Premises can be made Tenantable within the one hundred
twenty (120) day period from the happening of the fire
or other casualty and insurance proceeds are made
available to Landlord for repair of such damage or if
Landlord does not terminate this Lease as set forth
above, then, except as hereinafter provided, Landlord
shall, with reasonable promptness, repair the damage so
done except that Landlord shall not be required to
repair, replace or restore any items which Tenant is
obligated to repair or replace. Until such repair is
substantially completed, the Base Rent shall be abated
in proportion to the part of the Premises which is
unusable by Tenant in the reasonable conduct of its
business or profession. There shall be no abatement of
Base Rent by reason of any portion of the Premises being
unusable for a period of fifteen (15) days or less. If
the damage is due to the fault or negligence of Tenant
or Tenant's employees, agents or invitees, there shall
be no abatement of Base Rent.
12.2 Reparable Casualty. If the Premises, without
the fault or negligence of Tenant, shall be damaged by
fire or other casualty but not so as to render them
untenantable and insurance proceeds are made available
to Landlord, Landlord shall cause the damage to be
repaired with reasonable promptness and there shall be
no abatement of Base Rent or any other amounts due under
this Lease. If the fire or other casualty causing
damage to the Premises or other parts of the Project
have been caused by Tenant or Tenants employees, agents
or invitees, such damage shall be repaired by Landlord
and the amount paid for such repair shall be immediately
due from Tenant to Landlord with interest at the
Default Rate from the dates of Landlord's payments.
12.3 Landlord's Election. If the Project is so damaged by
fire or other casualty (although the Premises are
unaffected by such fire or other casualty, or if
affected, can be repaired within one hundred twenty
(120) days) that Landlord shall deem it advisable to
reconstruct, rebuild or raze the Project, then,
notwithstanding anything contained herein to the
contrary, this Lease may be terminated by Landlord as of
the date of the occurrence of the fire or other casualty
by giving written notice to Tenant of such termination
within thirty (30) days after the occurrence of the fire
or other casualty. Upon such notice of termination,
Tenant shall surrender to Landlord the Premises and all
interest therein under this Lease, and Landlord may
re-enter and take possession of the Premises and remove
Tenant therefrom. Landlord and Tenant shall be free and
discharged from all obligations arising hereunder after
the date of such termination.
13.
CONDEMNATION
13.1 Condemnation. Upon any taking under the power of
eminent domain, or sale under threat of the exercise of
said power ("Condemnation") of the whole or a
substantial part of the Project, the Premises or the
parking area that shall substantially interfere with
Tenant's use and occupancy of the balance thereof, this
Lease shall, at the election of either Tenant or
Landlord exercised by either party giving written notice
to the other of such termination, terminate as of the
date the condemning authority takes title or possession,
whichever first occurs. Upon Condemnation of any part
of the Project which shall not render the Premises
untenantable, Landlord shall have the right, at its
option, to terminate this Lease as of the date the
condemning authority takes title or possession,
<PAGE>
whichever first occurs. No award from the condemning authority
shall be apportioned, and Tenant hereby assigns to Landlord any
award which may be made, together with any and all rights of
Tenant now or hereafter arising in or to such award or any part
thereof; provided, however, that Tenant may receive any award
for Tenant's property and fixtures removable by Tenant at the
expiration of the Term under the terms of this Lease, or for
the interruption of, or damage to Tenant's business or for
relocation expenses recoverable against the condemning authority.
13.2 Restoration After Partial Taking. If there is a
Condemnation which does not result in a termination of
this lease, Landlord shall, to the extent of any funds
received from the condemning authority for repair or
restoration, restore the Project or Premises
substantially to their condition prior to such partial
Condemnation and Rent shall be abated in the proportion
which the square footage of the part of the Premises so
made unusable bears to the amount of useable square
footage immediately prior to the Condemnation. No
temporary taking of a part of the Premises or of the
Project shall give Tenant any right to terminate this
Lease or to any abatement of Rent.
14.
LIEN FOR RENT
In consideration of the mutual benefits arising under
this contract, Tenant grants a security interest to
Landlord in all property of Tenant now or hereafter
placed in or upon the Premises and such property is
hereby subjected to a lien in favor of Landlord and
shall be and remain subject to such lien of Landlord for
payment of all rents and other sums agreed to be paid by
Tenant herein. Such liens shall be in addition to the
cumulative of the Landlord's liens provided by law.
Promptly upon request by Landlord, Tenant shall execute
any UCC-1 Financing Statement evidencing and perfecting
said lien.
15.
HOLDOVER
If Tenant or any person claiming through or
under Tenant is in possession of any part of the
Premises after the expiration of the term, with
or without the express or implied consent of
Landlord, such tenancy shall be from
month-to-month only, and not a renewal of this
Lease or an extension for any further term, and
such month-to-month tenancy shall be subject to
each and every term, covenant and agreement
contained herein, except that Base Rent shall be
increased to one hundred fifty percent (150%) of
the amount of Base Rent payable by Tenant during
the last month of the Term. Nothing in this
Section shall be construed as a consent by
Landlord to any continued possession by Tenant
and Landlord expressly reserves the right to
require Tenant to surrender possession of the
Premises upon the expiration of the Term or upon
the earlier termination hereof and to assert any
remedy in law or equity to evict Tenant and/or
collect damages in connection with such
continued possession.
16.
INSURANCE
16.1 Landlord's Insurance. Landlord shall at all times
during the term of the lease, as an operating cost,
procure and maintain in force and effect a Broad Form
policy or policies of insurance covering the Project.
At Landlord's option, Landlord may procure endorsements
thereon for flood, earthquake, tornado, theft and
collapse, or such other coverages as Landlord deems
appropriate. Landlord may also obtain a Comprehensive
Package policy of
<PAGE>
liability insurance (including contractual liability),
employer's liability insurance, excess liability insurance and
such other insurance as Landlord deems necessary or
appropriate. Any insurance carried by Landlord may be under a
blanket policy (or policies) covering other properties of
Landlord and/or its related or affiliated entities.
16.2 Tenant's Insurance - Liability. Tenant shall keep
in force with respect to the Premises and Tenant's
business and other activities therein Commercial Package
liability insurance, including contractual and personal
injury liability, payable on an occurrence basis, with a
minimum combined limit of $1,000,000, naming Landlord
and Landlord's manager for the Project as additional
insureds.
16.3 Tenant's Insurance - Other: Tenant shall carry and
maintain a Broad Form policy of insurance covering all
of Tenant's property and all alterations, additions or
improvements permitted under this Lease, from time to
time in, on or upon the Premises in an amount not less
than ninety percent (90%) of their full replacement cost
from time to time during the term of this Lease,
providing coverage for sprinkler damage, vandalism and
malicious mischief. Such insurance shall name Landlord
and Landlord's manager for the Project as additional
insureds.
16.4 Evidence of Insurance. Tenant shall deliver to Landlord
policies or duly executed certificates of insurance.
Renewals shall be delivered to Landlord at least ten
(10) days prior to the expiration of the respective
policy terms.
16.5 No Representation of Adequate Coverage. Landlord
makes no representation that the limits or forms of
coverage of insurance specified in this Paragraph 16 are
adequate to cover Tenant's property or obligations under
this lease.
17.
DEFAULT
The occurrence of any one or more of the events set
forth in Sections 17.1, 17.2 and 17.3 shall constitute a
material default and breach of this Lease by Tenant.
17.1 Non-Payment of Rent. The failure of Tenant to make any
payment of Rent as and when due, where such failure
shall continue for a period of three (3) days after
notice from Landlord that said payment is delinquent.
17.2 Breach. The failure by Tenant to observe or perform any
of the covenants, conditions or provisions of the Lease
to be observed or performed by Tenant, other than the
failure to pay Rent where such failure shall continue
for a period of ten (10) days after written notice
thereof from Landlord to Tenant.
17.3 Insolvency. (a) The making by Tenant of any
general arrangement or assignment for the benefit of
creditors; (b) Tenant becomes a "debtor" as defined in
11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant,
the petition is dismissed within thirty (30) days; (c)
the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets
located at the Premises or of Tenant interest in this
Lease, where possession is not restored to Tenant within
fifteen (15) days; or (d) the attachment, execution or
other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest
in this Lease, where such seizure is not discharged
within fifteen (15) days.
17.4 Abandonment. The abandonment or vacation of the
Premises by Tenant.
<PAGE>
17.5 Remedies. Upon default by Tenant, Landlord shall
have the right, but not the obligation, to re-enter and
take the Premises and resume possession thereof and
thereafter to relet same for the remainder of the period
of the Term specified in this Lease; and if the Rent
received through such reletting is not at least equal to
the Rent provided for in this Lease, Tenant shall pay
and satisfy any deficiencies between the amount of the
Rent called for and that received through reletting, and
all expenses incurred as a result of such reletting
including, but not limited to the cost of renovating,
altering, and decorating for a new occupant. Nothing
herein shall be construed as in any way denying Landlord
the right, in case of any default by Tenant to treat the
default as an entire breach of the Lease and at
Landlord's option immediately sue for any and all
damages occasioned by Landlord thereby. Should Landlord
terminate this Lease and thereafter seek relief pursuant
to Section 1951.2 of the California Civil Code, interest
shall be allowed upon unpaid rent, and/or late
penalties, etc., for the purposes of Section 1941.2(b),
at ten percent (10%) per annum. Any proof by Tenant
under subparagraphs (2) or (3) of subdivision (a) of
Section 1951.2 of the California Civil Code, as the
amount of rental loss that could be reasonably avoided,
shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker
in the business of renting property of the same use as
the Premises and in the same geographic vicinity, and
such two real estate brokers shall select a third
licensed real estate broker and the three licensed real
estate brokers so selected shall determine the amount of
the rental loss that could be reasonably avoided for the
balance of the term of this Lease after the time of
award. The decision of the majority of said licensed
real estate brokers shall be final and binding upon the
parties hereto. Until Landlord elects to terminate this
lease, Landlord shall have the remedy provided for in
Section 1951.4 of the of the California Civil Code.
17.6 Late Charges. Tenant acknowledges that late payment by
Tenant to Landlord of Base Rent, operational expenses or
other monies that come due from time to time will cause
Landlord to incur costs not contemplated by this lease.
The exact amount of said costs will be difficult to
ascertain. Such costs would include processing and
accounting charges, late charges which may be imposed on
Landlord by the terms of any mortgage or ground lease
covering this Project. Accordingly, if any installment
of Base Rent, Additional Rent or operating expenses due
from Tenant shall not be received by Landlord or his
designee within ten (10) days after such amount shall be
due, then without further notice or demand Tenant shall
pay to Landlord a late charge of Ten Percent (10%) of
such overdue amount. Both parties agree that such late
charge represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of the late
payment by Tenant. Acceptance of a late charge by
Landlord shall in no event constitute a waiver of
Tenant's default with respect to such overdue amount,
nor prevent Landlord from exercising any other rights
and remedies he may have under this Lease.
18.
OPERATING EXPENSES
18.1 Operating Expenses Defined. "Operating Expenses", as
used in this Lease, means all amounts paid or accrued by
Landlord per calendar year for the operation and
maintenance of the Project or the land on which it is
situated, and the equipment, fixtures and facilities
used in connection therewith, including the parking
area. Operating Expenses includes, but is not limited
to the cost of utilities, building supplies, janitorial
and window cleaning services, normal maintenance and
repair of the Project and the common areas (including
elevators, if any, and the periodic refurbishing of the
common areas), heating and air-conditioning,
<PAGE>
waste disposal, lighting, maintenance of fire protection and
security systems, planting and landscaping, landscape
maintenance, taxes (defined below), insurance premiums
(including boiler and machinery, fire and extended coverage,
earthquake, flood, rental and public liability insurance), and
all labor, supplies, materials, tools, professional fees,
management fees, wages, salaries and payroll burden of the
Project manager, clerical maintenance and other employees
directly associated with the operation of the Project,
(including Project office rent or rental value, office supplies
and materials, and all other items constituting operating and
maintenance costs in connection with the Project and land
according to generally accepted accounting principles).
Operating Expenses shall not include the following: (a)
depreciation of the Project, (b) leasing commissions, (c)
repairs and restorations paid for by the proceeds of any
insurance policy or (d) construction of improvements of a
capital nature, except for the cost, or a portion thereof
properly allocable to the Project, of any capital improvements
made to the Project specifically to reduce Operating Expenses,
or required to be made to the Project specifically to reduce
Operating Expenses, or required to be made to the Project under
any governmental law or regulation not applicable to the
Project at the time it was constructed. Such cost shall be
amortized over such reasonable period of time as Landlord shall
determine, (e) ground rent, (f) debt service, (g) income and
franchise taxes other than that portion, if any, of income and
franchise taxes which may hereinafter be assessed and paid in
lieu of or as a substitute in whole or in part for Taxes.
18.2 Personal Property Taxes. Tenant shall be liable for
and shall pay before delinquency all taxes, and
penalties and interest thereon, if any, levied against
Tenant's furniture, trade fixtures and equipment, and
any other personal property of Tenant situated or
installed in and upon the Premises. For the purposes of
determining the amount of such taxes, figures supplied
by the county assessor's office or other taxing
authority as to the amount thereof shall be conclusive.
19.
SECURITY DEPOSIT
Concurrently with the execution of this Lease, Tenant
shall deliver to Landlord in good funds, the sum of
$4,000.00 to be held by Landlord as security for the
full and faithful performance of every provision of this
Lease (the "Security Deposit"). If Tenant defaults with
respect to any provision of this Lease, including but
not limited to the provisions relating to the payment of
Rent, Landlord may use, apply or retain all or any part
of the Security Deposit for the payment of any Rent or
for the payment of any other amount which Landlord may
spend or become obligated to spend by reason of Tenant's
default or to compensate Landlord for any other loss,
cost or damage which Landlord may suffer by reason of
Tenant's default. If any portion of the Security
Deposit is so used or applied, Tenant shall, within five
(5) days after written demand therefor deposit cash with
Landlord in an amount sufficient to restore the Security
deposit to the amount first deposited, and Tenant's
failure to do so shall be a material breach of this
Lease. Should Tenant faithfully perform all of the
terms, covenants and conditions of this Lease and be in
possession of the Premises at the end of the Term, the
amount of the Security Deposit shall be repaid by
Landlord to Tenant at the end of the Term.
<PAGE>
20.
UNDERLYING MORTGAGES
20.1 Subordination. This Lease and the term and estate hereby
granted are and shall be subject to subordinate to the
lien of each mortgage which may now or at any time
hereafter affect Landlord's interest in the Project, (an
"underlying Mortgage") at the option of the Landlord or
Landlord's Mortgagee, regardless of the interest rate,
the terms or repayment, the use of the proceeds or any
other provision of any such mortgage. Each holder of
each Underlying Mortgage shall have the right,
exercisable at such holders' sole option at any time, to
cause any of the Underlying Mortgages which such holder
owns to be and become subordinate and inferior to the
lien and charge of this Lease by delivering Notice of
such exercise to Tenant. Tenant shall from time to time
execute and deliver such instruments as Landlord or the
holder of any Underlying Mortgage, may reasonably
request to confirm the status of this Lease as provided
in this Section 20.
20.2 Attornment to Mortgagee. Tenant confirms that if by
reason of a default under any Underlying Mortgage the
holder of such Underlying Mortgage or its successor or
assignee in interest becomes the Landlord hereunder,
Tenant shall attorn to, and shall recognize such holder
as Tenant's Landlord under this Lease. Tenant shall
execute and deliver, at any time and from time to time,
upon request of Landlord or of the holder of any
Underlying Mortgage, an instrument which may be
reasonably necessary or appropriate to evidence such
attornment. Tenant waives the provisions of any statute
or rule of law now or hereafter in effect which may give
or purpose to give Tenant any right or election to
terminate this Lease or to surrender possession of the
Premises in the event any proceeding is brought by the
holder of the Underlying Mortgage to acquire Landlord's
interest hereunder.
20.3 Landlord's Default. In the event of any act or
omission by Landlord which pursuant to this Lease or by
law would give Tenant the right to terminate this Lease,
Tenant shall not exercise such right unless or until (a)
it has given written Notice of such act or omission to
the holder of each Underlying Mortgage who has
previously given Tenant written Notice of the existence
of such Underlying Mortgage and (b) a reasonable period
of time for remedying such act or omission shall have
elapsed following the giving of such Notice.
20.4 Non-Disturbance. Notwithstanding anything
contained in this Section, as a condition to the
attornment of subordination obligations set forth in
this Section, this Lease and the leasehold estate hereby
created shall not be extinguished or terminated or the
possession or the right of Tenant (including the rights
with respect to enjoyment and removal of Tenant's
property) be disturbed so long as this Lease shall be in
force and no material default by Tenant exists and the
Underlying Mortgagee shall enter into a non-disturbance
and attornment agreement at the request of Tenant in
form and substance reasonably acceptable to Tenant,
Landlord and such Underlying Mortgagee.
20.5 Estoppel Certificates. Tenant shall promptly upon
request of Landlord, delivery to Landlord for the holder
of the Underlying Mortgage an Estoppel Certificate.
21.
PARKING PROVISIONS
21.1 Unassigned Parking. Tenants at the JOHN WAYNE
EXECUTIVE GUILD have the right to the use of four (4)
parking spaces per 1,000 sq. ft. of rentable space.
Tenant shall have the right to use eight (8) unassigned
automobile parking spaces located on the uncovered
<PAGE>
surface parking area for which there shall be no monthly charge.
21.2 Landlord Not To Be Liable. Tenant, its agents,
employees, customers, business invitees, and all persons
using the drives and parking areas do so at their own
risk and Landlord shall not be responsible for, or in
any way have any obligation or liability for, any
damage, loss, theft, or injury to any vehicle or other
equipment, any contents thereof or any other personal
property or for the death or injury to any person while
located in or entering or exiting any portion of the
drives and parking area. Landlord shall have the right
at any time to change the arrangement or location of the
assigned or unassigned spaces without incurring any
liability to Tenant or entitling Tenant to any abatement
of any parking fee.
22.
HAZARDOUS MATERIALS
22.1 Landlord's Representation and Indemnity as to Hazardous
Materials. Landlord represents and warrants that no
Hazardous Materials are present on or affect the
Premises or the Project, and Landlord agrees to
indemnify and hold Tenant harmless for costs of any
monitoring, testing, removal cleanup or compliance with
the laws of any federal, state or local government
having jurisdiction over Hazardous Materials which
Tenant may cause or permit to be present, discharged,
stored or disposed on the Premises during the Term.
22.3 Freon. Tenant shall not install any freon-containing
systems or equipment, including, but not limited to,
refrigerators, freezers, supplemental HVAC systems or
self-contained air conditioners.
22.4 Hazardous Materials Defined. "Hazardous Materials", for
purposes of this Section 22, means any substance defined
as "hazardous substances", "hazardous materials",
"hazardous waste", "toxic substances", or related terms
by the California Health and Safety Code, or applicable
Federal law from time to time.
23.
RELOCATION; PROJECT NAME
23.1 Relocation. Landlord shall have the right, at any
time upon giving Tenant thirty (30) days' notice in
writing, to substitute for the Premises substantially
similar space in the Project. Substantially similar
space shall mean space that is approximately the same
size, and has substantially the same facilities.
Landlord will, as Landlord's sole cost and expense
(including the cost of relocating telephone service and
the reasonable cost of new stationary, should the Tenant
be relocated to another building or floor), move Tenant
to such substituted space. *The parties hereto agree
that, in such event, this Lease shall remain in full
force and effect and be deemed applicable to such space
designated by Landlord and such held space shall
thereafter be the Premises. Should Tenant refuse to
permit Landlord to Move Tenant to such new space at the
end of the thirty (30) day period, Landlord shall have
the right to terminate this Lease effective sixty (60)
days from the date of the original notice from Landlord.
Once Landlord gives Tenant the 30-day notice of intent
to relocate, Tenant may terminate the lease by given
written notice to the Landlord effective either at the
end of the 30-day or 60-day period after the date of the
notice of intent to relocate.
23.2 Project Name. Landlord shall have the right to name the
Project and to change the name or designation by which
the Project is commonly known at any time. Tenant shall
not use the name of the Project for any purpose other
than as the address of the business conducted by Tenant
in the Premises. Landlord shall provide a building
directory in a conspicuous place in the Project.
Landlord shall also provide one suite identification
sign adjacent to
<PAGE>
the main entry door of the Premises in Landlord's standard size
and form. Tenant shall pay Landlord's reasonable charges for
the initial installation of the suite identification sign and
for any subsequent changes to the directory listing and
identification sign at Tenant's request.
24.
NOTICES
Any notice, demand or request provided for or permitted
to be given pursuant to this Lease must be in writing
and shall be properly given and effective when
personally served, when sent by prepaid Western Union
telegram or air courier or when deposited in an official
depository under the regular care and custody of the
United States Mail, addressed as specified below, sent
by registered or certified mail, return receipt
requested, with postage prepaid. The time period in
which a response of any such mailed Notice must be
given, however, shall commence to run from the date of
receipt on the return receipt by the Notice by the
addressee thereof. Rejection or other refusal to accept
or the inability to deliver because of changes in
address of which no notice was given shall be deemed to
be receipt of the notice. Notices shall be addressed as
follows:
To Landlord: Southern California Sunbelt
Developers, Inc. - JWA
3230 East Imperial Hwy., Suite 200
Brea, California 92821
With a copy to the leasing agent on the Premises:
Leasing Office
John Wayne Executive Guild
3151 Airway Avenue
Costa Mesa, California 92626
Attention: Property Manager
To the Tenant at the Premises or to:
Jerry DeCiccio, C.F.O.
GTC Telecom
3151 Airway Avenue, Suite P-3
Costa Mesa, California 92626
Notice of change of address shall be given in the same
manner as prescribed herein for other Notices.
25.
BROKER'S OR AGENT'S COMMISSION
There are no claims for brokerage commission or finder's
fees in connection with the execution of this Lease,
except as listed below, and Tenant agrees to indemnify
Landlord and hold Landlord harmless against all
liabilities and costs arising from such claims,
including without limitation attorneys' fees in
connection therewith.
BROKER/AGENT: Hamilton Cove Realty, Inc.
The parties hereby acknowledge that HAMILTON COVE
REALTY, INC., a California Corporation ("HCR"), DAN W.
BAER, a California licensed real estate broker, has a
valid listing agreement for the subject property at the
JOHN WAYNE EXECUTIVE GUILD, and in the event a lease is
consummated with Landlord and BROKER/AGENT'S client, a
commission
<PAGE>
will be paid to HCR by Landlord.
26.
GENERAL
26.1 Equal Employment Opportunity. The provisions of
Executive Order 11246 (as amended) of the President of
the United States on Equal employment opportunities and
the rules and regulations issued pursuant thereto are
incorporated in this lease, and Landlord represents that
it will comply with those provisions unless exempted.
26.2 Place of Performance - Governing Law. Tenant shall
perform all covenants, conditions and agreements
contained herein, including, but not limited to payment
of Rent, in Orange County, California. Any suit arising
from or relating to this Lease shall be brought in
Orange County, California. This Lease shall be governed
by and construed in accordance with the laws of the
State of California.
26.3 Severability. If any clause or provision of this Lease
is illegal, invalid or unenforceable under present or
future laws effective during the Term, then, and in that
event, the parties intend that the remainder of this
Lease shall not be affected thereby, and the parties
also intend that in lieu of each clause or provision of
this Lease that is illegal, invalid or unenforceable,
there is added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid,
or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
26.4 Inurement. Subject to the provisions of this Lease
governing assignments and transfers by Landlord and
Tenant, respectively, the terms, provisions, covenants,
and conditions contained in this Lease shall apply to,
insure to the benefit of, and be binding upon the
parties hereto, and upon their respective successors in
interest and legal representatives.
26.5 Integration. This Lease and the Exhibits thereto
constitute the entire understanding between Landlord and
Tenant. All previous conversations, memorandums, and
writings pertaining to leasing of the Premises not
incorporated or referenced in this Lease are suspended
hereby. Any modification hereto must be made by a
separate written instrument. No officer, employee or
representative of Landlord, of Landlord's Manager or of
Tenant has the authority to make any representation or
promise not already contained herein or made pursuant to
the within provisions, and Landlord and Tenant expressly
agree that by executing this Agreement, and any other
document required herein or caused to be executed hereby
that it is not doing so in reliance upon any
representation or promise which is not set forth herein.
26.6 No Waiver. No delay or failure of Landlord in
exercising any right, privilege or remedy hereunder or
any single or partial exercise of any right, power or
privilege shall preclude other or future exercise
thereof or the exercise of any other right, power or
privilege. Any waiver, permission or consent of any
kind by Landlord must be in writing and shall be
effective only to the extent provided herein.
26.7 Attorneys' Fees and Arbitration. If any litigation,
arbitration or other legal proceeding is commenced
between any of the parties or their personal
representatives concerning any provision of this lease,
or the rights and duties of any party in relation
thereto, the prevailing party in such litigation or
arbitration shall be entitled, in addition to such other
relief as may be granted, to recover their costs and
reasonable attorney's fees and expenses, as costs, in
such litigation or arbitration. If any judgment results
<PAGE>
from such litigation or arbitration, then the prevailing party
shall be entitled to recover reasonable attorney's fees,
expenses and costs of enforcing such judgment and this
post-judgment right to attorney's fees is intended to be
severable from the other provisions of this Agreement, to
survive any judgment contained hereunder, and it is not deemed
merged into the judgment. As used herein, "reasonable
attorney's fees", "expenses", and "costs" shall mean the full
and actual costs of any legal services actually performed,
calculated on the basis of the usual fees charged and expenses
and costs incurred by the attorney performing such services.
26.8 Captions. Captions used in this Lease are for ease
of reference only and do not define or limit provisions.
26.9 Authority. If Tenant is a corporation, partnership,
trust, association or other entity, Tenant and each
person executing this Lease on behalf of Tenant hereby
covenant and warrant that (a) Tenant is duly
incorporated or otherwise established or formed and
validly existing under the laws of its state of
incorporation, establishment or formation, (b) Tenant is
duly qualified to do business in California, (c) Tenant
has full corporate, partnership, trust, association or
other appropriate power and authority to enter into this
Lease and to perform all Tenant's obligations hereunder,
and (d) each person (and all of the persons is more than
one signs) signing this Lease on behalf of Tenant is
duly and validly authorized to do so.
26.10 Submission of Lease. The submission of this Lease to
Tenant for examination or execution does not constitute
a reservation of or option on the Premises or an
agreement to lease the Premises or any other space.
This Lease shall become effective as a lease and
Landlord shall become obligated to rent space to Tenant
only upon the execution and delivery of this Lease by
Landlord and Tenant.
26.11 Exhibits. The following Exhibits are part of this
lease.
A Project Rules and Regulations
B Condominium / Sublease Rider
C Site Plan of Project
D Floor Plan of Premises
E Tenant Improvements
(Signatures Appear on Following Page)
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<PAGE>
Landlord:
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS,
INC.-JWA, a California corporation
By: /s/Dan W. Baer
DAN W. BAER, President Date: 2/9/99
Tenant:
GTC TELECOM
A Nevada corporation
By:___________________________________
____________________________
PAUL SANDHU, President & CEO Date
______________________________________
____________________________
PAUL SANDHU Date
______________________________________
____________________________
ERIC CLEMONS Date
<PAGE>
EXHIBIT "A"
PROJECT RULES AND REGULATIONS
EXHIBIT "A" to that Lease dated February 5, 1999 between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC. ("Landlord"), and
GTC TELECOM, a Nevada corporation; ERIC CLEMONS; and PAUL
SANDHU, jointly and severally ("Tenant") for the premises at
3151 Airway Avenue, Suite K-104, Costa Mesa, California 92626,
consisting of approximately 1,987 rentable square feet.
1) Tenant will refer all contractors, contractors'
representatives and installation technicians rendering
any service for Tenant to Landlord for Landlord's
supervision and/or approval before performance of any
such contractual services. This shall apply to all work
performed in the Project, including but not limited to
installation of telephones, telegraph equipment,
electrical devices and attachments, and installations of
any and every nature affecting floors, walls, woodwork,
trim, windows, ceilings, equipment, or any other
physical portion of the Project. No such work shall be
done by Tenant without Landlord's written approval first
had and obtained.
2) The work of the janitor 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, book cases, map cases, etc.,
necessary to prevent unreasonable hardship to Landlord
in discharging its obligations regarding cleaning service.
3) Movement in or out of the Project of furniture or office
equipment, or dispatch or receipt by Tenant of any
merchandise or materials which requires the use of
elevators or stairways, or movements through the Project
entrances or lobby shall be restricted to the hours
designated by Landlord from time to time. All such
movement shall be directed by Landlord and in a manner
to be agreed upon between Tenant and Landlord by
prearrangement before performance. Such prearrangement
initiated by Tenant shall include determination by
Landlord and be subject to its decision and control of
the time, method, and routing of movement. Limitations
are imposed by safety or other concerns which may
prohibit any articles, equipment or any other item from
being brought into the Project. Tenant expressly
assumes all risk of loss or damage to any and all
articles so moved, as well as injury to any person or
persons or the public engaged or not engaged in such
movement, including, without limitations, equipment,
property, and personnel of Landlord if damaged or
injured as a result of any acts done or undertaken in
connection with carrying out this service for Tenant
from the time of entering property to completion of the
work; and Landlord shall not be liable for the act or
acts of any person or persons so engaged in, or any
damage or loss to any property of persons resulting
directly or indirectly from any act done or undertaken
in connection with such service performed by or for Tenant.
4) No sign or signs will be allowed in any form on the
exterior of the Project or on any window or windows
inside or outside of the Project and so sign or signs,
except in uniform location and uniform style fixed by
Landlord, will be permitted in the public corridors or
on corridor doors or entrances of Tenant's space. All
"special" or large signs will be contracted for by
Landlord for Tenant at the rate fixed by Landlord from
time to time, and Tenant
will be billed and pay for such service accordingly.
Written consent from Landlord is an absolute
prerequisite for any such sign or signs Tenant may be so
permitted to use.
5) Tenant shall not operate a wholesale or retail
establishment such
<PAGE>
as food, drink, clothing, etc., without the written consent of
Landlord first had and obtained.
6) Tenant shall not place, install or operate on the
Premises or in any part of the Project, any engine or
machinery, or conduct mechanical operations, or place or
use in or about the Premises any explosives, gasoline,
kerosene, oil, acids, caustics, or any other flammable,
explosive or hazardous material without the written
consent of Landlord first had and obtained.
7) Landlord will not be responsible for any lost or stolen
personal property, equipment, money or jewelry from
Tenant's area public rooms regardless of whether such
loss occurs when the area is locked against entry or not.
8) No birds, animals, or bicycles shall be brought into or
kept in or about the Project.
9) Landlord may permit entrance to Tenant's offices by use
of pass keys controlled by Landlord or employees,
contractors, or service personnel supervised or employed
by Landlord.
10) None of the entries, passages, doors, elevators,
elevators doors, hallways, or stairways shall be
blocked, or obstructed, nor shall any rubbish, litter,
trash or materials of any nature be placed, emptied or
thrown into these areas, nor shall such areas be used at
any time except for access or egress by Tenant, Tenant's
agents, employees or invitees.
11) Any plant brought into the Project shall be subject to
inspection by Landlord's maintenance personnel. Any
plants found to be carrying disease or pests shall be
removed from the Project immediately upon request by the
Landlord.
12) No Tenant shall at any time occupy any part of the
Project as sleeping or lodging quarters.
13) The water closets and other water fixtures shall not be
used for any purpose other than those for which they
were constructed. No person shall waste water by
interfering with the faucets or otherwise.
14) No person shall disturb the occupants of the Project by
the use of any musical instruments, the making of
raucous noises, or other unreasonable use.
15) Nothing shall be thrown out of the windows of the
Project, or down the stairways or other passages.
16) Tenant shall not store any materials, equipment,
products, etc, outside the premises as shown on the
plats attached hereto.
17) Tenant shall comply with all local and federal codes and
ordinances. In the event of fire or code problems,
Tenant shall comply with said requirements.
18) Tenant and its agents, employees and invitees shall
observe and comply with the driving and parking signs
and markers on the Project grounds and surrounding areas.
19) Directories will be placed by the Landlord at
Landlords's expense, in the Project and no other
directories shall be permitted.
<PAGE>
20) No signs, draperies, shutters, window coverings,
decorations, hangings or obstructions of any type shall
be placed on any skylights or any doors or windows which
are visible from outside the premises without prior
written consent of the Landlord.
21) "Project Operating Hours" shall be from 7:00 a.m. to
5:30 p.m. Monday through Friday, and 8:00 a.m. to 12:00
p.m. on Saturday, but
not on Sundays, New Year's Day, Memorial Day, July 4th,
Labor Day, thanksgiving, Christmas or other legal
holidays. Landlord reserves the right to restrict entry
to the Project by unidentified persons during the hours
5:30 p.m. to 7:00 a.m., all hours Saturdays after 12:00
p.m., and all hours Sundays and legal holidays.
22) The roof is a restricted and unsafe area for
unauthorized persons. Only those specifically
authorized by Project management may enter the roof area.
23) Only those with specific authority from Project
management may enter the elevator, electrical, machine
and janitor rooms.
24) Tenant will be furnished, free of charge, eight (8) keys
to each of the following: (a) All door locks to each
Tenant premises. Extra keys may be furnished at a
reasonable charge. Tenant may not (a) copy entrance
keys; (b) Alter lock or install additional locks in any
door, unless agreed to in writing by Project management.
In such a case, work and materials will be at Tenant's
expense and Landlord will be furnished a key to the
lock. All keys furnished Tenants will be returned to
Landlord upon termination of the lease.
25) Only trucks or similar material handling equipment with
soft rubber wheels and side guards will be allowed in
the Project. No other vehicle of any kind will be
brought in by the Tenants or kept in its premises.
26) Cooking by any method other than a microwave is
prohibited. Brewing coffee, tea, hot chocolate and
similar beverages is provided: (a) Underwriter's
laboratory approved equipment are used for brewing
beverages; (b) Applicable Federal, State and City laws,
codes, ordinances, rules and regulations are followed.
27) Only telephone company technicians authorized by Project
management may enter and work in any telephone room.
Tenants who hire a telephone company to work in the
Project are responsible for notifying the company to
instruct their technicians to obtain authority from
Project management to enter telephone rooms and other
parts of the Project.
28) Packages, messages, mail, etc., must be delivered direct
to Tenant suites. Project management will not receive
or accept them for Tenants.
29) Tenants shall store their trash and garbage in their
premises in receptacles which facilitate disposal
methods in the City of Costa Mesa. Boxes, receptacles,
etc., which are used in moving Tenants in the Project
will be removed from the Project by the moving company
or Tenant will absorb the cost of removal. Disposal
cost of excessive trash or garbage beyond the normal and
ordinary garbage of an office facility will be the cost
of the Tenant.
30) Tenant shall not place a load upon any floor of the
Premises exceeding 50 lbs. of live load per square foot.
Tenant will pay the fees of the structural engineer of
the Project if structural engineering advice is
necessary in planning the positioning of heavy loads.
Business machines and mechanical equipment shall be
<PAGE>
placed and maintained by Tenant at Tenant's expense in
settings sufficient to absorb and prevent vibration,
noise and annoyance. Safes and other heavy equipment,
the weight of which will not constitute a hazard or
damage the Project or its equipment, shall be moved
into, from or about the Project only during such hours
and in such manner as shall be prescribed by Landlord.
31) The Landlord reserves the right to rescind any of these
rules and make such other and further rules and
regulations as in the judgment of Landlord shall from
time to time be needed for safety, protection, care and
good order therein, and in protection and
comfort of its Tenants, their agents, employees and
invitees, including, but not limited to rules and
regulations regarding hours of access to the Project,
which rules when made and notice thereof given to a
Tenant shall be binding upon him in like manner as if
originally herein prescribed. In the event of any
conflict, inconsistency or other difference between the
terms and provisions of these rules and regulations and
any lease now or hereafter in effect between Landlord
and any Tenant in the Project, Landlord shall have the
right to rely on the term or provision in either such
lease or such Rules and Regulations which is most
restrictive on such Tenant and most favorable to Landlord.
32) Landlord desires to maintain high standards of
environment, comfort, and convenience for its Tenants.
It will be appreciated if any undesirable conditions or
lack or courtesy or attention by its employees is
reported directly to Landlord.
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<PAGE>
A-4
EXHIBIT "B"
CONDOMINIUM / SUBLEASE RIDER
EXHIBIT "B" to that Lease dated February 5, 1999 between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC. ("Landlord"), and
GTC TELECOM, a Nevada corporation; ERIC CLEMONS; and PAUL
SANDHU, jointly and severally ("Tenant") for the premises at
3151 Airway Avenue, Suite K-104, Costa Mesa, California 92626,
consisting of approximately 1,987 rentable square feet.
RECITALS
A. Premises is a condominium which is a part of that
certain condominium project known as Executive Guild -
Costa Mesa Business Park - Phase II (the "Project").
B. The real property upon which the Project is constructed
was owned by The Irvine Company, a Michigan Corporation,
and is now assigned to the Corp. of the Presiding Bishop
of the Latter Day Saints and had been leased to Shearson
American Express Mortgage Corporation ("Shearson") and
is now assigned to GE Capital under that certain
unrecorded Ground Lease, dated March 1, 1981, between
the Irvine Company, as lessor and Shearson as lessee; a
Memorandum of which was recorded on April 16, 1981, in
Book 14022, Pages 858 to 860 of Official Records of
Orange County, California (said Ground Lease and the
recorded Memorandum are hereinafter collectively
referred to as the "Ground Lease"). Landlord is a
subtenant of GE Capital Corporation as assignee under
that certain Sublease dated October 1984 (the "Shearson
Lease").
C. There has been recorded upon the Project that certain
Declaration of Restrictions, which was recorded on June
8, 1981, in Book 14091, Pages 437, et seq., of Official
Records of Orange County, California ("the Declaration
of Restrictions"); and the Declaration of Annexation,
which was recorded on June 17, 1983, as Instrument No.
83-024927 of Official Records of said County, and
Amendment there to recorded on February 14, 1983, as
Instrument No. 83-070391 of Official Records of said
County (collectively the "Declaration of Annexation, as
amended").
Accordingly, Landlord and Tenant agree as follows:
1. This Lease is a sublease and is subject and
subordinate to the terms and provisions of the
Ground Lease, the Shearson Lease, the
Declaration of Restrictions, the Declaration of
Annexation, and the Association Management
Documents. The rights of Tenant to use, occupy
and possess the Premises are subject to
Landlord's right to use, occupy, and possess the
Premises as set forth in the Ground Lease, the
Shearson Lease, the Declaration of Restrictions,
the Declaration of Annexation and the
Association Management Documents.
2. Tenant agrees to comply with all applicable
provisions of the Ground Lease, the Shearson
Lease, the Declaration of Restrictions, the
Declaration of Annexation and the Association
Management Documents. Tenants shall neither
suffer nor permit any breach of the terms and
provisions of the Ground Lease, the Shearson
Lease, the Declaration of Restrictions, the
Declaration of Annexation, or the Association
Management Documents; any breach of or default
under such terms and provisions shall represent
a material default under this lease.
3. Although care has been taken so that terms and
provisions of the Lease, and Tenant's rights
hereunder, are not in conflict under the terms
and provisions of the Ground Lease, the
<PAGE>
Shearson Lease, the Declaration of Restrictions, the
Declaration of Annexation and/or the Association Management
Documents, to the extent that Landlord subsequently determines
that any duty of Landlord under this lease would require acts
or omissions by Landlord which would result in a breach of a
term or provision of the Ground Lease, the Shearson Lease, the
Declaration of Restrictions, the Declaration of Annexations
and/or Association Management Documents, Landlord shall be
excused from performance of any duty under this lease.
4. Landlord agrees to use its best efforts to
maintain the Ground Lease and the Shearson Lease
in full force and effect during the entire Term
of this Lease; provided, however, that if the
Ground Lease or the Shearson Lease shall for any
reason whatsoever terminate prior to its entire
Term, this Lease shall concurrently terminate.
5. In the event that Landlord is in default under
the terms or provisions of the Ground Lease, the
Shearson Lease, Declaration of Restrictions,
Declaration of Annexation and/or the Association
Management Documents by reason of the existence
or non-existence of any particular term or
provision of this Lease (but not by reason of
any act or omission taken under, or in violation
of, any particular term or provision of this
Lease), then in that event Landlord and Tenant
agree that they shall execute an amendment to
this Lease to cause the deletion or addition of
such particular term or condition as may be
required under the terms of the Ground Lease;
provided, however, that Tenant may terminate
this Lease if any amendment would materially
increase the obligations of Tenant hereunder
(for such purposes and without limitation of the
materiality standard, any amendment which would
increase Tenant's cost of occupying the Premises
more than One Thousand Dollars ($1,000.00) in
any one (1) year or which would deny Tenant the
substantial use and enjoyment of the Premises
shall be deemed material.
6. The "Premises", as it pertains to this Lease,
shall include a non-exclusive right to use the
common area of the Project, such as landscaping
and driveways, in accordance with the Ground
Lease, the Shearson Lease, the Declaration of
Restrictions, the Declaration of Annexation and
the Association Management Documents.
Landlord:
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC.-JWA
By: /s/Dan W. Baer 2/9/99
DAN W. BAER, President
Tenant:
GTC TELECOM
A Nevada corporation
By:___________________________________
____________________________
PAUL SANDHU, President & CEO Date
______________________________________
____________________________
PAUL SANDHU Date
______________________________________
____________________________
ERIC CLEMONS Date
<PAGE>
[Diagram of Leased Premises]
<PAGE>
[Diagram of Site Plan]
<PAGE>
EXHIBIT "E"
Tenant IMPROVEMENTS
GTC TELECOM, a Nevada corporation;
ERIC CLEMONS; and PAUL SANDHU
Jointly and Severally
Suite K-104
The following Tenant improvements to be provided to Tenant by
the Landlord, at Landlord's sole cost and expense.
None.
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GLOBAL PACIFIC INTERNET
770 The City Drive South, Suite 3400 Orange, CA 92868
Phn: (714) 937-5500 Fax: (714) 937-6310
http://www.globalpac.com
GLOBAL PACIFIC INTERNET RESELLER AGREEMENT
This Reseller Agreement (Agreement) details Terms and Conditions
of Services (Service) between Global Pacific Internet (Provider)
and GTC Telecomm (Reseller).
Provider Reseller
Global Pacific Internet GTC Telecomm
770 The City Drive South 3151 Airway Ave. #P3
Ste. 3400 Costa Mesa, CA 92626
Orange, CA 92868
WHEREAS, Provider provides computing services, software,
information services and access to information and software
furnished by third parties in accordance with the terms of the
Global Pacific Internet Service Agreement (hereinafter referred
to as the "Service"); and
WHEREAS, Reseller desires to distribute the Provider's Internet
Services to client-users;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Service.
Subject to the terms of the Service Agreement Exhibit A, a copy
of which is attached hereto and incorporated by reference
herein, Provider may provide selected services including Dial Up
Access, Email, FTP, Web Design, Hosting, Website Marketing,
Frame Relay, T1, Wireless T1 or Wireless Fractional T1 services.
Other services may be added or deleted in the future.
2. Fees.
Applicable Service Fees are outlined in Exhibit A
(attached), and are subject to change at term
renewal. Fees will be listed separately if
applicable for Set Up, Monthly Recurring, Annual,
Semi-Annual, One time Purchase, Lease and or Rental
fees. Fees will be listed for Services and/or
Equipment.
3. Client-User Compliance.
Provider shall provide the Service to all
client-users supplied by Reseller so long as each
client-user complies with the terms of the Service
Agreement.
4. Term.
The term of the Agreement shall commence upon the
date of execution of this Agreement and shall
continue, unless otherwise terminated by Provider as
provided herein, for the term of one year . Provider
retains the right to terminate this Agreement (a) if
Reseller violates any material provision of this
Agreement or the Service Agreement; (b) the Reseller
fails to competently perform its duties; or (c)
Provider discontinues the Service or its business.
However, Provider agrees to continue to pay
Reseller's Up-charges to Reseller after the
termination of the Agreement for those client-users
established by Reseller during the term of the
Agreement so long as Provider
<PAGE>
continues to provide the Service and so long as
these client-user accounts remain active and are
paid.
5. Promotional Materials.
Any proposed advertising or any other promotional
materials of Reseller's Service must be submitted
for approval to Provider at least fourteen (14) days
in advance of the submission of any such material
for dissemination. Provider shall have the right to
reject any such material for any reason.
6. Independent Contractor Status.
In entering into this Agreement, Reseller and its
employees shall have the status of independent
contractors with respect to Provider, and nothing
herein shall contemplate or constitute Reseller or
its employees as employees of Provider.
7. Agreement Not to Disclose.
Reseller acknowledges that Reseller's association
with Provider may provide Reseller with access to
certain confidential information of Provider,
including lists of accounts and prices, information
with respect to costs, marketing and sales, and
other knowledge and data relating to business
methods, processes and strategies, all of which are
valuable, special and unique assets of Provider and
give Provider opportunities to obtain advantages
over its competitors. Reseller agrees that Reseller
will not disclose and will not permit disclosure of
any such confidential information to any person,
firm, corporation, association or other entity for
any purpose or reason whatsoever. Provider will
offer the same Non-Disclosure protection for the
Reseller.
8. Non-Circumvention.
a. Reseller agrees, during the term of this
agreement and for a term of (1) one year thereafter,
not to contact without permission, in any manner and
for any reason whatsoever, any customer, broker, or
reseller of Provider for which Provider services
were performed and further Reseller agrees not to
become involved, directly or indirectly, in the
solicitation or marketing of any services for such
customers of Provider for the same period. Provider
will offer the same Non-Circumvention protection for
the Reseller.
b. Reseller agrees, during the term of this
agreement and for a term of (1) one year
thereafter, not to contact, solicit or do business
with any current or past employees, management,
vendor suppliers, or backbone providers, unless
permission is granted in writing by provider.
Provider will offer the same Non-Circumvention
protection for the Reseller.
9. Exclusivity.
Reseller agrees that its employees shall exclusively
promote the Provider's Service, rather than any
other Provider's service. This shall not prevent
Reseller's employees from investing their personal
assets in non-competing businesses in such a manner
that does not require substantial time or services
on the part of such employee in the operation of the
affairs of the entities in which such investments
are made.
10. Assignment.
This Agreement and the rights and duties of the
parties hereunder may not be assigned without the
prior written consent of Provider.
<PAGE>
11. Scope of Agreement.
This Agreement, including Appendix A - Service
Agreement Terms and Appendix B - E-mail Policies
attached hereto, constitutes the entire
understanding between the parties. It may not be
modified orally, but may be modified by a subsequent
writing signed by the parties hereto.
12. Force Majeure.
Neither party shall be liable for any delay or
failure in performance due to any reason or
unforeseen circumstance beyond the affected party's
control, including acts of God or public
authorities, war or war measures (whether or not a
formal declaration of war is in effect), civil
unrest, fire, epidemics, floods, earthquakes, or
delays in transportation, delivery or supply. The
obligations and rights of the excused party shall be
extended on a day to day basis for the period equal
to the period of excusable delay.
13. Severability.
In the event that any provision of this Agreement is
determined illegal or otherwise unenforceable, such
provision will be construed as if it were written so
as to be legal and enforceable to the maximum
possible extent, the entire Agreement shall not fail
of account thereof, and the balance of this
Agreement will continue in full force and effect as
to effectuate to the greatest extent possible the
parties' intent.
14. Governing Law.
The parties agree that this Agreement shall be
governed by the laws of the State of California, as
applicable to agreements made and to be performed in
such state, without regard to principles of
conflicts of law.
15. Arbitration.
Any controversy, claim or dispute between the
parties to this Agreement arising out of, in
connection with, or in relation to the
interpretation, validity, performance or breach of
the Agreement shall, at the request of either party,
first be resolved to the exclusion of a court of law
by binding arbitration, in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator(s) shall be
empowered to award relief which is legal and/or
equitable in nature.
16. Attorney's Fees.
In any or all proceedings brought to enforce rights
under this Agreement, the prevailing party shall be
entitled to receive its reasonable attorney's fees
and costs.
17. Consequential Damages.
Neither Provider nor Reseller will be liable for any
special, incidental or consequential damages.
18. Client-user List.
In the event of a cessation of operation of
Provider, Provider will furnish Reseller with a list
of all client-users, referred by Reseller during the
term of this Agreement, including names, addresses
and phone numbers, within ninety (90) days notice of
cessation of business.
<PAGE>
19. Further Assurances.
Each of the parties hereto shall execute and deliver
any and all additional documents and shall do any
and all acts and things reasonably required in
connection with the performance of the obligations
undertaken in this Agreement and to effectuate in
good faith the intent of the parties.
20. Appendixes.
The attached appendixes are part of this agreement:
Appendix A - Service Terms and Conditions and
Appendix B - E-mail Policies.
21. Notices.
All notices and all correspondences pursuant to this
Agreement shall be sent to the parties at the
following respective addresses:
Provider Reseller
Global Pacific Internet GTC Telecomm
770 The City Drive South 3151 Airway Ave. #P3
Ste. 3400 Costa Mesa, CA 92626
Orange, CA 92868
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized
representatives as of the date first above written.
"PROVIDER" "RESELLER"
Global Pacific Internet
By: /s/Jack Tortorice By: /s/Paul Sandhu
Jack Tortorice, President
DATE:
1/26/99 Date: 1/25/99
<PAGE>
770 The City Drive South, Suite 3400, Orange, CA 92868
HQ Phn: (714) 937-5500 Fax: (714) 937-6310
www.globalpac.com
RESELLER AGREEMENT, EXHIBIT A:
Provider Reseller
Global Pacific Internet GTC Telecomm
770 The City Drive South 3151 Airway Ave. #P3
Ste. 3400 Costa Mesa, CA 92626
Orange, CA 92868
SERVICE
1. Itemized Description of Service(s) for Resale:
A. Unless otherwise stated, the CIR (Committed Information
Rate) will exceed 25% of the customer ordered bandwidth.
2. Rate (Price) of Service(s) and Commissions offered:
A.Setup Fees: $1,500.00 (standard setup)
B.Monthly Service Fees: 80% of then current GPI list price
3. Service Equipment sold to Reseller Clients:
4.Payment Terms:
50% of Setup and First Month Svc fee due with order
50% of Setup (balance) and Last Month Svc fee due on
activation*
*activation is when client side radio/modem can access the internet
5.Payment Due:1st of each month
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized
representatives as of the date first above written.
"PROVIDER" "RESELLER"
Global Pacific Internet
By: /s/Jack Tortorice By:/s/Paul Sandhu
Jack Tortorice, President
Date: 1/26/99 Date: 1/25/99
TELECOMMUNICATIONS SERVICE AGREEMENT
This Agreement is made this on the date below by and between INTERNATIONAL
TELEPHONE & ELECTRONICS, LLC ("INTELECT"), a Nevada Limited Liability
Company, with its principal offices located at 1150 Silverado Street, La
Jolla, CA 92037 and GTC TELECOM ("CUSTOMER) a Nevada Corporation.
1. EXHIBITS Exhibit "A" is hereby incorporated by reference as though
fully set forth herein.
2. SERVICE COMMENCEMENT DATE/ PERIOD OF SERVICE/ INITIAL TERM This
Agreement shall be effective and the parties' obligations shall commence upon
the date of execution by the parties, and continue in effect (subject to
rights of termination contained herein) for a period of twelve (12)
months from such date provided for in Exhibit "A". This twelve (12)
month period shall constitute the Initial Term. This Agreement will be
automatically renewed on a month-to-month basis after the expiration of
the Initial Term. Either party may cancel this Agreement at the end of
the Initial Term, or any subsequent term, by giving the other party
written notice of its intent to cancel at least thirty (30) days prior
to such cancellation date.
3. CANCELLATION/ MODIFICATION In the event that INTELECT'S
agreement with its underlying providers ("CARRIER") is canceled or terminated
for any reason, neither CUSTOMER nor INTELECT will be liable for any commitments
or penalties. This Agreement may be modified only with the mutual
written agreement between the parties and shall not be deemed effective
unless the parties execute the Service Schedule (Exhibit "A").
4. SECURITY/DEPOSITS As a condition precedent to INTELECT'S obligations to
the CARRIER and to ensure the prompt payments of sums due hereunder,
CUSTOMER will provide security in the amount specified in Exhibit "A".
At termination or earlier in the event that funds are owed which do not
exceed the security deposit, then CUSTOMER shall forfeit whatever
portion of the security deposit is necessary to fulfill such shortage.
In the event that there is no shortfall, the security deposit shall be
returned within thirty (30) days of contract termination or at the time
there has been a complete and final reconciliation of CUSTOMER's
account, whichever occurs later.
5. BILLING AND PAYMENT. Weekly deposits shall be made by CUSTOMER to
INTELECT without reduction or offset in the amount equal to the weekly
bill presented to CUSTOMER by INTELECT, for use of Service, plus
applicable taxes, if any. Payments shall be wire transferred to
INTELECT'S designated account, identified hereafter, on a weekly basis
within three (3) business days (72 hours) of the receipt of invoice set
forth on each faxed summary invoice. Formal invoices with CDR records
will be forwarded to CUSTOMER weekly. If CUSTOMER fails to pay any
invoice within the designated time period, INTELECT shall be entitled to
immediately deduct and retain the amount of the invoice or balance owed
on the invoice from CUSTOMER's security deposit. Such failure to pay
shall be considered an act of default hereunder.
6. BILLING DISPUTES If CUSTOMER is not in agreement with INTELECT'S
weekly invoice, within fifteen (15) days thereafter CUSTOMER may notify
INTELECT of the disputed amount when it submits such dispute in writing
and provides documentation to support such dispute (via fax or mail);
provided however that payment of the disputed amount shall be paid in
its entirety pending the outcome of the dispute resolution process
identified herein. Any such disputes will not interfere in any way with
payments for subsequent weekly billings. INTELECT shall resolve the
dispute in writing within fifteen (15) days of receipt of CUSTOMER's
documentation and will determine whether any billing adjustment should
be made to CUSTOMER's account. Any amount, which is determined to be in
error, will be credited against the next periodic invoice. Such request
for adjustment shall not be cause for delay or reduction in payment of
the balance due on any current periodic invoice.
7. LATE PAYMENT A delinquency charge (liquidated damages) of one and
one-half per cent (1.5%) per month or the maximum lawful rate under
applicable state law will accrue upon any unpaid balance commencing
after the due date of the billing. Acceptance by INTELECT of any late
payment or delinquency charge shall in no event constitute a waiver by
INTELECT of CUSTOMER'S default, nor shall such acceptance prevent
INTELECT from exercising any or all other rights or remedies that it may
have.
<PAGE>
8. FRAUDULENT CALLS CUSTOMER shall indemnify and hold INTELECT harmless from
all costs, expenses, claims or actions arising from fraudulent calls of
any nature which may comprise a portion of the Services to the extent
that the party claiming the calls(s) in question to be fraudulent is (or
had been at the time of the call) an End User of the Services through
CUSTOMER or and End User of the Service through CUSTOMER's distribution
channels. CUSTOMER shall not be excused from paying INTELECT for
Services provided to CUSTOMER or any portion thereof on the basis that
fraudulent calls comprised a corresponding portion of the Services.
9. LICENSES AND STATE CERTIFICATIONS CUSTOMER warrants that in all
jurisdictions in which it provides long distance services that require
licensing, registration or certification, it has obtained the necessary
authority from the appropriate governmental authority.
10. TAX EXEMPTION / TAXES CUSTOMER will provide INTELECT upon execution of
the Agreement with a valid tax exemption form to exempt CUSTOMER, under
applicable law, from taxes that would otherwise be paid by CUSTOMER,
INTELECT will invoice CUSTOMER for taxes that are not covered by tax
exemption certificate properly filed with INTELECT. CUSTOMER
acknowledges and understands that all charges stated in this Agreement
are computed by INTELECT exclusive of any applicable use, excise, gross
receipts, sales and privilege taxes, duties fees or other taxes or
similar liabilities (other than general income or property taxes),
whether charged to or against INTELECT or CUSTOMER because of the
Service furnished to CUSTOMER ("Additional Charges"). Such Additional
Charges shall be paid by CUSTOMER in addition to all other charges
provided for herein. Any tax, levy, or other tax liability arising out
of the sale of any product or Service by CUSTOMER shall be collected and
paid to INTELECT or to any governmental authority directed by CUSTOMER,
and/or its customer/dealers in a timely manner.
11. TERMINATION / SUSPENSION OF SERVICE / REINSTITUTION OF SERVICE If
payment or deposits have not been satisfied as set forth in paragraph
six (6) for all charges (including transmission charges, service charges
and monthly fixed charges, if any) billed to CUSTOMER, then INTELECT may
and within ten (10) business days prior written notice to CUSTOMER,
suspend the telecommunications products and Service provided hereunder
in part or in whole and begin to terminate as provided herein. Traffic
limitations may be placed on CUSTOMER during this notice period.
INTELECT may suspend Service if it is required to take emergency steps
to protect against the loss of communications service, property damage,
or personal injury, or if a breach of any provision herein occurs.
INTELECT may also terminate Service and terminate if;
a) CUSTOMER fails to cure any violation of its obligations hereunder within
ten (10) days of receiving a notice of such violation from INTELECT
or In the event of repeated violations by CUSTOMER of its obligations
hereunder (of which CUSTOMER has been notified and had an opportunity
to cure).
b) Immediately upon written notice if CUSTOMER should become insolvent or
files for bankruptcy.
c) A final order by a government entity with appropriate jurisdiction is
entered which provides that the relationship hereunder is contrary to
law or regulation.
d) There is a breach of any provision herein not otherwise referred to in
this paragraph.
e) If regulatory action by the FCC or a foreign government agency prevents
INTELECT or its carriers from meeting the monthly commitment INTELECT
shall waive under-utilization charges otherwise applicable to the
months during which such regulatory action is in effect.
f) If INTELECT or the carrier detects the use of "polling"
technique by CUSTOMER for signaling, setup or completion of
calls, INTELECT may subject to and without limitation upon
the Tariff, block calls, without effect of the utilization
schedule.
g) INTELECT chooses to refuse service to callback providers.
h) If any action or ruling by the FCC, Carriers or foreign PTT
prevents or impedes INTELECT from performing any material
obligation in this Agreement INTELECT, may at its option and
upon prior thirty (30) days written notice to CUSTOMER,
terminate this Agreement with regard to the affected service
portion herein without penalty or liability. Any action or
ruling by the FCC, Carrier Service provider or foreign PTT
that prevents or effects INTELECT'S ability to provide
services shall not be considered a breach of this Agreement.
In addition, INTELECT'S action resulting from the FCC,
Carrier Service provider's blocking or interrupting
INTELECT'S service, or threatening to do so, shall not be
considered a breach of this Agreement.
<PAGE>
i) Upon termination or dispute, INTELECT will have an additional
thirty (30) days to complete a full and final accounting of
CUSTOMER's charges. INTELECT reserves the right to
retroactively adjust billing within thirty (30) days of
original billing date to reflect carrier(s) penalties and
billing/reconciliation. If CUSTOMER seeks reinstitution of
Service following denial of Service by INTELECT, CUSTOMER
shall forward to INTELECT, prior to the time Service is
reinstituted (I) all accrued and unpaid charges and (ii) all
LOC deposits as directed herein. INTELECT shall be entitled
to collect reasonable legal fees and all costs incurred by
INTELECT in the collection of any unpaid amount whether or
not suit is instituted.
12. MODIFICATION OF PRICE INTELECT reserves the right to change any Service
price charged to CUSTOMER upon seven (7) days written notice. If
INTELECT does change the price to CUSTOMER, CUSTOMER has thirty (30)
days in which to cancel the affected portion of Service covered by this
Agreement. If CUSTOMER has not canceled within thirty (30) days, then
CUSTOMER is obligated to comply with all conditions set forth in this
Agreement and to pay the modified price.
13. SEVERABILITY If any term or provision of the Agreement is determined to be
illegal, unenforceable, or invalid in whole or in part for any reason,
such illegal, unenforceable or invalid provision or part(s) thereof
shall be stricken from this Agreement and such provision shall not
affect the legality, enforceability, or validity of the remainder of
this section. The stricken provision shall be replaced to the extent
possible with a legal, enforceable and valid provision that is similar
in tenor to the stricken provision as is legally possible.
14. CONFIDENTIALITY/NON CIRCUMVENT The parties understand and agree that the
terms and conditions of this Agreement, all documents referenced
(including invoices to CUSTOMER for Service provided herein),
communications between the parties regarding this Agreement of the
Service to be provided herein (including price quotes to CUSTOMER for
any Service proposed to be provided or actually provided) and all
information regarding the customers of INTELECT, as well as such
information relevant to any other agreement between the parties
(collectively "Confidential Information"), are confidential as between
CUSTOMER and INTELECT. INTELECT and CUSTOMER and affiliated companies
and personnel shall maintain confidentially regarding the terms of this
Agreement and all technical knowledge obtained through this relationship
over the course of the Agreement and this requirement to maintain
confidentiality shall remain in full force and effect for a period equal
to the longer of (I) one (1) year following the effective date of this
Agreement; or (ii) one (1) year following the termination of all Service
hereunder.
15. HOLD HARMLESS Both INTELECT and CUSTOMER will hold each other harmless for
any expenses incurred with this transaction until Services have been
provided by INTELECT. CUSTOMER shall indemnify and hold harmless
INTELECT, and its agents and brokers from any loss, cost, damage,
expense, or liability; including, without limitation, court costs and
reasonable attorney's fees arising out of, in whole or in part, directly
or indirectly, the installation, hook-up, mistakes, accidents, errors,
omissions, interruptions, or defects in transmission, or delays,
including those which may be caused by regulatory or judicial
authorities, maintenance, service or trouble-shooting of the
transmission Services described in this Agreement. INTELECT MAKES NO
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
TELECOMMUNICATION
PRODUCTS AND SERVICES PROVIDED HEREUNDER AND EXPRESSLY
DISCLAIMS ANY
WARRANTY OF MERCHANTABILITY, DESCRIPTION OR FITNESS FOR ANY
PARTICULAR
PURPOSE OR FUNCTION. As a material inducement of INTELECT to supply the
Services hereunder at prices stated, purchaser agrees that INTELECT and
INTELECT'S agents and Service INTELECT shall in no event be liable for
any loss, expense or damage for (i) loss of revenue, profit, business or
goodwill, and/or (ii) special, exemplary, proximate, consequential or
incidental damages and expenses of any type or nature on account of any
breach or default hereunder by INTELECT, or on account of the use or
non-use of the telecommunications products and Services, or due to
interruption or termination of such telecommunications products and
Services for any reason unless due to willful misconduct of INTELECT.
16. FORCE MAJEURE The parties obligations under this Agreement are subject to,
and neither party shall be liable for delays, failures to perform
(except the payment of money by CUSTOMER), damages losses or
destruction, or malfunction of any equipment or any consequence thereof
caused or occasioned by or due to fire, flood, water, the elements labor
disputes or shortages, utility curtailments, power failures, explosions,
<PAGE>
civil disturbances, governmental actions, shortages of equipment for
supplies, unavailability of transportation, acts or omissions of third
parties, or any other cause beyond the party's reasonable control. The
obligations of INTELECT to provide the telecommunications products and
Services under the terms of this Agreement are subject to and contingent
on the continuation of INTELECT'S agreements with its Service providers
to provide the telecommunication products and Services described herein
at the rates and on the same or similar conditions at which such Service
providers are currently providing or offering to provide
telecommunications products or Services to INTELECT and its customers.
Any significant changes in such agreements or termination thereof which
make it impractical for INTELECT in its sole discretion to continue to
provide such telecommunications products and Services at current rates
and conditions shall relieve INTELECT of its obligations and all
liability under this Agreement.
17. REGULATION This Agreement is made expressly subject to all present and
future valid orders and regulations of any regulatory body having
jurisdiction of the subject matter hereof and to the laws of the United
States of America, any of its states, or any foreign governmental agency
having jurisdiction
18. AGENCY Neither party is authorized to act as an agent for, or legal
representative of, the other party and neither party shall have the
authority to assume or create any obligation on behalf of, or in the
names of, or binding upon the other party. Nothing in this Agreement
shall be construed to make the parties partners or joint venturers of
each other.
19. ASSIGNMENT / THIRD PARTY BENEFICIARIES/PARTIES IN INTEREST No party to
this Agreement may assign its rights or delegate its obligations under
this Agreement without the express written consent of the other parties,
except that INTELECT may assign this Agreement, without prior consent,
to any parent, subsidiary or affiliate or to any person, firm or
corporation which shall control, be under the control of or be under the
common control with INTELECT or any corporation into which INTELECT may
be merged or consolidated or which purchases all or substantially all of
INTELECT'S assets. This Agreement has been made and is made solely for
the benefit of INTELECT and CUSTOMER and their respective successors and
permitted assigns. Nothing in this Agreement is intended to confer any
rights/remedies under or by reason of this Agreement on any third party.
20. GOVERNING LAW This Agreement shall be in all respects, governed by and
construed and enforced in accordance with the laws of the State of
California, including all matters of construction, validity and
performance. Any action to enforce or interpret the terms of this
Agreement shall be instituted and maintained in the State of California.
CUSTOMER hereby consents to the jurisdiction of such court and waives
any objections to such jurisdiction. In any action or proceeding
arising out of this Agreement the party prevailing in such action shall
be entitled to recover its reasonable attorneys' fees and costs. The
parties agree to utilize the rules covered by the Expedited Dispute
resolution procedures in effect under the American Arbitration
Association as they are applicable to the accelerated resolution and
determination.
21. REPRESENTATION OF AUTHORITY Each party represents and warrants to the other
that the execution and delivery of this Agreement and the performance of
such party's obligations hereunder have been duly authorized and that
the Agreement is a valid and legal agreement binding on such parties and
enforceable in accordance with its terms.
22. NO WAIVER No term or provision of this Agreement shall be deemed waived and
no breach or default shall be deemed excused unless such waiver or
consent shall be in writing and signed by the party claimed to have
waived or consented. No consent by any party to, or waiver of, a breach
or default by the other, whether express or implied, shall constitute a
consent to, waiver of, or excuse for any different or subsequent breach
or default.
23. BINDING EFFECT / TIME IS OF THE ESSENCE / SIGNATURES This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Neither party shall assign,
delegate or transfer any of its rights or obligations hereunder without
the prior written consent of the other party. Time is of the essence in
the performance of each party's obligations under this Agreement.
Facsimile signatures are as valid as original.
<PAGE>
IN WITNESS WHEREOF, the parties hereto above caused this Agreement to be
executed by their duly authorized representatives effective as of the date
below.
Dated:
CUSTOMER: INTELECT:
/s/ Paul Sandhu /s/
SIGNATURE DATE SIGNATURE DATE
<PAGE>
Exhibit "A"
INTERNATIONAL RATE SCHEDULE
DESTINATION / TERMINATION RATE PER MINUTE
SEE ATTACHED RATE SHEET INCORPORATED BY
REFERENCE HEREIN
THE PARTIES AGREE:
1. Security Amount: $5,000.
2. Failure to remit surety as required will render this Agreement null
and void.
3. Service is FOB at the Point Of Presence (POP) designated by Intelect.
4. INTELECT is not responsible for any equipment costs, LEC or CAP local
loop or back-haul charges.
5. A test circuit may be established at CUSTOMERS sole expense.
6. Service for individual countries depend on capacity and availability
at the time of receipt of required deposit by Intelect.
7. Circuits will be activated by Intelect as availability and capacity
permit.
8. The initial billing increment per call will be 30 / 6 seconds, except
for Mexico.
Date:
CUSTOMER: INTELECT:
/s/ Paul Sandhu /s/
SIGNATURE SIGNATURE
SALES REPRESENTATIVE AGREEMENT
THIS SALES REPRESENTATIVE AGREEMENT (hereinafter "Agreement") is
made and entered into between GTC Telecom, Inc., its assigns, and
successors (hereinafter "GTC") and OhGolly.com, Inc., its assigns,
and successors (hereinafter "OhGolly"), on this 9th day of March, 1999.
RECITALS
WHEREAS GTC Telecom, Inc. is a corporation duly organized
and existing under the laws of the State of Nevada with offices
located at 3151 Airway Ave., Suite P-3, Costa Mesa, CA 92626; and
WHEREAS OhGolly, Inc. is a corporation duly organized and
existing under the laws of the State of California with offices
located at 18141 Beach Blvd., Suite 320, Huntington Beach, CA 92648;
and
WHEREAS GTC and OhGolly desire to enter into a legal and
binding agreement whereby OhGolly agrees to market GTC's Internet
Web Page Hosting services according to the terms of the Agreement as
set forth herein;
NOW, THEREFORE, GTC and OhGolly agree as follows:
MARKETING, PROMOTING, AND ADVERTISING
OF INTERNET WEB PAGE HOSTING SERVICES
1. APPOINTMENT OF OHGOLLY. Effective upon execution of this
Agreement, GTC hereby appoints OhGolly as its
non-exclusive independent marketing distributor, to
promote, market and distribute GTC's Internet Web Page
Hosting services at the rate plans and terms set forth in
this agreement. OhGolly hereby accepts its appointment
subject to the terms, conditions and limitations set forth
herein.
2. RATE PLAN. OhGolly agrees to market GTC's Internet Web
Page Hosting services at the rates set by GTC. Prior to
commencement of OhGolly's duties under this Agreement, GTC
shall furnish OhGolly with copies of its current price
lists and rate plans for GTC's Internet Web Page Hosting
service. OhGolly shall quote to Customers only those
prices and rates authorized by GTC.
3. INVOICES. GTC shall render all invoices directly to the
Customers and shall send copies of all Commissionable
invoices to OhGolly. Payments by Customers shall be made
directly to GTC.
4. NONSOLICITATION. OhGolly, its officers, directors, and
employees, including but not limited to, Paul Thenard II,
Lars Perrson, Todd Johnson, and Jeff Einstoss, acknowledge
that GTC's relationships with its employees, customers,
clients, suppliers, sponsors and other persons are
valuable business assets. To forestall any use of any
such information, OhGolly and its shareholders, officers,
directors, and employees agree that for the term of this
<PAGE>
Agreement and for a period of one (1) year thereafter,
OhGolly and its shareholders, officers, directors, and
employees shall not, directly or indirectly, attempt to
remarket customer accounts which have been sold to GTC by
OhGolly.
5. TRADEMARKS. OhGolly shall not use GTC's name or marks
without the express written consent of GTC.
6. RETURN OF MARKETING MATERIALS. OhGolly shall return all
marketing, promotional, advertising, or any other sales
literature, information, or confidential information
provided to OhGolly by GTC within thirty (30) days of the
effective termination of this agreement.
7. PRESS RELEASES AND OTHER MARKETING MATERIALS. Either
party to this agreement must obtain approval for any and
all press releases, advertisements, or any other marketing
materials to be used, prior to dissemination.
SALE CONFIRMATION
8. TIMING OF COMMENCEMENT OF SALES. An order (the
"Customer") solicited by OhGolly will be considered a sale
( "Sale") upon the completion of the following:
(a) OhGolly has successfully completed a personal Internet
Web Page for the Customer;
(b) OhGolly has sent the Customer a Fulfillment Package
(an example of which is attached hereto was Exhibit "A"); and
(c) GTC has assigned an Authorization number to the
Customer.
Upon the occurrence of paragraph 8(a)(b) & (c), the order
shall be considered a Sale and OhGolly will receive its
Commission as outlined in paragraph 9 & 10.
COMMISSIONS
9. SALES COMMISSION. GTC agrees to pay OhGolly $100 per each
Sale (the "Sales Commission") within the time period
specified in paragraph 10.
10. SUBMISSION OF SALES AND PAYMENT OF COMMISSION. OhGolly
agrees to submit an invoice for all Sales to GTC weekly by
11:59 p.m. Friday, Pacific Standard Time. OhGolly shall
receive compensation for all such submitted Sales as follows:
GTC shall pay OhGolly 65% of all Commissions due on a weekly
basis within seven (7) days from the date of submission to
GTC. GTC shall pay the balance of 35% of the Commission
within sixty days from the date of submission to GTC. Sales
submitted after the deadline will be payable on the next
payment cycle.
11. COMMISSION CREDIT. Pursuant to that certain Purchase and
Services Agreement dated March 9, 1999 between GTC and
Service One Communications, Inc. (the "Service One
Agreement"), OhGolly agrees to credit GTC towards the payment
of any Commissions owed to OhGolly under this Agreement, any
credit due to GTC pursuant to paragraph 3(d) of the Service
One Agreement.
<PAGE>
12. MONTHLY STATEMENTS. GTC shall submit to OhGolly
monthly statements of Commissions due and payable to OhGolly
under the terms of this Agreement, with reference to the
specific invoices on which the Commissions are being paid.
13. INSPECTION OF RECORDS. OhGolly shall have the right, at its
own expense and not more than once in any four (4) month
period, to inspect at reasonable times, GTC's relevant
accounting records to verify the accuracy of Commissions paid
by GTC under the terms of this Agreement.
CUSTOMER SUPPORT
14. CUSTOMER SUPPORT. GTC shall have the option to appoint
OhGolly as its Customer Support Representative to the
Customers (the "Support Option"). Should GTC elect to
exercise the Support Option, OhGolly agrees to respond to all
customer support calls on a timely basis and to provide
support to Customers with regards to the operation and
maintenance of the Customer's Personal Internet Web Page. In
return, GTC shall pay OhGolly $3.00 for each customer support
call made by a Customer to OhGolly (the "Support Fee").
OhGolly shall provide GTC with an invoice of all such
customer support calls weekly by Friday at 11:30 am, Pacific
Standard Time. GTC shall pay OhGolly the Support Fee within
seven (7) days of the date of such invoices. GTC shall have
the right to terminate the Support Option provided that GTC
provide OhGolly with seven (7) days notice of such
termination.
RELATIONSHIP BETWEEN OHGOLLY AND GTC
15. INDEPENDENT CONTRACTOR. OhGolly's relationship to
GTC hereunder shall be that of an independent vendor. Neither
party shall be deemed to be the agent of the other, and
neither shall have the authority to act on behalf of the
other party except in the matter and extent agreed to in
writing. Nothing contained in this Agreement shall be
construed to imply that OhGolly or GTC, or any employee,
agent or other authorized representative of any such party,
is a partner, joint venturer, agent officer or employee of
the other. Neither party hereto shall have any authority to
bind the other in any respect vis a vis any third party, it
being intended that each shall remain an independent
contractor and responsible only for its own actions. OhGolly
and GTC are independent contractors, each responsible for its
own actions, costs and expenses. Neither OhGolly nor GTC
shall have any right to, and shall not, commit the other
party to any agreement, contract, or undertaking or waive or
compromise any of such other party's rights against customers
or other parties.
16. NOT EMPLOYEES. Persons retained by a party hereto as
employees or agents shall not be deemed to be employees or
agents of the other party because of the relationship
established herein. OhGolly, its agents or employees, shall
not be entitled to participate in, or otherwise receive, any
benefit or right as any employee under any GTC benefit or
welfare plan, including but not limited to, employee
insurance, pension, or security plans, as a result of
entering into this agreement.
17. BUSINESS EXPENSES. OhGolly shall be responsible for, and
GTC shall have no liability for, any and all business
expenses incurred by OhGolly in performing its duties
hereunder. Business expenses shall include, but are not
<PAGE>
limited to, all operating, travel, meals, and entertainment
expenses. Each of OhGolly and GTC shall bear its own costs
and expenses for marketing, promoting and advertising the
services of GTC unless mutually agreed to in writing
otherwise in advance.
18. TAXES. GTC is not responsible for any taxes, unemployment
insurance, insurance, Social Security, or any local, state,
or federal fees and/or taxes incurred by OhGolly, its agents
or employees. GTC shall pay OhGolly fees and commissions
only according to the provisions of this agreement. OhGolly
is responsible for all state, local, and federal taxes and
fees on all monies paid to OhGolly by GTC. Conversely, GTC
shall be responsible for all applicable state, federal, and
local taxes and fees on all monies paid to GTC by its consumers.
19. REPRESENTATIONS TO THIRD PARTIES. OhGolly agrees that it
will make no representations with respect to its relationship
to GTC except that it is an independent marketing distributor
of GTC telecommunication services.
CONFIDENTIAL INFORMATION AND TRADE SECRETS
20. CONFIDENTIAL INFORMATION. OhGolly hereby acknowledges and
agrees that all information disclosed to OhGolly by GTC,
whether written or oral, relating to GTC's business
activities, its customer names, addresses, all operating
plans, information relating to its existing services, new or
envisioned GTC products or services and the development
thereof, scientific, engineering, or technical information
relating to GTC's interface with long distance carriers,
GTC's marketing or product promotional material, including
brochures, product literature, plan sheets, and any and all
reports generated to customers, or to OhGolly with regard to
customers, unpublished list of names, and all information
relating to GTC's order processing, pricing, cost and
quotations, and any and all information relating to GTC's
relationship with customers and OhGolly, is considered
confidential information, and is proprietary to, and is
considered the invaluable trade secret of GTC (collectively
"Confidential Information"). Any disclosure of any
Confidential Information by OhGolly, its employees, agents or
representatives shall cause immediate, substantial, and
irreparable harm and loss to GTC, and GTC's competitive
position in the marketplace. OhGolly understands that GTC
desires to keep such Confidential Information in the
strictest confidence, and that OhGolly's agreement to do so
is a continuing condition of the receipt and possession of
Confidential Information, and a material provision of this
agreement, and a condition that shall survive the termination
of this Agreement. Consequently, OhGolly shall use
Confidential Information for the sole purpose of performing
its obligations as provided herein. OhGolly agrees:
A. not to disclose Confidential Information to future or
existing competitors;
B. to limit dissemination of Confidential Information to
only those OhGolly employees who have a need to know
such Confidential Information in order perform their
duties as set forth herein;
C. to return Confidential Information, including all
copies and records thereof, to GTC upon receipt of a
request from GTC, or termination of the agreement as
provided herein, whichever occurs first.
<PAGE>
MISCELLANEOUS PROVISIONS
21. TERM AND TERMINATION. This Agreement shall be for an
initial term of 12 months. Either GTC or OhGolly may
terminate this Agreement at any time upon thirty (60) days
written notice given by the terminating party.
Notwithstanding the above, if either party defaults in the
performance of any material obligation in this Agreement,
then the non-defaulting party may give written notice to the
defaulting party, and if such default is not cured within ten
(10) days following such notice, the non-defaulting party
shall be entitled to terminate this Agreement.
22. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with
respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No
understanding, promise, inducement, statement of intention,
representation, warranty, covenant or condition, written or
oral, express or implied, whether by statute or otherwise,
has been made by any party hereto which is not embodied in
this Agreement or the written statements, certificates, or
other documents delivered pursuant hereto or in connection
with the transactions contemplated hereby, and no party
hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement,
representation, warranty, covenant or condition not so set
forth.
23. NOTICES. All notices provided for in this Agreement shall
be in writing signed by the party giving such notice, and
delivered personally or sent by overnight courier or
messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex,
facsimile transmission, telegram or similar means of
communication. Notices shall be deemed to have been received
on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or
if sent by overnight courier or messenger, shall be deemed to
have been received on the next delivery day after deposit
with the courier or messenger, or if sent by certified or
registered mail, return receipt requested, shall be deemed to
have been received on the third business day after the date
of mailing. Notices shall be sent to the addresses set forth
below:
If to GTC:
GTC Telecom, Inc.
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626
Attn: Paul Sandhu, President
With a copy to:
Law offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attention: M. Richard Cutler
<PAGE>
If to OhGolly:
OhGolly.com, Inc.
18141 Beach Blvd., Suite 320
Huntington Beach, CA 92648
Attn: Paul Thenard II, President
24. CHOICE OF LAW. This Agreement and the rights of the
parties hereunder shall be governed by and construed in
accordance with the laws of the State of California including
all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of
conflict of laws.
25. JURISDICTION. The parties submit to the jurisdiction of the
Courts of the State of California or a Federal Court
empaneled in the State of California for the resolution of
all legal disputes arising under the terms of this Agreement,
including, but not limited to, enforcement of any arbitration
award.
26. VENUE. The parties hereto hereby consent to the venue and
jurisdiction of the Superior Court of the State of
California, Orange County, Central District and waive all
defenses of improper venue or jurisdiction.
27. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same
instrument.
28. AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified, or supplemented only
by a written agreement signed by all of the parties hereto.
29. TITLES AND CAPTIONS. All section titles or captions
contained in this Agreement are for convenience only and
shall not be deemed part of the context nor affect the
interpretation of this Agreement.
30. PRONOUNS AND PLURALS. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or
persons may require.
31. AGREEMENT BINDING. This Agreement shall be binding upon
the heirs, executors, administrators, successors and assigns
of the parties hereto.
32. PRESUMPTION. This Agreement or any Section thereof shall
not be construed against any party due to the fact that said
Agreement or any Section thereof was drafted by said party.
33. FURTHER ACTION. The parties hereto shall execute and
deliver all documents, provide all information and take or
forbear from all such action as may be necessary or
appropriate to achieve the purpose of the Agreement.
<PAGE>
34. PARTIES IN INTEREST. Nothing herein shall be construed
to be to the benefit of any
third party, nor is it intended that any provision shall be for
the benefit of any third party.
35. SAVINGS CLAUSE. If any provision of this Agreement, or
the application of such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held
invalid, shall not be affected thereby.
36. INDEMNIFICATION. OhGolly agrees to indemnify and hold
harmless GTC for any errors or omissions by OhGolly, either
intentional or unintentional resulting in a claim by third
parties, arising out of its work in accordance with this
Agreement.
37. SEVERABILITY. Should any provision or any part of this
agreement be held unenforceable by any court or arbitrator,
then the remainder of the agreement shall be given full force
and effect and the invalid provision shall be deemed severed
from this agreement.
GTC AND OHGOLLY ACKNOWLEDGE THAT THEY HAVE READ EACH AND EVERY
PARAGRAPH OF THIS AGREEMENT AND THAT THEY UNDERSTAND THEIR RIGHTS
AND OBLIGATIONS AND THAT THEY HAVE BEEN ADVISED TO CONSULT THEIR
RESPECTIVE ATTORNEYS PRIOR TO EXECUTING THIS AGREEMENT.
GTC Telecom, Inc. OhGolly, Inc.
/s/ Paul Sandhu /s/ Paul Thenard II
By: Paul Sandhu, President By: Paul Thenard II, President
PURCHASE AND SERVICES AGREEMENT
THIS PURCHASE AND SERVICES AGREEMENT
(hereinafter "Agreement") is made and entered into between GTC Telecom, Inc.,
its assigns, and successors (hereinafter "GTC") and Service One
Communications, Inc., its assigns, and successors (hereinafter "Service"),
on this 9th day of March, 1999 (the "Execution Date").
RECITALS
WHEREAS GTC Telecom, Inc. is a corporation duly organized
and existing under the laws of the State of Nevada, with offices
located at 3151 Airway Ave., Suite P-3, Costa Mesa, CA 92626;
WHEREAS Service One Communications, Inc. is a corporation
duly organized and existing under the laws of the State of Nevada,
with offices located at 18141 Beach Blvd., Suite 320, Huntington
Beach, CA 92648;
WHEREAS Service previously contracted with approximately
7,500 individuals / entities (as set forth in Exhibit "A", attached
hereto) to design, develop, and set-up individual personal web pages
for said individuals (the "Customers");
WHEREAS GTC desires to purchase all of Service's rights,
title, and interests to the Customers;
WHEREAS GTC desires to contract with Service to design,
develop, and set-up personal Internet Web Pages for the Customers;
and
WHEREAS GTC and Service desire to enter into a legal and
binding agreement as set forth herein.
NOW, THEREFORE, GTC and Service agree as follows:
PURCHASE OF CUSTOMERS
1. PURCHASE OF CUSTOMERS. Service agrees to sell, transfer,
convey and assign to GTC and GTC agrees to purchase from Service,
subject to the terms and conditions set forth in this Agreement, all
of Service's rights, title and interest in and to the Customers,
including without limitation, all of the accounts receivable owing
from the Customers.
2. VALID CUSTOMERS. Following the execution of this Agreement,
GTC shall submit an invoice to all Customers for payment. Only
those Customers that execute the contract and return payment to GTC,
shall be considered Valid Customers. GTC shall provide Service with
copies of all documentation necessary, supporting GTC's
determination of the status of a Customer.
<PAGE>
3. PURCHASE PRICE FOR VALID CUSTOMERS. In exchange for the
Customers and for design, development, and set-up services as
defined below, GTC agrees to pay Service $100.00 per each Valid
Customer as follows:
(a) On the Execution Date, GTC shall pay Service $75,000.00
as credit towards the purchase of 750 Valid Customers;
(b) Upon Thirty (30) days from the Execution Date (the
"Initial Validation Period"), GTC shall determine the number
of Valid Customers as set forth in paragraph 2 as of that
date. If the number of Valid Customers exceed 750, GTC shall
pay Service $100.00 for each additional Valid Customers
within one (1) week of the Initial Validation Period, up to
an additional 375 Valid Customers.
(c) Upon sixty (60) days from the Execution Date (the "Final
Validation Period"), GTC shall determine the number of Valid
Customers as set forth in paragraph 2 as of that date. If
the number of Valid Customers exceed 1,125, GTC shall pay
Service $100.00 for each additional Valid Customers within
one (1) week of the Final Validation Period.
(d) If, however, following the Final Validation Period, the
number of Valid Customers is less than 750, Service shall owe
GTC $100.00 per Valid Customer less 750. This amount shall
constitute a credit on behalf of GTC towards any future
services contracted for between GTC and Service, its assigns,
successors, or affiliated company, OhGolly.com, Inc.
4. DESIGN, DEVELOPMENT, AND SET-UP SERVICES. In addition to
transferring all rights, title, and interests in the Customers to
GTC, Service One agrees to design, develop, and set-up Personal
Individual Internet Web Pages (as previously agreed between Service
One and the Customers) for all Valid Customers transferred under
this Agreement. In addition, upon completion of the design and
development of the Customer's Personal Internet Web Page, Service
shall send to Customer a Fulfillment Package (of the form of exhibit
"B," attached hereto) for completion by the Customer. Service shall
provide GTC with the originals of all completed Fulfillment
Packages. All Personal Internet Web Pages covered by this Agreement
shall be hosted on GTC's Internet servers.
5. CUSTOMER SUPPORT. GTC shall have the option to appoint
Service as its Customer Support Representative to the Customers (the
"Support Option"). Should GTC elect to exercise the Support Option,
Service agrees to respond to all customer support calls on a timely
basis and to provide support to Customers with regards to the
operation and maintenance of the Customer's Personal Internet Web
Page. In return, GTC shall pay Service $3.00 for each customer
support call made by a Customer to Service (the "Support Fee").
Service shall provide GTC with an invoice of all such customer
support calls weekly by Friday at 11:30 am, Pacific Standard Time.
GTC shall pay Service the Support Fee within seven (7) days of the
date of such invoices. GTC shall have the right to terminate the
Support Option provided that GTC provide Service with seven (7)
days notice of such termination.
6. NONSOLICITATION. Service, its officers, directors, and
employees, including, but not limited to, Paul Thenard II, Lars
Perrson, Todd Johnson, and Jeff Einstoss, acknowledge that GTC's
relationships with its employees, customers, clients, suppliers,
<PAGE>
sponsors and other persons are valuable business assets. To
forestall any use of any such information, Service and its
shareholders, officers, directors, and employees, including but not
limited to, Paul Thenard II, Lars Perrson, Todd Johnson, and Jeff
Einstoss, agree that for the term of this Agreement and for a
period of one (1) year thereafter, Service and its shareholders,
officers, directors, and employees, including, but not limited to,
Paul Thenard II, Lars Perrson, Todd Johnson, and Jeff Einstoss,
shall not, directly or indirectly, attempt to remarket Customers
which have been sold to GTC by Service.
MISCELLANEOUS
7. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to
the transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings related to the subject
matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement or the written statements, certificates, or other
documents delivered pursuant hereto or in connection with the
transactions contemplated hereby, and no party hereto shall be bound
by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so
set forth.
8. NOTICES. All notices provided for in this Agreement shall be
in writing signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger or sent by
registered or certified mail (air mail if overseas), return receipt
requested, or by telex, facsimile transmission, telegram or similar
means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to GTC:
GTC Telecom, Inc.
3151 Airway Avenue, Suite P-3
Costa Mesa, CA 92626
Attn: Paul Sandhu, President
With a copy to:
Law offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attention: M. Richard Cutler
<PAGE>
If to Service:
Service One Communications, Inc.
18141 Beach Blvd., Suite 320
Huntington Beach, CA 92648
Attn: Paul Thenard II, President
9. CHOICE OF LAW. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the
laws of the State of California including all matters of
construction, validity, performance, and enforcement and without
giving effect to the principles of conflict of laws.
10. JURISDICTION. The parties submit to the jurisdiction of the
Courts of the State of California or a Federal Court empaneled in
the State of California for the resolution of all legal disputes
arising under the terms of this Agreement, including, but not
limited to, enforcement of any arbitration award.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
12. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a
written agreement signed by all of the parties hereto.
13. TITLES AND CAPTIONS. All section titles or captions
contained in this Agreement are for convenience only and shall not
be deemed part of the context nor affect the interpretation of this
Agreement.
14. PRONOUNS AND PLURALS. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may
require.
15. AGREEMENT BINDING. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the
parties hereto.
16. PRESUMPTION. This Agreement or any Section thereof shall not
be construed against any party due to the fact that said Agreement
or any Section thereof was drafted by said party.
17. FURTHER ACTION. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all
such action as may be necessary or appropriate to achieve the
purpose of the Agreement.
18. PARTIES IN INTEREST. Nothing herein shall be construed to be
to the benefit of any
third party, nor is it intended that any provision shall be for the
benefit of any third party.
19. SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall
<PAGE>
be held invalid, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those as to
which it is held invalid, shall not be affected thereby.
WHEREFORE, The parties hereto hereby agree to the foregoing
and execute this Agreement as of the date first above written.
"GTC" "Service"
GTC TELECOM, INC. SERVICE ONE COMMUNICATIONS, INC.
/s/ Paul Sandhu /s/ Paul Thenard II
By: Paul Sandhu, President By: Paul Thenard II, President
EPOCH NETWORKS, INC.
BRANDED SERVICES AGREEMENT
This Branded Services Agreement ("Agreement") is entered into as of
this 3rd day of February, 1999, between Epoch Networks, Inc.,
d.b.a. Epoch Internet ("Epoch"), and GTC Telecom, Inc. ("Branded
Provider").
WHEREAS, Epoch is an Internet access provider with proprietary
technology, software, systems and engineering;
WHEREAS, Branded Provider desires to offer an Internet access
product in its own name or the name of one or more designees;
WHEREAS, Branded Provider desires to market Internet services in the
markets agreed to by the parties hereto as set forth on Attachment A
hereto ("Markets"), and as may be set forth in the POP Expansion
Agreement attached as Exhibit A hereto ("POP Expansion Agreement"); and
WHEREAS, Epoch desires to extend its marketing efforts and establish
relationships throughout the United States with Branded Provider and
other branded providers who shall re-brand and market Epoch products
and services to their customers;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, it is hereby agreed:
1. Appointment of Branded Provider.
Epoch appoints Branded Provider (on a non-exclusive and
non-territorial basis) to act as an authorized Epoch Branded
Provider in the Markets to resell Epoch's products and services in
its own name during the term of this Agreement, subject to all the
terms and conditions herein, and Branded Provider accepts such
appointment as an authorized Epoch Branded Provider, subject to all
the terms and conditions herein.
2. Services.
The specific products and services of Epoch that Branded Provider
desires to resell and that Epoch agrees to provide ("Services"), and
the terms and conditions on which the Services and any optional
services shall be provided, shall be designated by the parties
hereto in this Agreement and in the applicable Attachments hereto.
3. Epoch Responsibilities.
Epoch shall use commercially reasonable efforts to provide the
Services pursuant to this Agreement, and, to the extent necessary,
shall provide the following services and products in connection
therewith:
a) Provide customized Internet Services listed
in the Attachments ( "Branded Services"). The
Services may also include branded dial-up
software (the "Branded Software") and branded
customer service for customers. The costs of
programming, packaging, duplicating, obtaining
third-party components and branding of the
Branded Software shall be borne by Branded Provider.
b) Provide registration, mail and other
servers sufficient to support the Branded
Software customers.
c) Provide a network operations center for
dedicated and hosted customers on a "24X7" basis
at (888) NET-DOWN, or such other telephone number
as shall be supplied to Branded Provider or its
customers.
d) Provide the billing information in a form
and timeframe sufficient for Branded Provider to
bill its customers.
e) Provide network monitoring and engineering
for Epoch's network and maintain such network.
f) Provide Internet equipment and backbone
infrastructure at the Network Access Points
("NAP") to service connections between the NAPs
and Epoch's Points of Presence ("POP").
g) Provide Internet protocol ("IP") addresses
to Branded Provider and its customers, in
accordance with Epoch's normal IP policies, as
such policies may be modified by Epoch from time
to time, as needed in providing dedicated access
services.
h) Provide, at the sole cost of Branded
Provider, marketing support for the Branded
Software.
<PAGE>
i) Provide and install equipment and obtain
locations for POPs, which shall be established
and configured based on the projections of
Branded Provider set forth on Attachment B hereto
and in accordance with the terms and conditions
of the POP Expansion Agreement, attached as
Exhibit A hereto.
j) Make available Internet University
training, in both classroom and online formats
provided by Epoch, to Branded Provider for
training Branded Provider's sales, marketing and
project management personnel, for which Branded
Provider shall pay reasonable fees, plus any
necessary travel expenses, for such training.
4. Branded Provider Responsibilities.
In consideration for its appointment as a Branded Provider,
Branded Provider, in addition to the other responsibilities
included herein and in the applicable Attachments, agrees to
the following responsibilities:
a) Solicit customers to use Epoch's Internet
services and maintain a trained and capable sales
and support organization to solicit and register
customers and support Epoch efforts to assure
customer satisfaction.
b) Allocate necessary funding and personnel to
support Branded Provider's product development,
integration, marketing, sales and training with
respect to Branded Services and products.
c) Present to potential customers of Branded
Provider an Internet Service Application (using
only Epoch's form of Internet Service
Application, as the same may be updated by Epoch
or changed or adapted for Branded Providers'
specific needs, only with prior written
authorization from Epoch). Branded Provider shall
work with and assist such customers in completing
the form. Such Application shall constitute
authorization from Branded Provider to Epoch to
provide such customer with the Services on the
terms set forth therein.
d) Set prices for products and services
provided to its customers independent of any
prices charged by Epoch to its customers.
e) Exercise effective control over Branded
Provider's customers, and offer such customer
billing and other services as it deems
appropriate. Branded Provider shall be
responsible for the collection of any charges
pertaining to customer access fees, as well as
other services rendered by Epoch to customer.
f) Take no action inconsistent with this
Agreement, and reasonably support Epoch's efforts
in providing Internet service to Branded
Provider's customers.
5. Fees and Minimum Monthly Revenue Commitment.
a) Fees.
Epoch shall provide the Services to Branded
Provider's customers and bill Branded Provider in
accordance with fees set forth on Attachment A.
Branded Provider agrees to pay Epoch not less
than the amount of the Minimum Monthly Revenue
Commitment, as such amount may be modified in
accordance with the Ramp Schedule set forth in
Attachment A. Upon execution of this Agreement,
Branded Provider shall deposit with Epoch an
amount of funds equal to Branded Provider's
Minimum Monthly Revenue Commitment referred to in
Section 5 c) hereof ("Deposit"). If at the time
of any application of the Deposit as provided
herein Branded Provider is in compliance with the
terms and conditions hereof, (a) an amount equal
to up to fifty percent (50%) of the Deposit shall
be applied to charges for the development and
customization of the Branded Software and b) the
balance of the Deposit shall be applied to
Branded Provider's Monthly Minimum Revenue
Commitment for and after the month in which
Branded Provider's obligation under such Ramp
Schedule has reached one hundred percent (100%).
Notwithstanding the foregoing, users may be
charged amounts in addition to the prices
provided for herein as needed in Epoch's sole
discretion to regulate the use of customers in
accordance with Epoch's Acceptable Use Policy
("AUP"), control abuse of Internet services and
comply with regulatory requirements or changes of
law or regulations.
<PAGE>
b) Billing and Payment.
Standard recurring charges (e.g., for Internet
access) shall be billed in advance and
usage-based or consulting services shall be
billed in arrears. All invoices are payable
within thirty (30) days of receipt. After thirty
(30) days, unpaid invoices are subject to Epoch's
then-current late payment charge plus interest at
the rate of one and one-half percent (1.5%) per
month on any outstanding balance, or the maximum
permitted by law, plus all expenses of
collection. If Branded Provider disputes any
amount due Epoch under this Agreement or any of
the Attachments hereto (the "Disputed Amount"),
Branded Provider shall pay the Disputed Amount
and provide Epoch with written notice setting
forth the Disputed Amount and Branded Provider's
reasons for disputing such amount. Branded
Provider shall receive a credit against Branded
Provider's next invoice for the portion, if any,
of the Disputed Amount charged in error.
c) Minimum Monthly Revenue Commitment.
In consideration of Epoch providing Services to
Branded Provider at a wholesale rate, Branded
Provider agrees to take or pay for the Services
as set forth herein. Subject to the effect of
the Ramp Schedule set forth in Attachment A
hereto, as determined by the Start Date defined
therein ("Start Date"), Branded Provider shall
pay Epoch at least the amount per month for
Services set forth in Attachment A as Branded
Provider's Minimum Monthly Revenue Commitment.
For any month in which actual revenues received
by Epoch are less than Branded Provider's Minimum
Monthly Revenue Commitment, Branded Provider
shall pay to Epoch the amount of the difference
between the amount of revenues actually received
and such Minimum Monthly Revenue Commitment.
Monthly Revenues for this purpose shall include
only revenues received with respect to dedicated
services, dial-up services, hosting and
co-location services, lease payments from rental
equipment and charges for optional services
provided by Epoch.
6. Epoch Trademarks and Related Matters.
Except as otherwise provided in writing by Epoch, Branded
Provider shall have no right, title or interest in or to, or
license to use, any trademarks, tradenames or other
intellectual property in or to which Epoch now or hereafter
has any proprietary right or license (collectively, the "Epoch
Marks"), all of which shall remain Epoch's exclusive property.
Branded Provider shall not at any time challenge, or
encourage or support the challenge of another person of,
Epoch's rights in and to the Epoch Marks, nor obtain or seek
to obtain any rights therein. Any use of the Epoch Marks by
Branded Provider or any person employed by or contracting with
Branded Provider shall constitute a material breach of this
Agreement, shall be cause for termination of this Agreement
by Epoch in accordance with Section 8 hereof and shall
constitute irreparable business harm, the amount of which
would be difficult to ascertain, and, therefore, Branded
Provider agrees that Epoch shall have the right to apply to a
court of competent jurisdiction for an order restraining any
such breach (whether or not this Agreement is terminated by
Epoch) and for such other relief as Epoch shall request. The
right of Epoch to enjoin a breach or violation of this
Agreement is in addition to the remedies at law or in equity
otherwise available to it. Branded Provider covenants, which
covenant shall survive the termination of this Agreement, not
to use the name "Epoch," any of the Epoch Marks or other
trademarks or other intellectual property confusingly similar
thereto in any manner or for any purpose whatsoever.
7. Confidentiality, Non-Disclosure, Trade Secrets and
Intellectual Property Rights.
a) The parties hereto each possess certain
confidential and proprietary information
(collectively "Confidential Information"),
including, but not limited to, information
relating to customers; subscribers; prospective
subscriber leads; sales and marketing procedures
and techniques; financial information; personnel
management; facilities; trade secrets;
affiliates; procedures; processes; systems;
software; equipment or network configurations;
past, present, or future research or development;
and business affairs; regardless of the form in
which Confidential Information is stored or
preserved, whether conveyed orally or in writing,
and whether or not designated as confidential and
proprietary. The parties hereto may desire to
disclose Confidential Information to each other
subject to the terms and conditions of this
Agreement.
<PAGE>
b) Each Party shall (a) hold all Confidential
Information received from the other Party in
confidence using the same degree of care that the
recipient uses to protect its own confidential
and proprietary information of like kind (but in
no event less than reasonable care); (b) use such
Confidential Information only for the purposes
set forth herein; (c) reproduce such Confidential
Information only to the extent necessary to
support such purpose; and (d) restrict disclosure
of and access to such Confidential Information to
those employees who have a need to know this
Confidential Information for performance of the
activities contemplated by this Agreement and who
are advised of the confidential nature of the
Confidential Information. This obligation to
maintain Confidential Information in confidence
shall continue for a period of three (3) years
following the termination of this Agreement.
c) "Confidential Information" shall not
include any information which: (a) is or becomes
available to the public through no breach of this
Agreement; (b) was previously known by the
recipient without any obligation to hold it in
confidence; (c) is wholly and independently
developed by the recipient without the use of
Confidential Information of the other Party; (d)
is received from a third party free to disclose
such information without restriction; (e) is
approved for release by written authorization of
the disclosing Party, but only to the extent of
and subject to such conditions as may be imposed
in such written authorization; or (f) is
required by law or regulation to be disclosed,
but only to the extent and for the purposes of
such required disclosure order.
d) If either Party becomes legally required to
disclose any Confidential Information of the
other Party, the recipient shall, to the extent
possible, provide the disclosing Party with
prompt written notice of such requirement so that
the disclosing Party may seek a protective order
or other appropriate remedy and/or waive
compliance with respect to that disclosure. In
any case, the recipient will disclose only that
portion of the Confidential Information which,
based on the reasonable advice of counsel, is
legally required to be disclosed and will
otherwise exercise all reasonable efforts to
obtain reliable assurance that confidential
treatment will be accorded the Confidential
Information.
e) This Agreement does not convey any right of
ownership in the Confidential Information or in
any copyrights, trademarks, or other rights
relating thereto.
f) The Parties acknowledge that a breach of
the obligations contained in this Agreement shall
constitute a material breach of this Agreement
and cause irreparable harm to the disclosing
Party for which monetary damages would be
inadequate. Accordingly, in addition to any
other remedy to which the disclosing Party may be
entitled at law or in equity, the disclosing
Party shall be entitled to injunctive relief
(without any requirement to post a bond) to
prevent breaches of any provision of this
Agreement and to specifically enforce the terms
and provisions hereof. The right of the
disclosing Party to enjoin a violation of this
Agreement shall be in addition to the remedies at
law or in equity otherwise available to the
disclosing Party.
g) Immediately upon the termination of this
Agreement for any reason, the recipient shall
return to the disclosing Party or, at the
disclosing Party's option, destroy any materials
or copies of Confidential Information provided
with or generated in connection with this
Agreement including, but not limited to, any
other information containing or based upon, in
whole or in part, any Confidential Information.
h) From and after the date of this Agreement,
until the date which is six (6) months after the
termination hereof for any reason, neither party
shall hire any employees, officers or directors
of the other party to this Agreement, or solicit
any such person to terminate his or her
employment with the other party to this Agreement.
8. Term and Termination of Agreement.
a) Term.
The term of this Agreement shall be three (3)
years from the Start Date, and shall
automatically be renewed for successive one (1)
year periods, unless either party provides the
other with written notice not less than sixty
(60) days prior to the expiration of the then
current term.
<PAGE>
b) Termination.
i) By Branded Provider. Branded
Provider may terminate this Agreement (a)
without "cause," by providing Epoch with
one hundred and twenty (120) days prior
written notice of branded Provider's
intent to terminate this Agreement and (b)
for "cause" if Epoch breaches any material
term of this Agreement.
ii) By Epoch. Epoch may terminate this
Agreement for "cause" if Branded Provider
breaches any material term of this
Agreement, which shall include, but is not
limited to, disparaging any product,
service or personnel of Epoch, failing to
timely provide the forecasts required
pursuant to subsection 10b) hereof or
abusing, or suffering its customers to
abuse, Epoch's network.
iii) Notice. The party terminating this
Agreement for "cause" shall give the other
party written notice of termination, which
notice shall include an explanation that
clearly describes the event(s),
occurrence(s) or existing fact(s)
constituting such cause. Upon such
notice, the other party shall have (a)
sixty (60) days to cure any non-monetary
breach (or if such breach cannot be
corrected within such sixty (60) days,
such party shall have commenced and be
continuing diligently to cure such breach)
and (b) five (5) days to cure any monetary
breach. If any such breach is not cured
within such period, this Agreement shall
terminate, unless the party giving such
notice waives such breach in writing.
c) Effects of Termination.
i) Termination Fee. If Branded
Provider shall terminate this Agreement
pursuant to Section 8b)i)(a) above,
Branded Provider shall, on or before the
effective date of termination pursuant to
such notice, pay Epoch a termination fee
equal to seventy-five percent (75%) of the
sum of Branded Provider's Minimum Monthly
Revenue Commitments for all then remaining
months in the term of this Agreement.
ii) Liquidated Damages. If Epoch
terminates this Agreement for "cause,"
Branded Provider shall pay Epoch as
liquidated damages and not as a penalty an
amount equal to the sum of Branded
Provider's Minimum Monthly Revenue
Commitments for all then remaining months
in the term of this Agreement.
iii) Amounts Due. If this Agreement is
terminated for any reason, any and all
amounts due Epoch through the date of
termination shall be or continue to be due
and payable notwithstanding any such
termination.
9. Representations and Warranties.
Except as otherwise provided below, Branded Provider represents
and warrants to Epoch and Epoch represents and warrants to Branded
Provider as follows:
a) Such Party has all requisite power and
authority, including all necessary licenses, to
engage in such Party's business and enter into this
Agreement and consummate the transactions
contemplated herein.
b) This Agreement has been duly executed by such
Party and constitutes a legal, valid and binding
obligation of such Party, enforceable against it in
accordance with its terms.
c) There is no suit, action or litigation,
administrative, arbitration or other proceeding or
governmental investigation against or affecting such
Party that may, severally or in the aggregate,
materially and adversely affect its ability to
perform any of its obligations under this Agreement.
d) No consent or permission of any person is
required for or with respect to the execution and
delivery by such Party of this Agreement or the
consummation by it of the transactions contemplated
herein, and neither the negotiation or execution of
this Agreement nor the consummation of such
transactions by Branded Provider shall require, or
give any person or entity a valid claim to, the
payment of any royalty, brokerage commission,
finder's or other fee or commission to any person or
entity other than Epoch. Branded Provider hereby
agrees to indemnify, defend and hold harmless Epoch
and its successors and assigns from and against and
in respect of any such claim.
<PAGE>
e) Neither the execution and delivery of this
Agreement by such Party nor the consummation of the
transactions contemplated herein shall: (i) conflict
with or result in any violation of or constitute a
default (or an event that, with the giving of notice
or the passage of time or both, would constitute a
default) under any law or any material instrument,
lien or agreement to which such Party is subject or
a party or by which such Party or its properties or
assets are bound or affected; or (ii) otherwise
materially adversely affect the consummation of the
transactions contemplated herein.
f) Neither Branded Provider nor any affiliate of
Branded Provider has received any notice, or
otherwise has knowledge of, any claims (or any facts
or prior act(s) upon which such a claim or assertion
could be based) with respect to any of Branded
Provider's trademarks used in connection with the
Branded Services, including but not limited to
claims that any of such Branded Provider's
trademarks are invalid or are defective in any way.
Branded Provider has taken all steps and done all
acts necessary to protect Branded Provider's right,
title and interest therein and the use thereof by
Epoch, which use shall be on a royalty-free and
non-exclusive basis.
g) Such party is the owner or licensee of all
proprietary software and intellectual property
provided by such party under the terms of this
Agreement. To the extent that Branded Provider
requests Epoch to develop new software which is
deemed proprietary by and to Branded Provider,
Branded Provider shall own all rights and interest
to such software; provided, however, that Epoch
shall have a non-exclusive license to use such
software, which Epoch may use without charge.
Branded Provider does not own, and shall not
acquire, any rights to software which is proprietary
or licensed to Epoch, even though Branded Provider
may have paid reasonable fees for Epoch to customize
such Epoch software for Branded Provider's use
pursuant to this Agreement, including, but are not
limited to, CustomDial, SmartList and www.com.
h) There exists no present condition or state of
facts or circumstances known to such Party or any of
its affiliates that would prevent it from performing
or fulfilling its obligations under or contemplated
in this Agreement.
10. Covenants of Branded Provider.
Branded Provider hereby covenants and agrees with Epoch as follows:
a) Branded provider shall pay on a monthly
basis the applicable fees, subject to Branded
Provider's Minimum Monthly Revenue Commitment, in
accordance with Section 5 hereof.
b) Branded Provider agrees that Epoch may at
any time refuse service to any customer that:
(i) is using Border Gateway Protocol, (ii) uses
the User Diagram Protocol layer (streaming);
(iii) violates or attempts to violate Epoch's AUP
or other generally accepted Internet protocols
(e.g., "spamming"); (iv) abuses Epoch's network
or the Internet through use of the Services; or
(v) breaches any provision of Epoch's Internet
Service Application (the substantive provisions
of which shall be incorporated in Branded
Provider's agreement with its customers, which
agreement shall be furnished to Epoch for its
approval prior to its use).
c) Branded Provider shall provide Epoch with a
monthly forecast, in the form of Attachment B,
that specifies the sales forecast for the
succeeding four (4) months for each type of
Service for each Market in which Branded Provider
shall be selling such services. Epoch may rely on
such information to build infrastructure to meet
Branded Provider's forecasted needs. Branded
Provider may request in writing to Epoch that
Epoch add to the capacity of an existing POP or
establish a new POP, which request shall be
responded to by Epoch within thirty (30) days of
its receipt. Epoch may, in its sole discretion,
decline to expand the capacity of an existing
facility or build a new POP. If Branded Provider
requests that Epoch open any new POP or add
capacity to an existing POP, Branded Provider and
Epoch shall enter into the POP Expansion
Agreement attached hereto as Exhibit A, pursuant
to which Branded Provider shall agree to pay
Epoch a minimum dollar amount set forth in the
POP Expansion Agreement in addition to the
Minimum Monthly Revenue Commitment. Epoch hereby
acknowledges that Branded Provider shall not be
held responsible for any inaccuracies with
respect to good faith forecasts; and Branded
Provider acknowledges that the failure to timely
provide any of such forecasts shall constitute a
material breach of this Agreement by Branded
Provider.
d) Branded Provider hereby acknowledges and
agrees that all IP addresses are, and shall
remain, the property of Epoch; and IP addresses
shall not be used by Branded Provider after
expiration or termination of this Agreement and
shall be surrendered and returned to Epoch at
such time.
<PAGE>
e) Branded Provider shall comply with the
terms and conditions contained in all attachments
that are incorporated herein.
f) If, during the term of this Agreement,
Branded Provider learns of any claim against or
infringement of any of Branded Provider's
trademarks used in connection with Branded
Services or any claim of unfair competition or
other challenge to Branded Provider's ownership
of such Branded Provider's trademarks or Epoch's
right to use any of such Branded Provider's
trademarks, Branded Provider shall promptly
notify Epoch thereof. During the term of this
Agreement, Branded Provider shall have the
obligation, at its own cost and expense, to take
such action as is necessary to restrain any such
infringement or to defend any other such claim or
challenge. Epoch shall cooperate with Branded
Provider in connection therewith, provided that
branded Provider shall pay all of Epoch's
reasonable expenses in connection therewith. If
Branded Provider is unable or unwilling to
provide such defense, Epoch may elect (but shall
not be obligated) to terminate this Agreement for
cause (as defined herein) and seek any of the
remedies and damages provided for therein or
otherwise available at law or in equity.
g) Branded Provider shall comply in all
material respects with all laws applicable to
Branded Provider's business, including reselling
the Services.
h) Branded Provider hereby acknowledges and
agrees that Epoch shall have the right to
reasonably determine (and Branded Provider hereby
agrees to comply with) all policies or procedures
relating to the implementation of any new
technology relating to or affecting the Services
or the responsibilities of the parties hereunder.
i) Branded Provider agrees that upon
termination of this Agreement it shall cease the
resale of Services hereunder, and further agrees
that Branded Provider and Epoch shall remain
liable for the provision of Services to Branded
Provider's customers until the expiration of the
agreements with Branded Provider's customers. If
Branded Provider fails to pay timely the amounts
specified in section 8 c) hereof, Branded
Provider agrees that Epoch may, in its sole
discretion, assume such agreements with
customers, after which such customers shall
become customers of Epoch, and Branded Provider
shall receive no revenues with respect to such
customers.
j) Branded Provider shall not during the term
of this Agreement, or after the expiration or
termination hereof, disparage any Epoch
personnel, products or services.
k) If Branded Provider furnishes Epoch with a
written request to disconnect the Internet access
of any customer of Branded Provider, Epoch shall
have a reasonable period to disconnect such
customer, and Branded Provider agrees that Epoch
shall have no liability whatsoever for any
consequences resulting from such disconnection,
and Branded Provider shall indemnify Epoch for
any such liability.
Branded Provider shall execute and deliver to Epoch such
further documents and take such further actions, including
supplying Epoch at Branded Provider's expense such
information, specifications and other items, as Epoch may
reasonably request from time to time in order to render the
Services.
11. Limitation Of Liability.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT OR
OTHERWISE, (I) EPOCH SHALL NOT BE LIABLE WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR ANY AMOUNT IN EXCESS OF ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000) IN THE AGGREGATE AND (II) NEITHER EPOCH NOR
BRANDED PROVIDER SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY
INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OF
ANY KIND, INCLUDING, WITHOUT LIMITATION, LOSS OF DATA OR
FILES, PROFIT, GOODWILL, TIME, SAVINGS OR REVENUE. SOME
STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL
OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION AND
EXCLUSIONS MAY NOT APPLY.
<PAGE>
12. Electronic Communications Privacy Act Notice (18 USC
2701-2711).
EPOCH MAKES NO GUARANTEE OF CONFIDENTIALITY OR PRIVACY OF ANY
COMMUNICATION OR INFORMATION TRANSMITTED ON ITS NETWORK OR ANY
NETWORK ATTACHED TO ITS NETWORK. Epoch shall not be liable
for the privacy of e-mail addresses, registration and
identification information, disk space, communications,
confidential or trade-secret information, or any other content
stored on Epoch's equipment, transmitted over networks
accessed by the Services, or otherwise connected with Branded
Provider's or its customers' use of the Services.
13. Warranty Disclaimer.
Branded Provider acknowledges that the Services are being
provided hereunder by Epoch at Branded Provider's own risk.
Epoch, its employees, affiliates, agents, third-party
information providers, merchants, licensors and the like do
not warrant that the Services shall be uninterrupted or error
free; nor do they make any warranty as to the results that may
be obtained from use of the Services, or as to the accuracy or
reliability of any content, product, service or merchandise
provided through the Services. Epoch does not warrant that any
access number provided to Branded Provider's customers for
connecting to the Internet or receiving the Services shall be
a local call from such users' area code and exchange. THE
SERVICES ARE PROVIDED ON AN "AS IS, AS AVAILABLE" BASIS. TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NO WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT BY WAY OF LIMITATION,
THOSE OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
OF NON-INFRINGEMENT, ARE MADE WITH RESPECT TO THE SERVICES OR
ANY CONTENT OR SOFTWARE INCLUDED THEREIN. SOME STATES DO NOT
ALLOW LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY LASTS, SO
THE ABOVE LIMITATIONS MAY NOT APPLY TO BRANDED PROVIDER.
14. Indemnification.
Branded Provider and Epoch each agree to be responsible for
their own acts and those of their subordinates, employees,
agents and subcontractors during the performance of this
Agreement. Subject to the provisions of Section 11 hereof,
each party hereby indemnifies the other against any and all
losses, costs, damages, claims, expenses or liabilities
arising from any breach of such party's obligations and duties
as set forth in this Agreement.
15. Binding Arbitration.
Epoch and Branded Provider agree to settle by
arbitration any disagreement or controversy, which cannot be
settled by negotiation, arising between Epoch and Branded
Provider and any of their respective subordinates, employees,
agents or subcontractors relating to this Agreement and/or any
customer serviced by Epoch. Such arbitration shall be
conducted, with venue in Orange County, California, according
to standard arbitration rules then in effect of the American
Arbitration Association. Initiation of arbitration may be made
by serving written notice to the other party. This arbitration
agreement is binding upon all parties. Any award the
arbitrator makes shall be final and binding on all parties and
judgment on such award may be entered in any court having
jurisdiction. Furthermore, the prevailing party shall be
entitled to recover reasonable attorney's fees.
16. General.
a) Severability. If any provision of this
Agreement or the application of any such provision
to either party or to any circumstances shall be
determined by any court of competent jurisdiction to
be unenforceable to any extent, the remainder hereof
or the application of such provision to the party or
circumstances other than those to which it is so
determined to be invalid and unenforceable, shall
not be affected thereby, and each provision hereof
shall be valid and shall be enforced to the fullest
extent permitted by law.
b) Notices. All notices, consents, demands,
requests, approvals and other communications which
are required or may be given hereunder shall be in
writing and shall be deemed to have been duly given
on the date of service if personally delivered or
sent by fax (with a confirmation copy to be sent by
certified first class mail), or on the third day
after mailing if mailed certified first class mail,
postage prepaid and addressed as designated below.
By giving to the other party at least ten (10) days'
written notice thereof, either party and its
respective successors and assigns shall have the
right, from time to time and at any time during the
term of this Agreement, to specify as its address
any other address within the United States of America.
c) Cooperation. The parties hereto agree to
cooperate in taking such actions and to execute and
deliver such additional documents and instruments as
may be reasonably necessary or convenient to
effectuate the purposes of this Agreement.
d) Taxes; Shipping and Other Expenses. Branded
Provider shall pay all applicable sales and use
taxes arising from or related to Branded Provider's
purchase or lease of any equipment from Epoch,
together with all
<PAGE>
shipping expenses reasonably
incurred by Epoch in providing such equipment to
Branded Provider. Except as expressly provided
herein to the contrary, the fees and expenses of
Branded Provider and Epoch in connection with the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
shall be paid by the party incurring such fees.
e) Attorneys' Fees. In the event that either of
the parties hereto (or any successor thereto)
resorts to legal action to enforce, defend or
interpret any of the terms or the provisions of this
Agreement, the prevailing party shall be entitled to
receive, in addition to such other remedies as shall
be awarded to it in such legal action, reimbursement
from the non-prevailing party for all reasonable
attorneys' fees and all other costs incurred in
commencing or defending such action. In addition,
the prevailing party shall be entitled to recover
from the non-prevailing party post-judgment
attorneys' fees incurred by the prevailing party in
enforcing a judgment against the non-prevailing
party. Notwithstanding anything in this Agreement to
the contrary, the provisions of the preceding
sentence are intended to be severable from the
remainder of this Agreement, shall survive any
judgment rendered in connection with the aforesaid
legal action and shall not be merged into any such
judgment.
f) Relationship of the Parties. Epoch and
Branded Provider intend that Branded Provider is an
independent contractor. The mode, manner, method and
means employed by Branded Provider and the
performance of the terms and conditions of this
Agreement shall be of Branded Provider's selection
and under the sole control of Branded Provider. The
parties acknowledge that personnel employed by
Branded Provider to perform services under this
Agreement are not Epoch employees and that Branded
Provider assumes full and sole responsibility for
the acts of its employees, agents and independent
contractors. Branded Provider and Epoch acknowledge
that their relationship arising from this Agreement
does not constitute or create a general agency,
joint venture, partnership, employment relationship
or franchise between them and Branded Provider does
not have, nor shall Branded Provider hold itself out
as having, any authority to make any agreement or
incur any liability or bind Epoch in any manner.
g) Entire Agreement; Amendment. This Agreement,
together with the applicable Attachments and
Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto with respect to
the subject matter hereof. This Agreement cannot be
amended or terminated orally, and may be amended or
terminated only in writing duly executed by both of
the parties hereto.
h) Waivers. No delay or omission by either party
in exercising any right or power accruing upon the
non-compliance or failure or performance by the
other party hereto of any provisions of this
Agreement shall impair any such right or power, or
to be construed to be a waiver thereof. A waiver by
either party of any of the covenants, conditions or
agreements hereof to be performed by the other must
be in writing and signed by the party who is waiving
such covenant, condition or agreement.
i) Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall
be deemed an original, but all of which together
shall constitute one and the same document.
j) Headings and Usage. Headings of the sections
of this Agreement are for reference purposes only
and shall not affect the construction or
interpretation of any of its provisions. The use of
the singular shall, where applicable, also refer to
the plural and the use of the plural shall, where
applicable, also refer to the singular, as the case
may be.
k) Assignment. This Agreement may not be
assigned by Branded Provider without the consent of
Epoch. Epoch may assign its duties and obligations
hereunder to any entity that acquires all (or
substantially all) of the assets or stock of Epoch,
provided such assignee assumes, and faithfully
performs, the duties and obligations of Epoch
hereunder.
l) Applicable Law. This Agreement shall be
governed by, and construed and enforced in
accordance with, the internal laws of the State of
California, exclusive of the choice of laws
provisions thereof.
m) Successors and Assigns. This Agreement shall
be binding on and inure to the benefit of the
parties and their permitted successors and assigns.
All provisions of this Agreement which by their
nature should survive expiration or termination,
including, without limitation, accrued rights to
payment, warranty disclaimers, limitations of
liability, confidentiality and proprietary
information, shall survive such expiration or
termination until such time that the obligations are
satisfied in full or by their nature expire.
n) Force Majeure. Epoch shall not be held liable for
failure to fulfill its obligations hereunder if such
failure is due to causes beyond its reasonable control
(Force Majeure), including, without limitation, actions or
failures
<PAGE>
to act of any third-party upon whom Epoch
reasonably relies for services (e.g. Local Exchange
Carriers, IntereXchange Carriers, etc.), act of God, fire,
earthquake, catastrophe, legislation, governmental
prohibition or regulation or change therein, hacker,
national emergency, riot, insurrection, war, strike,
lockout, work stoppage or other labor difficulty, or other
cause reasonably unforeseen in the normal course of
business. The time for any performance required under this
Agreement shall be extended by the delay incurred as a
result of any such act of Force Majeure and Epoch shall in
no way be responsible nor liable for any damages or losses
incurred as a result of such act(s).
o) Confidentiality. Neither party shall publicize or
disclose the existence of this Agreement or its terms
without the consent of the other, and in the event of such
agreement, all press release materials shall be reviewed
and approved by the other party. The failure of either
party to exercise in any respect any right provided for
herein shall not be deemed a waiver of any further rights
hereunder.
p) No Assurances Regarding Profitability. Branded
Provider acknowledges that it has read this Agreement and
understands and accepts the terms, conditions and
covenants contained herein. Epoch expressly disclaims the
making of, and Branded Provider acknowledges that it has
not received or relied on, any guaranty, express or
implied, as to the amount of commissions or other revenue
that it may earn as a result of its activities pursuant to
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EPOCH NETWORKS, INC. GTC TELECOM, INC.
By: /s/Seth Parcell By: /s/Paul Sandhu
Name: Seth Parcell Name: Paul Sandhu
Its: President Its: CEO
Address: 18201 Von Karman Avenue, 5th Floor Address:
3151 Airway Avenue, #P3
Irvine, CA 92612 Costa Mesa, CA 92626
Tel: 949-474-4950 Tel: 714-549-7700
Fax: 949-955-3229 Fax: 714-549-7707
Attachment A - Branded Provider Price List, Monthly Revenue
Commitment and Ramp Schedule
Attachment B - Markets and Forecast Addendum
Exhibit A - POP Expansion Agreement
Copyright, 1998 Epoch Networks, Inc.
<PAGE>
Attachment A
Branded Provider (Private Label) Product Price List,
Monthly Revenue Commitment
And Ramp Schedule
DEDICATED INTERNET ACCESS
Branded Provider shall receive twenty percent (20%) off current
Epoch retail prices.
<TABLE>
Dedicated Pricing:
Epoch Retail Price 1 Price to Branded Provider 1
Service Monthly Activation Fee Monthly Activation Fee
<S> <C> <C> <C> <C>
56K $240 $350 $192 $280
128K $395 $500 $316 $400
256K $750 $700 $600 $560
384K $950 $950 $760 $760
512K $1,250 $1,000 $1,000 $800
T-1 (1.54 Mbs)$1,795 $1,500 $1,436 $1,200
T-3 (up to 45 Mbs) Quote only$7,500 Quote only $6,000
BGP Premium A.Q. A.Q. A.Q. A.Q.
ISDN - 64K $240 $495 $192 $396
(1 B Channel)
ISDN - 128K $480 $990 $384 $792
(2 B Channels)
Metered T-1 $2,000 $1,600
Monthly $250 $200
Access
Usage $.035/Mb n/a 2
Monthly Cap $1,895 $1,421 2
</TABLE>
Notes:
1.The "Monthly Charge" shall be for Epoch Internet service
only; the "Activation Fee" shall
be for Epoch set-up; LEC monthly; cross-connect and installation
charges shall be quoted
separately and charged in addition to all Epoch fees and charges.
2. The usage charge shall be calculated by applying the
percentage amount of the discount to
the total monthly usage based on the retail rate.
Branded Provider may purchase the following services at the prices
set forth below.
Digital Subscriber Line (DSL) 1
<TABLE>
Line 160K 200K 416K 768K 1.1M
Speed
<S> <C> <C> <C> <C> <C>
Monthly $75 $125 $135 $165 $199
Local
Access2
Monthly $85 $85 $85 $160 $160
Internet for for for for for
Access2 10GB 10GB 10GB 20GB 20GB
per per per per per
Month Month Month Month Month
Excess Usage $0.04 $0.04 $0.04 $0.04 $0.04
per Mb per Mb per Mb per Mb per Mb
Activation $375 $375 $375 $375 $375
</TABLE>
<PAGE>
Notes:
1. Netopia routers/CSU/DSU for use with the Services may
be leased from Epoch at $35 per month each. Branded
Provider shall pay Epoch the amount of its purchase price
for any leased equipment not returned to Epoch within
ninety (90) days after termination of the related Internet
services agreement.
2. Start-ups require payment of the monthly access fees
for the first and last months.
Customer Router & CSU (CPE) - Extremely Low Rental
Packages, See Below For Details
99% Uptime Guarantee - No Charge
Local Loop (LEC) Provisioning - No Charge
NOC Support at "888-NET-DOWN" - No Charge for 24 X
7 Network Support
E-Mail @ Customer Domain - a dedicated line customer
may choose to have Epoch manage and host e-mail services
at a custom domain. Each e-mail account shall be charged
a one-time set-up fee of $20/user and an annual account
maintenance charge of $8 per account. This is not
inclusive of applicable domain name registration or
transfer fees.
Lifetime Equipment Guarantee - No Charge (for all
equipment provisioned through Epoch)
DIAL-UP INTERNET ACCESS
The prices shown below are prices to be charged to Branded
Provider.
Dial-up Pricing
Service (Epoch POPs): Price
Unlimited1 9600 to $13.00
56K2 Analog
ISDN Dial-up Pricing
1 B Channel $25.50 month
Usage 20 hours
Excess $.0163/min
2 B Channels $25.50 month
Usage 10 hours
Excess $.0323/min
Notes:
1. Unlimited dial-up access is subject to control of
abusive network users as defined by the Epoch Acceptable Use
Policy.
2. 56K analog service, where available, is standardized
on Rockwell chip sets and K56Flex technology.
Online Interactive Registration - No Charge
Authentication - No Charge
UseNet News - No Charge
E-Mail @ Epoch Vanity Domains - No Charge
E-Mail @ Branded Domain - see description below
MyWebSite (personal, -www.myweb.eni.net $0 set-up
non-branded web sites) $.25 per month per account
(plus excess)
www.myweb.brand.com - $7,500 set-up
<PAGE>
DIAL-UP SOFTWARE
CustomDial Plus Software - Costs: (dial-up access software
branded and customized)
Dial-up Access Software- custom branded for each Branded Provider
Epoch shall develop customized dial-up software based upon
Epoch's standard configuration options. Epoch's customized
software shall perform user account creation, including one
e-mail account, and user set up based upon Epoch's standard
configuration options through on-line, toll-free interaction
with one (1) of Epoch's account registration servers. A
one-time charge of $5,000 shall be charged for Windows 95/98,
and an additional charge of $2,500 shall apply for NT. Any
additional modifications to standard customization shall be
billed at $200 per hour and shall be subject to programmer
availability.
Epoch shall make reasonable efforts to complete software
customization within eight (8) weeks of receipt of executed
customization guide and all required artworks/logos, which
shall be provided by Branded Provider. Any changes made to
the requirements, documents or artwork shall result in
additional programming time required and thus delay this
timeline. Each customer shall receive in its e-mail inbox a
branded, custom "Welcome Letter" upon successful registration
of a dial-up Internet account and the creation of a customized
start page/partial service offered via Snap!, for which
Branded Provider shall pay $500 in the aggregate.
Snap!- Dial-up Web Site Launch Page:
A central, customized start page shall be the first thing to
appear when Branded Provider's customers log onto the Internet.
The start page shall have links and graphics specific to
Branded Provider's company. All web development is done on a by
quote only basis. A one time fee of $2500 shall be charged to
configure and develop the base functionality of this "page."
All artwork and logos are to be provided by Branded Provider at
the time of customization/configuration guide review. Any
additional programming shall be at a charge of $200/hour and be
subject to availability of programming resources. Additional
web hosting fees shall apply.
E-Mail @ Branded Domain
Each version of the customized Internet software may be
customized to contain one (1) or more "domains" for e-mail
addresses (i.e., [email protected]). Epoch shall charge
a one (1) time fee of $1,000 per unique domain for customer
e-mail addresses to configure mail servers and systems to host
mail services at the unique domain. Domain name registration
and transfer fees charged by Epoch and other parties may also
apply.
WEB HOSTING AND SERVER C0-LOCATION
Branded Provider shall receive twenty percent (20%) off
current Epoch retail prices.
<TABLE>
Retail Pricing Hosting & Co-Location
Service: Mo Fee Set up fee Meter Fee (per Mb)
<S> <C> <C> <C>
Hosting $25 $250 $.0400 /Mb for 0 - 25,000Mb,
$.015/Mb thereafter
Co-Lo's1:
1/6 Rack $105 $600
1/3 Rack $180 $900
1/2 Rack $270 $1,200
Full Rack $540 $1,500
Set-up Fees:
Co-Lo's1:
Ethernet $750 $.015/Mb up to 170,000 Mb,
$.005/Mb thereafter
$6,000 cap
FDDI $7,500 $.008/Mb up to 150,000 Mb,
$.001/Mb thereafter
$75,000 cap
Fast Enet $3,500 $.008/Mb up to 150,000 Mb,
$.001/Mbthereafter
$75,000 cap
</TABLE>
1. Epoch data centers only. (Subject to availability)
<PAGE>
CUSTOMER SERVICE
Dial Up Internet Technical Support (DISC): (Branded with
customer greeting) This service includes technical support for
dial up customers only and shall be subject to Epoch's standard
dial up support service levels.
Epoch shall customize its Dial-up Internet Support Center for
Branded Provider's customers for a one (1) time charge of $5,000
per unique branding (telephone number and custom greeting)
consistent with Epoch's standard branded support program. The
customer support center shall include technical support seven
(7) days per week, and Epoch shall provide monthly statistical
data consistent with its standard reporting practices. At
Branded Provider's request, Epoch shall provision a unique toll
free number for support of a particular customer base. The set
up charge for this service shall be at quote, calls to this toll
free number shall be charged an additional $0.09 per minute if
provided by Epoch. Branded Provider may provision its own toll
free number.
Cost bundled with dial-up access price listed above.
Dedicated Internet Support (Network Operations Center) NOC:
Phone answered generically. For dedicated Fractional T-1 to T-3
customers only.
Network Operations Center Support maybe accessed via
a toll free call to "1-888-NET-DOWN"
Network Support shall included support hours of 24
hours per day, 7 days a week.
Network monitoring status on a 24 x 7 basis
Proactively contacts clients to inform them of line
status issues (only if problems are detected)
TRAINING AND SUPPORT SERVICES
Training Courses and Support Services:
Internet 101 (online)
Internet 101 delivers a basic introduction to the Internet.
Since the course is online, students must have access to
computer with access to the Internet and a user account with a
password. Students may login and interact with the information
at anytime and from anywhere in the world. Course fee is $10
per person. (See http://www.school.com for more information)
Internet Overview (1/2 day classroom)
Internet Overview is a brief overview of the Internet Industry
and the competitive marketplace. The course can be given
within Epoch's training facility or off-site. Course fee is
$500 per person. (Course fees are exclusive of travel &
expenses.)
Internet Essentials (2 day classroom)
Internet Essentials is a detailed review of the Internet
industry, technology, products, applications, market
strategies, and selling connectivity. This course can be given
within Epoch's training facility or off-site. Course fee is
$1000 per person. (Course fees are exclusive of travel &
expenses.)
Internet Credibility (2 day classroom)
Internet Credibility is a comprehensive look at the more
technical aspects of Internet technology and is designed to
enhance the abilities of experienced Internet Sales
Representatives & Sales Engineers. The course can be given
within Epoch's training facility or off-site. Course fee is
$1500 per person. (Course fees are exclusive of travel &
expenses.)
PROGRAM SET-UP CHARGES
FTP Set-up:
<PAGE>
Epoch shall provision a secure and unique FTP site where
billing and other branded service information shall be
posted on a mutually agreed time frame. A one (1) time
set-up fee of $500 shall be charged for each FTP site plus
an annual maintenance fee of $250
Registration Interface:
Epoch shall provide a Web interface to the Epoch's servers
(including, but not limited to Radius, mail, and user
database servers), so that Branded Provider may add or
delete dial-up Internet access users at its discretion. A
one (1) time programming and set-up fee of $2,500 shall be
charged for each unique configuration of the Registration
interface. This interface shall be subject to Epoch's
security provisions, which shall include at a minimum a
secure user ID and password access to this utility as well
as dedicated access to Epoch's network for this utility.
Other Programming
Any other systems programming or customization not
included shall be done on a case by case basis, upon
customer request.
Strategic Account Management & Project Management (Epoch
tasks)
Branded Provider's dedicated single point of contact to
ensure that all tasks are managed, and proactively
completed during the branding process. This person shall
also be Branded Provider's ongoing support for the term of
the Agreement, to ensure that Branded Provider and its
customers are serviced to the highest levels in the
industry today.
Miscellaneous Services:
Domain Name Registration - $100 per domain name
charge to Branded Provider (does not include InterNic fee
whichshall be billed directly to the customer by the "Nic")
Domain Name Transfer - $75 per domain name transfer
REVENUE COMMITMENT, DISCOUNT LEVEL AND RAMP SCHEDULE
Minimum Monthly Revenue Commitment in recurring revenues: $25,000
Contract Ramp: (As a percentage of the Monthly Minimum Revenue
Commitment.)
Month one (1) shall commence upon the first day of the
first month commencing after full execution of the Branded
Services Agreement to which this is attached ("Start Date").
<TABLE>
<S> <C> <C> <C> <C> <C>
Month 1 0% Month 4 30% Month 7 term 100%
Month 2 0% Month 5 50%
Month 3 10% Month 6 80%
</TABLE>
Taxes, Surcharges, and Fees:
Prices listed above do not include federal, state, or local
sales or uses taxes, nor do they include surcharges or fees
which may be imposed by governmental, regulatory, or other
entities. Branded Provider will be liable for any and all such
taxes, fees or surcharges imposed upon Epoch in connection with
or arising from the provision of products and/or services under
the Agreement.
<PAGE>
Attachment B
Markets and Forecast
The geographic markets are:
Forecasted customers and usage is: (list to be provided to
Epoch monthly per the Agreement)
<TABLE>
Access Type # @ POP- Market 1 Market 2 Market 3
<S> <C> <C> <C> <C> <C>
Dial-up: Analog
ISDN
Dedicated: 56K
128K
256K
384K
T-1
T-1+
Other:
</TABLE>
<PAGE>
EXHIBIT A
POP EXPANSION AGREEMENT
THIS POP EXPANSION AGREEMENT (the "Agreement") is entered into
this ___ day of _____, 1998, by and between Epoch Networks, Inc.,
d.b.a. Epoch Internet, a California corporation ("Epoch") and
__________, a __________ corporation ("Branded Provider").
Capitalized terms not defined herein shall have the meaning set
forth in the Reseller Agreement.
WHEREAS, Epoch and Branded Provider have entered into that
certain Branded Services Agreement dated __________ (the "Reseller
Agreement").
WHEREAS, Branded Provider desires to resell Services of Epoch
in locations not currently serviced by Epoch and Epoch desires to
expand the sale of its services.
NOW, THEREFORE, in consideration of the mutual premises
contained herein, it is hereby agreed:
1. Establishment of POP
On or before __________, 199_, Epoch shall establish a POP to
provide analog dial-up Internet and dedicated connectivity access at
speeds of at least 1.5 megabits per second (the "POP") in a service
area designated as ____________________ (the "Market") under the
following terms and conditions:
(a) Branded Provider shall not be in default under the
terms of the Reseller Agreement;
(b) Epoch shall include not less than one (1) local dial-up
access number for dial-up POPs and shall take steps consistent with
its regular business practices and market forecasts provided by
Branded Provider to ensure timely delivery of Internet services to
the customers of Branded Provider. Epoch may, at its option, choose
to make additional local dial-up numbers available in the Market;
(c) Epoch shall notify Branded Provider, in writing, when
Services are available in the Market; and
(d) Epoch shall be solely responsible for the support and
maintenance of its network in the Market. In addition, Epoch may
solicit customers to use the extension of its network in the Market
through its standard sales and marketing channels.
Epoch may decline to extend its network into the Market if
telecommunications services and facilities appropriate for such
network extension are not available within the Market.
2. Price for Usage
Branded Provider shall pay Epoch current rates for Services
as set forth in the Reseller Agreement, provided that revenues
generated from such POP shall not be included in the revenue
commitments set forth in Attachment A of the Reseller Agreement.
3. Ramp Schedule
Branded Provider shall guaranty Revenues to Epoch from the
Market of at least the amount set forth below during the term of
this Agreement:
Months After Monthly
Installation Revenue
1 0
2 0
3-15 $4,000
For any month in which actual revenues received by Epoch are
less than the amount set forth in the table above, Branded Provider
shall pay to Epoch the amount of the difference between the amount
of revenues actually received and such amount. Monthly Revenues for
this purpose shall include only revenues received with respect to
dedicated services, dial-up services, hosting and co-location
services, lease payments from rental equipment and charges for
optional services provided by Epoch.
<PAGE>
4. Term
The term of this Agreement shall be for fifteen (15) months
after the installation of the POP. If the term of the Reseller
Agreement expires prior to the expiration of this Agreement, Epoch
may extend the term of the Reseller Agreement with respect to the
Market only to be coterminous herewith.
5. Conflict with Reseller Agreement
The terms and conditions of the Reseller Agreement as they
may be supplemented hereby shall remain in full force and effect.
6. LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT OR
OTHERWISE, (I) EPOCH SHALL NOT BE LIABLE WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT OR THE RESELLER AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER
LEGAL OR EQUITABLE THEORY FOR ANY AMOUNT IN EXCESS OF THE
AMOUNT SET FORTH IN THE RESELLER AGREEMENT IN THE AGGREGATE
AND (II) NEITHER EPOCH NOR BRANDED PROVIDER SHALL BE LIABLE
WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR ANY INCIDENTAL, CONSEQUENTIAL, EXEMPLARY
OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING, WITHOUT
LIMITATION, LOSS OF DATA OR FILES, PROFIT, GOODWILL, TIME,
SAVINGS OR REVENUE. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE
ABOVE LIMITATION AND EXCLUSIONS MAY NOT APPLY.
7. Electronic Communications Privacy Act Notice (18
USC 2701-2711)
EPOCH MAKES NO GUARANTEE OF CONFIDENTIALITY OR PRIVACY
OF ANY COMMUNICATION OR INFORMATION TRANSMITTED ON ITS NETWORK
OR ANY NETWORK ATTACHED TO ITS NETWORK. Epoch shall not be
liable for the privacy of e-mail addresses, registration and
identification information, disk space, communications,
confidential or trade-secret information, or any other Content
stored on Epoch's equipment, transmitted over networks
accessed by the Services, or otherwise connected with Branded
Provider's or End Users' use of the Services.
8. Warranty Disclaimer
Branded Provider uses the services provided hereunder
at Branded Provider's own risk. Epoch, its employees,
affiliates, agents, third-party information providers,
merchants, licensors and the like do not warrant that the
Services shall be uninterrupted or error free; nor do they
make any warranty as to the results that may be obtained from
use of the Services, or as to the accuracy or reliability of
any Content, product, service, or merchandise provided through
the Services. Epoch does not warrant that any access number
provided to End Users for connecting to the Services shall be
a local call from End Users' area code and exchange. THE
SERVICES ARE PROVIDED ON AN "AS IS, AS AVAILABLE" BASIS. NO
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT BY WAY OF
LIMITATION, THOSE OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR OF NON-INFRINGEMENT, ARE MADE WITH RESPECT TO THE
SERVICES OR ANY CONTENT OR SOFTWARE THEREIN. SOME STATES DO
NOT ALLOW LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY LASTS,
SO THE ABOVE LIMITATIONS MAY NOT APPLY TO BRANDED PROVIDER.
9. Indemnification
Branded Provider and Epoch each agree to be responsible
for their own acts and those of their subordinates, employees
and subcontractors during the performance of the work under
this Agreement. Each party hereby indemnifies the other
against any and all losses, costs, damages, claims, expenses
or liabilities arising from any breach of each party's
obligations and duties as set forth in this Agreement.
<PAGE>
10. Binding Arbitration
Epoch and Branded Provider agree to settle by
arbitration any disagreement or controversy arising between
Epoch and Branded Provider and any of their respective
employees, agents, etc. relating to this Agreement and/or any
customer serviced by Epoch. Such arbitration shall be
conducted, with venue in Orange County, California, according
to standard arbitration rules then in effect of the American
Arbitration Association. Initiation of arbitration may be made
by serving written notice to the other party. This arbitration
agreement is binding upon all parties. Any award the
arbitrator makes shall be final and binding on all parties and
judgment on it may be entered in any court having
jurisdiction. Furthermore, the prevailing party shall be
entitled to recover reasonable attorneys fees.
11. General
Neither party shall have the right to assign any
rights, duties or obligations hereunder without the prior
written consent of the party, which may not be unreasonably
withheld.
Neither party shall be held liable for failure to
fulfill its obligations hereunder if such failure is due to
causes beyond its reasonable control (Force Majeure)
including, without limitation, actions or failures to act of
any third-party upon whom either party reasonably relies for
services (e.g. Local Exchange Carriers, IntereXchange
Carriers, etc.), acts of God, earthquake, fire, catastrophe,
governmental prohibitions or regulations, hackers, national
emergencies, riots, wars, strikes, lockouts, work stoppages or
other labor difficulties, or other causes reasonably
unforeseen in the normal course of business. The time for any
performance required under this Agreement shall be extended by
the delay incurred as a result of any such act of Force
Majeure and neither party shall in no way be responsible for,
nor liable for, any damages or losses incurred as a result of
such act(s).
The entire Agreement between the parties is
incorporated in this Agreement (including all Attachments
hereto) and supersedes all prior discussions and agreements
between the parties relating to the subject matter herein.
This Agreement can be modified only in writing when duly
signed by authorized representatives of both parties.
If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of
this Agreement.
This Agreement is governed by the laws of the State of
California, exclusive of the choice of laws provisions thereof.
12. No Publicity
Neither party shall publicize or disclose the existence of
this Agreement or its terms, or issue a press release
concerning this Agreement, except as required by competent
legal process, without the consent of the other, with such
approval not to be unreasonably withheld, and in the event of
such agreement, all press release materials shall be reviewed
and approved by the other party. The failure of either party
to exercise in any respect any right provided for herein shall
not be deemed a waiver of any further rights hereunder.
13. Acknowledgments
Branded Provider acknowledges that it has read this
Agreement and understands and accepts the terms, conditions
and covenants contained herein. Epoch expressly disclaims the
making of, and Branded Provider acknowledges that it has not
received or relied on, any guaranty, express or implied, as to
the amount of revenue that it may earn as a result of its
activities pursuant to this Agreement.
14. Notices
All notices made to Branded Provider shall be delivered
to its address designated below, or as otherwise designated by
Branded Provider from time to time. All notices to Epoch shall
be delivered to its address designated below, or as otherwise
designated by Epoch from time to time.
<PAGE>
15. Binding Effect
This Agreement is binding upon the parties hereto,
their respective executors, administrators, heirs and
successors in interest. All obligations by either party which
expressly or by their nature survive the expiration or
termination of this Agreement shall continue in force and
effect subsequent to and notwithstanding this Agreements
expiration or termination until such time that the obligations
are satisfied in full or by their nature expire.
IN WITNESS WHEREOF, the parties have so agreed and made
effective on the date first-above written.
EPOCH NETWORKS, INC. BRANDED PROVIDER
By: By:
Name: Name:
Its: Its:
Address: Address:
18201 Von Karman Ave
5th Floor
Irvine, CA 92612
Tel: 949-474-4950 Tel:
Fax: ###-##-#### Fax:
LEASE
dated as of May 21, 1998
between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC.,
as Landlord ("Landlord")
and
GEN-TEL COMMUNICATIONS ("GTC"); A CALIFORNIA CORPORATION;
ERIC CLEMONS; AND PAUL SANDHU
JOINTLY AND SEVERALLY
as Tenant ("Tenant")
relating to premises at
SUITE P-3
THE JOHN WAYNE EXECUTIVE GUILD CENTER
3151 Airway Avenue
Costa Mesa, California 92626
<PAGE>
LEASE SUMMARY
This page is for the convenience of the parties and summarizes the
principal terms of the lease. It does not alter or define any of
the terms of this lease.
Project: The project in which the Premises is located
is THE JOHN WAYNE EXECUTIVE GUILD CENTER,
located at 3151 Airway Avenue, Costa Mesa,
California.
Tenant: The Tenant is GEN-TEL COMMUNICATIONS ("GTC");
ERIC CLEMONS; and PAUL SANDHU, Jointly and
Severally
Term: The term of the lease is three (3) year(s).
Commencement
Date: This lease shall commence on June 1, 1998.
Termination
Date: This lease shall terminate on May 31, 2000.
Premises: The Premises consist of ground floor office
space located within THE JOHN WAYNE EXECUTIVE
GUILD, Building P and further referenced as
"Suite P-3", and further outlined in
Exhibit(s) to the lease.
Net rentable area of the Premises:
Approximately 2,712 rentable square feet.
Base
Year Rent: Effective Base Rental Rate for the thirty-six (36)
month period of occupancy is approximately $1.98-1/3
per square foot.
Year 1 $5,017.20 per month ($1.85 per sq. ft.)
*Year 2 $5,559.60 per month ($2.05 per sq. ft.)
*Year 3 $5,559.60 per month ($2.05 per sq. ft.)
Operating Expenses: Base Year Start Date: 6-1-98 to 5-31-00
Following the first anniversary, and each subsequent anniversary of
the commencement date of this lease, Tenant shall pay, each month,
as Additional Rent, at the same time as the Base Rent, Tenant's pro
rata share of annual Operating Expenses in excess of the Operating
Expenses derived from the Base Year Expenses. Landlord and Tenant
agree that Tenant's pro rata share is a fraction, the numerator of
which is the number of rental square feet of the Premises, and the
denominator of which is the total rentable square feet contained in
the Project. Tenant's share is approximately 2.5 percent of the
rentable square footage of the total Project and shall be for an
amount not to exceed four percent (4%) per annum nor less than one
percent (1%) per annum, times the then current Rent amount.
Security Deposit: $6,000.00
Tenant Improvements: See Exhibit "E"
<PAGE>
TABLE OF CONTENTS
1. TERM/PREMISES/USE ...........................................1
1.1 Leasing Clause and Premises ...........................1
1.2 Term ..........................................................1
1.3 Use ...........................................................1
2. RENT ...............................................................1
2.1 Base Rent .....................................................1
2.2 Initial Base Rent .............................................1
2.3 Adjustments in Base Rent ......................................1
2.4 Partial Payment of Rent........................................2
2.5 Additional Rent ...............................................2
2.6 Additional Rent ...............................................2
3. SERVICES TO BE FURNISHED BY LANDLORD ............2
3.1 General .......................................................2
3.2 Electricity/HVAC ..............................................2
3.3 Limits re Air-Conditioning ....................................2
3.4 Landlord Not to Be Liable .....................................3
4. PREPARATION AND ACCEPTANCE OF PREMISES ...............3
4.1 Condition of Premises on Delivery .............................3
4.2 Tenant Improvements ...........................................3
5. QUIET ENJOYMENT ....................................................3
6. REPAIRS AND RE-ENTRY .............................................4
6.1 Tenant's Obligations ..........................................4
6.2 Landlord's Obligations ........................................4
6.3 Re-Entry by Landlord ..........................................4
7. ALTERATIONS BY TENANT AND TENANT FIXTURES .................4
7.1 Tenant Alterations ............................................4
7.2 Tenant Fixtures and Other Property ............................4
8. ASSIGNMENT AND SUBLETTING ..........................................5
8.1 Prohibition of Assignment and Other Transfers .................5
8.2 Proposed Assignment and Sublease...............................5
8.3 Tenant to Remain Liable .......................................5
8.4 Landlord's Assignment .........................................5
9. USE OF THE PREMISES ................................................5
9.1 Legal Use and Violations of Insurance Coverage ................5
9.2 Nuisance; Rules and Regulations ...............................6
10. INDEMNITY/LIABILITY ................................................6
10.1 Indemnity By Tenant ...........................................6
10.2 Landlord Not To Have Liability ................................6
10.3 Mutual Release and Waiver of Subrogation ......................7
10.4 Transfer of Ownership .........................................7
10.5 Express Agreement .............................................7
11. ACCESS FOR REPAIRS AND INSPECTION .............................7
<PAGE>
12. FIRE OR OTHER CASUALTY ...........................................7
12.1 Major Casualty ................................................7
12.2 Repairable Casualty ...........................................8
12.3 Landlord's Election ...........................................8
13. CONDEMNATION .......................................................8
13.1 Condemnation ..................................................8
13.2 Restoration After Partial Taking ..............................9
14. LIEN FOR RENT ......................................................9
15. HOLDOVER ...........................................................9
16. INSURANCE ..........................................................9
16.1 Landlord's Insurance ..........................................9
16.2 Tenant's Insurance - Liability ...............................10
16.3 Tenant's Insurance - Other ...................................10
16.4 Evidence of Insurance ........................................10
16.5 No Representation of Adequate Coverage .......................10
17. DEFAULT ...........................................................10
17.1 Non-Payment of Rent ..........................................10
17.2 Breach .......................................................10
17.3 Insolvency ...................................................10
17.4 Abandonment ..................................................10
17.5 Remedies .....................................................11
17.6 Late Charges .................................................11
18. OPERATING EXPENSES ................................................11
18.1 Operating Expenses Defined ...................................11
18.2 Payment of Operating Expenses ................................12
18.3 Personal Property Taxes ......................................12
19. SECURITY DEPOSIT ..................................................13
20. UNDERLYING MORTGAGES ..............................................13
20.1 Subordination ................................................13
20.2 Attornment to Mortgage .......................................13
20.3 Landlord's Default ...........................................13
20.4 Non-Disturbance ..............................................14
20.5 Estoppel Certificates ........................................14
21. PARKING PROVISIONS ................................................14
21.1 Unassigned Parking ...........................................14
21.2 Landlord Not To Be Liable ....................................14
22. HAZARDOUS MATERIALS ...............................................14
22.1 Landlord's Representations and Indemnity as to
Hazardous Materials ..............................................14
22.2 Tenant's Representations and Indemnity as to
Hazardous Materials .............................................14
<PAGE>
22.3 Freon ....................................................14
22.4 Hazardous Materials Defined ..............................14
23. RELOCATION; PROJECT NAME..........................................15
23.1 Relocation ..............................................15
23.2 Project Name ............................................15
24. NOTICES ...........................................................15
25. BROKER'S OR AGENT'S COMMISSION ...................................16
26. GENERAL ...........................................................16
26.1 Equal Employment Opportunity ..............................16
26.2 Place of Performance - Governing Law ......................16
26.3 Severability .............................................16
26.4 Inurement ................................................16
26.5 Integration .................................................17
26.6 No Waiver ...................................................17
26.7 Attorney's Fees and Arbitration ..............................17
26.8 Captions ....................................................17
26.9 Authority ...................................................17
26.10 Submission of Lease ........................................17
26.11 Exhibits ....................................................19
<PAGE>
STATE OF CALIFORNIA
COUNTY OF ORANGE
OFFICE LEASE
THIS LEASE ("Lease"), made and entered into by and between
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC. ("SCSD"), and
GEN-TEL COMMUNICATIONS ("GTC"); ERIC CLEMONS; AND PAUL
SANDHU, JOINTLY AND SEVERALLY ("Tenant"), and dated, May
21, 1998 for reference purposes only.
1.
TERM/PREMISES/USE
1.1 Leasing Clause and Premises. Subject to the terms and
conditions of this Lease, Landlord hereby leases
premises to Tenant, and Tenant hereby rents and accepts
premises from Landlord pursuant to the terms of this
Lease. The "Premises" are approximately 2,712 rentable
square feet on the ground floor of Building P at THE
JOHN WAYNE EXECUTIVE GUILD CENTER, located at 3151
Airway Avenue, Costa Mesa, California (the "Project"),
designated suite number P-3 and more fully described on
a floor plans attached hereto and marked Exhibits "D".
1.2 Term. The term of this Lease (the "Term") shall be
three (3) year(s) commencing on June 1, 1998 and
terminating May 31, 2000.
1.3 Use. Tenant shall use the Premises for general
business offices uses and shall not occupy or use, or
permit any portion of the Premises to be occupied or
used for any other purpose whatsoever. This Lease
covers no other part of the Project or the ground upon
which it is located, except the nonexclusive rights
granted by Landlord to Tenant, its agents, employees,
customers, business invitees and visitors to use the
public corridors, the elevators, stairways and similar
common areas within the Project, and the ground level
parking area.
2.
RENT
2.1 Base Rent. Tenant shall pay Landlord a monthly base
rent ("Base Rent"), without offset or deduction, as set
forth in this Section. Base Rent shall be payable
commencing on the Commencement Date. The first payment
shall be made, in advance, upon execution of this Lease.
The second and subsequent payments shall be made in
monthly installments in advance for the following month,
on the first day of each and every month until the end
of the Term, to the following address:
SCSD EXECUTIVE GUILD J.W.A.
3230 East Imperial Hwy., Suite 200
Brea, California 92821
2.2 Initial Base Rent. Tenant shall pay a Base Rent of
$5,017.20 per month until adjusted pursuant to Section 2.3.
2.3 Adjustments in Base Rent. Base Rent shall be
increased according to the following schedule:
Lease Yr Base Rent/Monthly Annual
Base Rent
Year 1 $5,017.20 per month ($1.85 per sq. ft.) $60,206.64
*Year 2 $5,559.60 per month ($2.05 per sq. ft.) $66,715.20
*Year 3 $5,559.60 per month ($2.05 per sq. ft.) $66,715.20
<PAGE>
2.4 Partial Payment of Rent. Tenant shall make all
rental payments in full. Payment or receipt of a rental
payment of less than the amount stated in the lease
shall be deemed to be nothing more than partial payment
on that month's account. Under no circumstances shall
Landlord's acceptance of a partial payment constitute
accord and satisfaction. Nor will Landlord's acceptance
of a partial payment forfeit Landlord's right to collect
the balance due on the account, despite any endorsement,
stipulation, or other statement on any check. The
Landlord may accept any partial payment check with any
conditional endorsement without prejudice to its right
to recover the balance remaining due, or to pursue any
other remedy available under this lease.
2.5 Additional Rent. All other sums of money required
under this Lease to be paid by Tenant to Landlord, other
than Base Rent, are designated "Additional Rent". The
term "Rent" in this Lease means Base Rent and Additional
Rent.
2.6 Tenant's pro rata share of Operating Expenses shall be
determined in proportion to the part of the total square
footage of the Project which is usable and used by
Tenant in the reasonable conduct of its business or
profession, and shall be paid as Additional Rent, in the
manner set forth in Section 18. Landlord and Tenant
agree that Tenant's pro rata share is a fraction, the
numerator of which is the number of rental square feet
of the Premises, and the denominator of which is the
total rentable square feet contained in the Project.
Tenant's share is approximately 2.5% (Tenant's Share")
in an amount not to exceed four (4) Index points per
annum nor less than one Index point per annum, times the
then current Rent amount.
3.
SERVICES TO BE FURNISHED BY LANDLORD
3.1 General. Landlord shall furnish or cause to be
furnished to the Premises the following services: (a)
electricity for lighting the Premises and operating
ordinary 110-volt portable desk top office equipment of
the type normally used in general business offices,
subject to paragraph 3.2 of this Lease, (b) heat and
air-conditioning as may reasonably be required for the
comfortable use and occupancy of the Premises during
Project Operating Hours, (c) janitor and cleaning
services limited to emptying and removal of general
office refuse, dusting and light vacuuming of floors as
needed, Monday through Friday, and such window washing
as may in the reasonable judgment of Landlord be
required, (d) replacement of fluorescent tubes and light
bulbs, (e) domestic water for the operation of
lavatories, drinking fountains and coffee bars and (f)
toilet room supplies.
3.2 Electricity/HVAC. There will be no additional cost
to Tenant for Tenant's use of electrical service unless
and until Tenant's use of electrical power exceeds
electrical allowance of $.12 (twelve cents) per square
foot per month. The electric usage shall be reviewed on
a quarterly basis and any amount in excess of said
allowance shall be billed to Tenant which is immediately
due and payable to Landlord as "additional rent".
3.3 Limits re Air-Conditioning. In the event that Tenant
requires equipment or machines, generating heat
substantially in excess of what is generally considered
standard equipment for professional and clerical office
use, which affect the temperature of the Premises
maintained by the air-conditioning system, Landlord
reserves the right to provide supplementary
air-conditioning equipment. Prior to installation of
any additional air-conditioning equipment, Landlord
will review with Tenant the cost,
<PAGE>
installation and maintenance cost of said equipment and
said cost shall be paid by Tenant upon demand.
3.4 Landlord Not To Be Liable. Landlord shall not be
liable for failure to furnish or cause to be furnished
any of the foregoing services when such failure is
caused by accidents or conditions beyond the control of
the Landlord, or by necessary repairs, labor
disturbances or labor disputes of any character, whether
resulting from or caused by acts of Landlord or
otherwise; provided, however, that in any such events,
Landlord shall make a prompt and diligent effort to
cause the resumption of such services. Landlord shall
not be liable under any circumstances for loss of or
injury to property, however occurring, through or in
connection with or incidental to the furnishing of any
of the foregoing, nor shall any failure relieve Tenant
from the duty to pay the full amount of rent herein
reserved, or constitute or be construed as a
constructive or other eviction of Tenant. If Tenant is
in default under this Lease, Landlord shall have the
right, at Landlord's option, to suspend or discontinue
the foregoing services, or any thereof, during the
continuance of any such default, and any such suspension
or discontinuance shall not be deemed to be an eviction
or ejection of Tenant.
4.
PREPARATION AND ACCEPTANCE OF PREMISES
4.1 Condition of Premises on Delivery. The
Premises are rented "as-is", without any additional
services or improvements to be provided by Landlord
unless otherwise specified in Exhibit "E" attached
hereto. Taking possession of the Premises by Tenant
shall be conclusive evidence as against Tenant that the
Premises and the Project were in good and satisfactory
condition when possession was taken.
4.2 Tenant Improvements. Prior to the commencement of the
term of this Lease, Landlord shall substantially
complete the work, if any, as may be required to be done
as specified in attached Exhibit "E" and/or Lease
Summary Page. Landlord's time to complete such work, if
any be specified in attached Exhibit "E" and/or Lease
Summary Page, shall be extended by one day for each day
of delay resulting from interference with or hindrance
of such work by Tenant, or any of Tenant's employees,
servants, or agents, for changes in such work requested
by Tenant and agreed to by Landlord and for delays
caused by the failure of Tenant or Tenant's contractor
to timely and properly complete any of Tenant's work in
the Premises. Neither such delays or any other delay
shall make this Lease void or voidable or alter or
affect any of the terms hereof and Tenant shall not be
entitled to any abatement of rent therefor; and all
claims for damages arising out of any delay are waived
and released by Tenant.
5.
QUIET ENJOYMENT
Tenant, upon keeping, observing and performing all of
the covenants and agreements of this Lease on its part
to be kept, observed and performed, shall lawfully and
quietly hold, occupy and enjoy the Premises during the
term of this Lease, subject, however, to the covenants,
agreements, terms, provisions and conditions of this
Lease and to underlying mortgages to which this Lease is
subject and subordinate.
<PAGE>
6.
REPAIRS AND RE-ENTRY
6.1 Tenant's Obligations. Tenant will, at Tenant's own cost
and expense, repair or replace any damage done to the
Project or any part thereof, caused by Tenant or
Tenant's agents, employees, invitees, or visitors. If
Tenant fails to promptly make such repairs or
replacements within fifteen (15) days of the occurrence
of the event causing such damage, Landlord may, at its
option, make such repairs and replacements itself, and
Tenant shall repay the cost thereof to Landlord on
demand as Additional Rent. Tenant shall take good care
of the Premises and the fixtures and improvements
therein and shall not commit or allow any waste or
damage to be committed on any portion of the Premises,
and shall, upon termination of this Lease, deliver up
the Premises (except as otherwise herein provided) in
substantially the same condition as accepted by Tenant
on commencement date, reasonable wear and tear excepted,
and shall deliver to Landlord all keys to the Premises.
6.2 Landlord's Obligations. Landlord shall make
repairs, restorations and replacements as and when
needed to the Premises which are not the requirement of
the Tenant or other Tenants of the Project.
6.3 Re-Entry by Landlord. Upon termination of this Lease,
Landlord shall have the right to re-enter and assume
possession of the Premises, and the cost and expense of
any repairs necessary to restore the condition of the
Premises to the condition in which they are to be
delivered to Landlord shall be borne by Tenant.
7.
ALTERATIONS BY TENANT AND TENANT FIXTURES
7.1 Tenant Alterations. Tenant will not make or allow to
be made any alterations, additions or improvements
("Tenant Alterations") in or to the Premises without the
prior written consent of Landlord, which will not be
unreasonably withheld. Tenant shall pay or cause to be
paid all costs for work done by it or caused to be done
by it on the Premises of a character which will or may
result in liens on Landlord's interest therein and
Tenant will keep the Premises free and clear of all
mechanic's liens, and other liens on account of work
done for Tenant or persons claiming under it. Tenant
shall indemnify and hold Landlord harmless against any
liability, loss, damage, costs or expenses, including
attorneys fees, on account of any claims of any natures
whatsoever relating to Tenant Alterations, including
claims of liens of laborers or materialmen or others for
work performed for, or materials or supplies furnished
to Tenant or persons claiming under Tenant. All Tenant
Alterations (whether temporary or permanent in
character) made in or upon the Premises, either by
Landlord or Tenant, shall be Landlord's property on
termination of this Lease and shall remain on the
Premises, without compensation to Tenant.
7.2 Tenant Fixtures and Other Property. All built-in
furniture, cabinetwork, movable business and trade
fixtures and equipment installed by Tenant shall be
removed by Tenant at the termination of this Lease if
Tenant so elects, and shall be so removed if required by
Landlord, or if not so removed, shall, at the option of
Landlord, become the property of Landlord. All such
removals and restoration shall be accomplished in good
and workmanlike manner so as not to damage the Premises
or the Project. Any damage to the Premises caused by
installation, alteration or removal of Tenant's fixtures
or equipment shall be repaired at the expense of Tenant.
<PAGE>
8.
ASSIGNMENT AND SUBLETTING
8.1 Prohibition of Assignment and Other Transfers.
Tenant shall not, except as otherwise provided herein,
without the prior written consent of Landlord: (a)
assign, mortgage, pledge, encumber or otherwise transfer
this Lease or any interest under the Lease; or (b)
sublease all or any part of the Premises. The consent
of Landlord to any assignment, other transfer or
sublease of this Lease and the term and estate hereby
granted shall not relieve Tenant of the obligation to
obtain such consent to any further assignment or other
transfer.
8.2 Proposed Assignment and Subleases. If Tenant desires
to assign or sublease this Lease or any part hereof,
then at least thirty (30) days, but not more than one
hundred eighty (180) days, prior to the date, when
Tenant desires the assignment or sublease to be
effective (the "Transfer Date"), Tenant shall give
Landlord a Notice (the "Assignment Notice") which shall
set forth the name, address and business of the proposed
assignee or sublessee, the Transfer Date, information
(including references) on the credits and financial
condition of the proposed assignee or sublessee and such
other material as Landlord shall reasonably require.
Landlord shall within thirty (30) days following the
Assignment Notice notify Tenant in writing that Landlord
elects to (a) either disapprove the proposed assignee or
sublessor; (b) terminate this Lease as to the space so
affected as of the date so specified by Tenant, in which
event Tenant will be relieved of all further obligation
hereunder as to such space; or (c) permit Tenant to
assign or sublet such space to the proposed assignee or
sublessee. If Landlord shall fail to notify Tenant in
writing of such election within said thirty (30) day
period, Landlord shall be deemed to have elected to
approved the proposed assignee or sublessee. If the
Rent agreed to by Tenant and its subtenant and assignee
is greater than the rent payable under this Lease, such
excess Rent shall be paid to Landlord at the same time
and in the same manner as the Basic Rent.
8.3 Tenant to Remain Liable. Notwithstanding any
assignment or subletting, Tenant and any guarantor of
Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of
all Rent under this Lease and for compliance with all of
Tenant's other obligations under this Lease.
8.4 Landlord's Assignment. Landlord may sell,
transfer, mortgage, encumber or assign the Project or
this Lease. Within ten (10) days after request by
Landlord, upon such sale, transfer, mortgage,
encumbrances or assignment, by Landlord, Tenant shall
execute, acknowledge and deliver a certificate
("Estoppel Certificate") in recordable form certifying:
the capacity of the person executing such certificate
and that such person is duly authorized to execute it on
behalf of Tenant; the commencement date of this Lease
and the date upon which the Term expires; that this
Lease is unmodified and in full force and effect (or if
modified, in full force and effect as modified); that
Landlord is not in default thereunder, that there are no
defenses or offsets thereto known to Tenant (if such be
the case); and the date to which Rent has been paid.
9.
USE OF THE PREMISES
9.1 Legal Use and violations of Insurance Coverage.
Tenant shall use the Premises in a careful, safe and
proper manner and shall not occupy or use, or permit any
portion of the Premises to be occupied or used, for any
business or purpose which is unlawful or deemed to be
disreputable in any manner, nor shall Tenant permit
anything to
<PAGE>
be done which will in any way increase the risk of fire,
any hazard, loss of rent, casualty or other loss of
value to the Project, and/or its contents, and in the
event that, by reason and acts of Tenant, there shall be
any increase in the rate of any insurance policy on the
Project or its contents, created by Tenant's acts or
conduct of business, then Tenant hereby agrees, upon
documentation of such increase by Landlord, to pay such
increases as Additional Rent.
9.2 Nuisance; Rules and Regulations. Tenant shall
conduct its business in such manner as not to create any
nuisance, or interfere with, or disturb any other
Tenant, or Landlord in its management of the Project.
Tenant shall observe and comply with the Rules and
Regulations set forth in attached Exhibit A and such
other and further reasonable Rules and Regulations which
Landlord at any time may make and communicate to Tenant
and apply to Tenants and occupants of the Project
generally and which, in the reasonable judgment of
Landlord, shall be necessary for the operation,
maintenance, reputation or appearance of the Project.
10.
INDEMNITY/LIABILITY
10.1 Indemnity By Tenant. Tenant shall indemnify, defend,
protect, and hold harmless Landlord from and against any
and all claims, losses, proceedings, damages, causes of
action, liability, costs and expenses (including
attorney's fees) arising from or in connection with, or
caused by any act, omission or negligence of Tenant or
any sublessee of Tenant, or their respective
contractors, licensees, invitees, agents, servants or
employees, on or about the Premises or the Project, to
the extent permitted by law; and if any action or
proceeding be brought against Landlord by reason of any
such claim, Tenant upon notice from Landlord, shall
defend the same at Tenant's expense by counsel
satisfactory to Landlord. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk
of damage to property or injury to persons in, upon or
about the Premises arising from any cause other than
Landlord's gross negligence or wilful misconduct, and
Tenant hereby waives all claims in respect thereof
against Landlord. These provisions are in addition to,
and not in lieu of, the insurance required to be
provided elsewhere in this Lease.
10.2 Landlord Not To Have Liability. Tenant hereby
assumes all risks and liabilities of a landowner in the
possession, use or operation of the Premises. Tenant
hereby agrees that Landlord shall not be liable for
injury to Tenant's business or any loss of income
therefrom or for damages to the goods, wares,
merchandise or other property of Tenant, Tenant's
employees, invitees, customers, contractors, workers, or
any other person in or about the Premises, nor shall
Landlord be liable for injury to the person of Tenant,
Tenant's employees, agents or contractors, where such
damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing,
air-conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from
conditions arising upon the Premises or from other
sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same
is inaccessible to Tenant. Landlord shall not be liable
or responsible for any injury, loss or damage to any
property or person occasioned by theft, fire, act of
God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, or order of
governmental body of authority, or other matter beyond
the control of Landlord. Nothing contained herein shall
be construed as excusing Landlord from liability for its
gross negligence or intentional misconduct.
<PAGE>
10.3 Mutual Release and Waiver of Subrogation. Landlord
and Tenant each hereby waives, and releases the other
from any claim or liability for damage to such party's
property occurring during the Term which is covered by
insurance. Each party shall cause the property hazard
insurance carried by it, with respect to the Project,
the Premises or such party's other property located
therein, to be endorsed, if necessary, to prevent any
invalidation of such insurance by reason of the waivers
and releases contained in this Section, provided such
endorsement can be obtained at no cost. If additional
costs are involved, the party carrying such insurance
shall give the other party the opportunity to apply for
such endorsement.
10.4 Transfer of Ownership. Upon the sale or transfer of the
Project, the obligations and duties, of the Landlord
selling or transferring the Project under the Lease
shall terminate, except as to liabilities that shall
have accrued prior to the transfer or which are the
result of the conduct of that Landlord.
10.5 Express Agreement. This Lease shall be considered an
express agreement governing any case of damage to or
destruction of the Project or the Premises by fire or
other casualty, and any law which purports to govern the
rights of Landlord and Tenant in such a contingency in
the absence of express agreement, and any successor or
other law of like import shall have no application.
11.
ACCESS FOR REPAIRS AND INSPECTION
Landlord and Landlord's agents shall have the right to
enter the Premises at all reasonable hours to examine
them, to show them to prospective purchasers, mortgagees
or Tenants, and to make and perform such cleaning,
maintenance, repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable
for the safety, improvement, or preservation of the
Premises or of other portions of the Project, without
such acts constituting an eviction of Tenant in whole or
in part or entitling Tenant to any abatement of rent by
reason of loss or interruption of business of Tenant, or
otherwise. If Tenant shall not be personally present to
open and permit an entry in the Premises, at any time
when for any reason an entry therein shall be necessary
or permissible, Landlord or Landlord's agents may enter
the Premises by use of a master key, or in any emergency
may forcibly enter the Premises, without rendering
Landlord or Landlord's agents liable therefor (provided
that during such entry Landlord or Landlord's agents
shall accord reasonable care to Tenant's property), and
without in any manner affecting the obligations and
covenants of this Lease. Landlord shall have the right
to erect, build, use and maintain unexposed pipes, ducts
and conduits in and through the Premises.
12.
FIRE AND OTHER CASUALTY
12.1 Major Casualty. If the Premises, or the Project, shall
be so damaged by fire or other casualty as to render the
Premises untenantable, and if such damage shall be so
great that an architect selected by Landlord shall
certify in writing to Landlord that the Premises, with
the exercise of reasonable diligence, but without the
payment of overtime or other premiums, cannot be made
Tenantable within one hundred twenty (120) days from the
happening of the fire or other casualty, or if insurance
proceeds are not made available to Landlord for repair
of such damages, then, in either event, this Lease may
be terminated by Landlord as of the date of the
occurrence of the fire or other casualty by giving
thirty (30) days written notice to Tenant of such
termination. Upon such notice of termination, Tenant
shall surrender to Landlord
<PAGE>
the Premises and all interest therein under this Lease,
and Landlord may re-enter and take possession of the
Premises and remove Tenant therefrom. Landlord and
Tenant shall be free and discharged from all obligations
arising under this Lease after the date of such
termination. If, however, the damages shall be such
that Landlord's architect shall certify that the
Premises can be made Tenantable within the one hundred
twenty (120) day period from the happening of the fire
or other casualty and insurance proceeds are made
available to Landlord for repair of such damage or if
Landlord does not terminate this Lease as set forth
above, then, except as hereinafter provided, Landlord
shall, with reasonable promptness, repair the damage so
done except that Landlord shall not be required to
repair, replace or restore any items which Tenant is
obligated to repair or replace. Until such repair is
substantially completed, the Base Rent shall be abated
in proportion to the part of the Premises which is
unusable by Tenant in the reasonable conduct of its
business or profession. There shall be no abatement of
Base Rent by reason of any portion of the Premises being
unusable for a period of fifteen (15) days or less. If
the damage is due to the fault or negligence of Tenant
or Tenant's employees, agents or invitees, there shall
be no abatement of Base Rent.
12.2 Reparable Casualty. If the Premises, without
the fault or negligence of Tenant, shall be damaged by
fire or other casualty but not so as to render them
untenantable and insurance proceeds are made available
to Landlord, Landlord shall cause the damage to be
repaired with reasonable promptness and there shall be
no abatement of Base Rent or any other amounts due under
this Lease. If the fire or other casualty causing
damage to the Premises or other parts of the Project
have been caused by Tenant or Tenants employees, agents
or invitees, such damage shall be repaired by Landlord
and the amount paid for such repair shall be immediately
due from Tenant to Landlord with interest at the
Default Rate from the dates of Landlord's payments.
12.3 Landlord's Election. If the Project is so damaged by
fire or other casualty (although the Premises are
unaffected by such fire or other casualty, or if
affected, can be repaired within one hundred twenty
(120) days) that Landlord shall deem it advisable to
reconstruct, rebuild or raze the Project, then,
notwithstanding anything contained herein to the
contrary, this Lease may be terminated by Landlord as of
the date of the occurrence of the fire or other casualty
by giving written notice to Tenant of such termination
within thirty (30) days after the occurrence of the fire
or other casualty. Upon such notice of termination,
Tenant shall surrender to Landlord the Premises and all
interest therein under this Lease, and Landlord may
re-enter and take possession of the Premises and remove
Tenant therefrom. Landlord and Tenant shall be free and
discharged from all obligations arising hereunder after
the date of such termination.
13.
CONDEMNATION
13.1 Condemnation. Upon any taking under the power of
eminent domain, or sale under threat of the exercise of
said power ("Condemnation") of the whole or a
substantial part of the Project, the Premises or the
parking area that shall substantially interfere with
Tenant's use and occupancy of the balance thereof, this
Lease shall, at the election of either Tenant or
Landlord exercised by either party giving written notice
to the other of such termination, terminate as of the
date the condemning authority takes title or possession,
whichever first occurs. Upon Condemnation of any part
of the Project which shall not render the Premises
untenantable, Landlord shall have the right, at its
option, to terminate this Lease as of the date the
condemning authority takes title or possession,
<PAGE>
whichever first occurs. No award from the condemning
authority shall be apportioned, and Tenant hereby
assigns to Landlord any award which may be made,
together with any and all rights of Tenant now or
hereafter arising in or to such award or any part
thereof; provided, however, that Tenant may receive any
award for Tenant's property and fixtures removable by
Tenant at the expiration of the Term under the terms of
this Lease, or for the interruption of, or damage to
Tenant's business or for relocation expenses recoverable
against the condemning authority.
13.2 Restoration After Partial Taking. If there is a
Condemnation which does not result in a termination of
this lease, Landlord shall, to the extent of any funds
received from the condemning authority for repair or
restoration, restore the Project or Premises
substantially to their condition prior to such partial
Condemnation and Rent shall be abated in the proportion
which the square footage of the part of the Premises so
made unusable bears to the amount of useable square
footage immediately prior to the Condemnation. No
temporary taking of a part of the Premises or of the
Project shall give Tenant any right to terminate this
Lease or to any abatement of Rent.
14.
LIEN FOR RENT
In consideration of the mutual benefits arising under
this contract, Tenant grants a security interest to
Landlord in all property of Tenant now or hereafter
placed in or upon the Premises and such property is
hereby subjected to a lien in favor of Landlord and
shall be and remain subject to such lien of Landlord for
payment of all rents and other sums agreed to be paid by
Tenant herein. Such liens shall be in addition to the
cumulative of the Landlord's liens provided by law.
Promptly upon request by Landlord, Tenant shall execute
any UCC-1 Financing Statement evidencing and perfecting
said lien.
15.
HOLDOVER
If Tenant or any person claiming through or
under Tenant is in possession of any part of the
Premises after the expiration of the term, with
or without the express or implied consent of
Landlord, such tenancy shall be from
month-to-month only, and not a renewal of this
Lease or an extension for any further term, and
such month-to-month tenancy shall be subject to
each and every term, covenant and agreement
contained herein, except that Base Rent shall be
increased to one hundred fifty percent (150%) of
the amount of Base Rent payable by Tenant during
the last month of the Term. Nothing in this
Section shall be construed as a consent by
Landlord to any continued possession by Tenant
and Landlord expressly reserves the right to
require Tenant to surrender possession of the
Premises upon the expiration of the Term or upon
the earlier termination hereof and to assert any
remedy in law or equity to evict Tenant and/or
collect damages in connection with such
continued possession.
16.
INSURANCE
16.1 Landlord's Insurance. Landlord shall at all times
during the term of the lease, as an operating cost,
procure and maintain in force and effect a Broad Form
policy or policies of insurance covering the Project.
At Landlord's option, Landlord may procure endorsements
thereon for flood, earthquake, tornado, theft and
collapse, or such other coverages as Landlord deems
appropriate. Landlord may also obtain a Comprehensive
Package policy of
<PAGE>
liability insurance (including
contractual liability), employer's liability insurance,
excess liability insurance and such other insurance as
Landlord deems necessary or appropriate. Any insurance
carried by Landlord may be under a blanket policy (or
policies) covering other properties of Landlord and/or
its related or affiliated entities.
16.2 Tenant's Insurance - Liability. Tenant shall keep
in force with respect to the Premises and Tenant's
business and other activities therein Commercial Package
liability insurance, including contractual and personal
injury liability, payable on an occurrence basis, with a
minimum combined limit of $1,000,000, naming Landlord
and Landlord's manager for the Project as additional
insureds.
16.3 Tenant's Insurance - Other: Tenant shall carry and
maintain a Broad Form policy of insurance covering all
of Tenant's property and all alterations, additions or
improvements permitted under this Lease, from time to
time in, on or upon the Premises in an amount not less
than ninety percent (90%) of their full replacement cost
from time to time during the term of this Lease,
providing coverage for sprinkler damage, vandalism and
malicious mischief. Such insurance shall name Landlord
and Landlord's manager for the Project as additional
insureds.
16.4 Evidence of Insurance. Tenant shall deliver to Landlord
policies or duly executed certificates of insurance.
Renewals shall be delivered to Landlord at least ten
(10) days prior to the expiration of the respective
policy terms.
16.5 No Representation of Adequate Coverage. Landlord
makes no representation that the limits or forms of
coverage of insurance specified in this Paragraph 16 are
adequate to cover Tenant's property or obligations under
this lease.
17.
DEFAULT
The occurrence of any one or more of the events set
forth in Sections 17.1, 17.2 and 17.3 shall constitute a
material default and breach of this Lease by Tenant.
17.1 Non-Payment of Rent. The failure of Tenant to make any
payment of Rent as and when due, where such failure
shall continue for a period of three (3) days after
notice from Landlord that said payment is delinquent.
17.2 Breach. The failure by Tenant to observe or perform any
of the covenants, conditions or provisions of the Lease
to be observed or performed by Tenant, other than the
failure to pay Rent where such failure shall continue
for a period of ten (10) days after written notice
thereof from Landlord to Tenant.
17.3 Insolvency. (a) The making by Tenant of any
general arrangement or assignment for the benefit of
creditors; (b) Tenant becomes a "debtor" as defined in
11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant,
the petition is dismissed within thirty (30) days; (c)
the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets
located at the Premises or of Tenant interest in this
Lease, where possession is not restored to Tenant within
fifteen (15) days; or (d) the attachment, execution or
other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest
in this Lease, where such seizure is not discharged
within fifteen (15) days.
17.4 Abandonment. The abandonment or vacation of the
Premises by Tenant.
<PAGE>
17.5 Remedies. Upon default by Tenant, Landlord shall
have the right, but not the obligation, to re-enter and
take the Premises and resume possession thereof and
thereafter to relet same for the remainder of the period
of the Term specified in this Lease; and if the Rent
received through such reletting is not at least equal to
the Rent provided for in this Lease, Tenant shall pay
and satisfy any deficiencies between the amount of the
Rent called for and that received through reletting, and
all expenses incurred as a result of such reletting
including, but not limited to the cost of renovating,
altering, and decorating for a new occupant. Nothing
herein shall be construed as in any way denying Landlord
the right, in case of any default by Tenant to treat the
default as an entire breach of the Lease and at
Landlord's option immediately sue for any and all
damages occasioned by Landlord thereby. Should Landlord
terminate this Lease and thereafter seek relief pursuant
to Section 1951.2 of the California Civil Code, interest
shall be allowed upon unpaid rent, and/or late
penalties, etc., for the purposes of Section 1941.2(b),
at ten percent (10%) per annum. Any proof by Tenant
under subparagraphs (2) or (3) of subdivision (a) of
Section 1951.2 of the California Civil Code, as the
amount of rental loss that could be reasonably avoided,
shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker
in the business of renting property of the same use as
the Premises and in the same geographic vicinity, and
such two real estate brokers shall select a third
licensed real estate broker and the three licensed real
estate brokers so selected shall determine the amount of
the rental loss that could be reasonably avoided for the
balance of the term of this Lease after the time of
award. The decision of the majority of said licensed
real estate brokers shall be final and binding upon the
parties hereto. Until Landlord elects to terminate this
lease, Landlord shall have the remedy provided for in
Section 1951.4 of the of the California Civil Code.
17.6 Late Charges. Tenant acknowledges that late payment by
Tenant to Landlord of Base Rent, operational expenses or
other monies that come due from time to time will cause
Landlord to incur costs not contemplated by this lease.
The exact amount of said costs will be difficult to
ascertain. Such costs would include processing and
accounting charges, late charges which may be imposed on
Landlord by the terms of any mortgage or ground lease
covering this Project. Accordingly, if any installment
of Base Rent, Additional Rent or operating expenses due
from Tenant shall not be received by Landlord or his
designee within ten (10) days after such amount shall be
due, then without further notice or demand Tenant shall
pay to Landlord a late charge of Ten Percent (10%) of
such overdue amount. Both parties agree that such late
charge represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of the late
payment by Tenant. Acceptance of a late charge by
Landlord shall in no event constitute a waiver of
Tenant's default with respect to such overdue amount,
nor prevent Landlord from exercising any other rights
and remedies he may have under this Lease.
18.
OPERATING EXPENSES
18.1 Operating Expenses Defined. "Operating Expenses", as
used in this Lease, means all amounts paid or accrued by
Landlord per calendar year for the operation and
maintenance of the Project or the land on which it is
situated, and the equipment, fixtures and facilities
used in connection therewith, including the parking
area. Operating Expenses includes, but is not limited
to the cost of utilities, building supplies, janitorial
and window cleaning services, normal maintenance and
repair of the Project and the common areas (including
elevators, if any, and the periodic refurbishing of the
common areas), heating and air-conditioning,
<PAGE>
waste disposal, lighting, maintenance of fire protection and
security systems, planting and landscaping, landscape
maintenance, taxes (defined below), insurance premiums
(including boiler and machinery, fire and extended
coverage, earthquake, flood, rental and public liability
insurance), and all labor, supplies, materials, tools,
professional fees, management fees, wages, salaries and
payroll burden of the Project manager, clerical
maintenance and other employees directly associated with
the operation of the Project, (including Project office
rent or rental value, office supplies and materials, and
all other items constituting operating and maintenance
costs in connection with the Project and land according
to generally accepted accounting principles). Operating
Expenses shall not include the following: (a)
depreciation of the Project, (b) leasing commissions,
(c) repairs and restorations paid for by the proceeds of
any insurance policy or (d) construction of improvements
of a capital nature, except for the cost, or a portion
thereof properly allocable to the Project, of any
capital improvements made to the Project specifically to
reduce Operating Expenses, or required to be made to the
Project specifically to reduce Operating Expenses, or
required to be made to the Project under any
governmental law or regulation not applicable to the
Project at the time it was constructed. Such cost shall
be amortized over such reasonable period of time as
Landlord shall determine, (e) ground rent, (f) debt
service, (g) income and franchise taxes other than that
portion, if any, of income and franchise taxes which may
hereinafter be assessed and paid in lieu of or as a
substitute in whole or in part for Taxes.
18.2 Payment of Operating Expenses. It is mutually agreed
that the calculation of the actual annual increase in
the operating expenses, for each individual unit of the
John Wayne Executive Guild complex, is difficult,
costly, and time consuming. Therefore, whenever the
base monthly rent provided for herein is to be increased
in response to changes in the Consumer Price Index, the
Landlord shall have the unilateral option to observe the
following provisions. The adjustment, if any, shall be
calculated upon the basis of the United States
Department of Labor Statistics, Revised Consumer Price
Index for SUBGROUP ALL ITEMS - ALL URBAN CONSUMERS, Los
Angeles - Anaheim - Riverside, 1982/1984 = 100 (Index).
The index, published as of ninety (90) days prior to the
commencement date of the Lease shall be considered the
"Base". The amounts to be adjusted shall be increased
by the percentage increase, if any, in the Index, as of
ninety (90) days prior to the adjustment date, over the
"Base". Additional adjustments will be made in the same
manner, at the end of each ensuing twelve (12) month
period, including option periods, of the full lease
term. The annual adjustment in the C.P.I. shall be
cumulative and will be added to each adjusted amount on
an annual basis. Said increase shall not exceed four
percent (4%) per annum nor be less than one percent (1%)
per annum. For each subsequent anniversary date of the
Lease, Tenant's share of the annual increase in
operating expenses shall be calculated in like manner.
For example: Lease commencement date is June 1, 1998
and the C.P.I. published on March 1, 1999, is 2 points
higher than the previous year, and the current monthly
base lease payment is $5,017.20, the monthly operating
expense increase is determined as follows:
$5,017.20 x .02 x 0.50 (50%) = $50.17 increase per
month. Such monthly increase shall commence with the
thirteenth (13) month of this Lease.
18.3 Personal Property Taxes. Tenant shall be liable for
and shall pay before delinquency all taxes, and
penalties and interest thereon,
<PAGE>
if any, levied against Tenant's furniture, trade fixtures and equipment,
and any other personal property of Tenant situated or
installed in and upon the Premises. For the purposes of
determining the amount of such taxes, figures supplied
by the county assessor's office or other taxing
authority as to the amount thereof shall be conclusive.
19.
SECURITY DEPOSIT
Concurrently with the execution of this Lease, Tenant
shall deliver to Landlord in good funds, the sum of
$6,000.00 to be held by Landlord as security for the
full and faithful performance of every provision of this
Lease (the "Security Deposit"). If Tenant defaults with
respect to any provision of this Lease, including but
not limited to the provisions relating to the payment of
Rent, Landlord may use, apply or retain all or any part
of the Security Deposit for the payment of any Rent or
for the payment of any other amount which Landlord may
spend or become obligated to spend by reason of Tenant's
default or to compensate Landlord for any other loss,
cost or damage which Landlord may suffer by reason of
Tenant's default. If any portion of the Security
Deposit is so used or applied, Tenant shall, within five
(5) days after written demand therefor deposit cash with
Landlord in an amount sufficient to restore the Security
deposit to the amount first deposited, and Tenant's
failure to do so shall be a material breach of this
Lease. Should Tenant faithfully perform all of the
terms, covenants and conditions of this Lease and be in
possession of the Premises at the end of the Term, the
amount of the Security Deposit shall be repaid by
Landlord to Tenant at the end of the Term.
20.
UNDERLYING MORTGAGES
20.1 Subordination. This Lease and the term and estate hereby
granted are and shall be subject to subordinate to the
lien of each mortgage which may now or at any time
hereafter affect Landlord's interest in the Project, (an
"underlying Mortgage") at the option of the Landlord or
Landlord's Mortgagee, regardless of the interest rate,
the terms or repayment, the use of the proceeds or any
other provision of any such mortgage. Each holder of
each Underlying Mortgage shall have the right,
exercisable at such holders' sole option at any time, to
cause any of the Underlying Mortgages which such holder
owns to be and become subordinate and inferior to the
lien and charge of this Lease by delivering Notice of
such exercise to Tenant. Tenant shall from time to time
execute and deliver such instruments as Landlord or the
holder of any Underlying Mortgage, may reasonably
request to confirm the status of this Lease as provided
in this Section 20.
20.2 Attornment to Mortgagee. Tenant confirms that if by
reason of a default under any Underlying Mortgage the
holder of such Underlying Mortgage or its successor or
assignee in interest becomes the Landlord hereunder,
Tenant shall attorn to, and shall recognize such holder
as Tenant's Landlord under this Lease. Tenant shall
execute and deliver, at any time and from time to time,
upon request of Landlord or of the holder of any
Underlying Mortgage, an instrument which may be
reasonably necessary or appropriate to evidence such
attornment. Tenant waives the provisions of any statute
or rule of law now or hereafter in effect which may give
or purpose to give Tenant any right or election to
terminate this Lease or to surrender possession of the
Premises in the event any proceeding is brought by the
holder of the Underlying Mortgage to acquire Landlord's
interest hereunder.
20.3 Landlord's Default. In the event of any act or
omission by Landlord which pursuant to this Lease or by
law would give Tenant
<PAGE>
the right to terminate this Lease, Tenant shall not exercise
such right unless or until (a)
it has given written Notice of such act or omission to
the holder of each Underlying Mortgage who has
previously given Tenant written Notice of the existence
of such Underlying Mortgage and (b) a reasonable period
of time for remedying such act or omission shall have
elapsed following the giving of such Notice.
20.4 Non-Disturbance. Notwithstanding anything
contained in this Section, as a condition to the
attornment of subordination obligations set forth in
this Section, this Lease and the leasehold estate hereby
created shall not be extinguished or terminated or the
possession or the right of Tenant (including the rights
with respect to enjoyment and removal of Tenant's
property) be disturbed so long as this Lease shall be in
force and no material default by Tenant exists and the
Underlying Mortgagee shall enter into a non-disturbance
and attornment agreement at the request of Tenant in
form and substance reasonably acceptable to Tenant,
Landlord and such Underlying Mortgagee.
20.5 Estoppel Certificates. Tenant shall promptly upon
request of Landlord, delivery to Landlord for the holder
of the Underlying Mortgage an Estoppel Certificate.
21.
PARKING PROVISIONS
21.1 Unassigned Parking. Tenants at the JOHN WAYNE
EXECUTIVE GUILD have the right to the use of four (4)
parking spaces per 1,000 sq. ft. of rentable space.
Tenant shall have the right to use nineteen (19)
unassigned automobile parking spaces located on the
uncovered surface parking area for which there shall be
no monthly charge.
21.2 Landlord Not To Be Liable. Tenant, its agents,
employees, customers, business invitees, and all persons
using the drives and parking areas do so at their own
risk and Landlord shall not be responsible for, or in
any way have any obligation or liability for, any
damage, loss, theft, or injury to any vehicle or other
equipment, any contents thereof or any other personal
property or for the death or injury to any person while
located in or entering or exiting any portion of the
drives and parking area. Landlord shall have the right
at any time to change the arrangement or location of the
assigned or unassigned spaces without incurring any
liability to Tenant or entitling Tenant to any abatement
of any parking fee.
22.
HAZARDOUS MATERIALS
22.1 Landlord's Representation and Indemnity as to Hazardous
Materials. Landlord represents and warrants that no
Hazardous Materials are present on or affect the
Premises or the Project, and Landlord agrees to
indemnify and hold Tenant harmless for costs of any
monitoring, testing, removal cleanup or compliance with
the laws of any federal, state or local government
having jurisdiction over Hazardous Materials which
Tenant may cause or permit to be present, discharged,
stored or disposed on the Premises during the Term.
22.3 Freon. Tenant shall not install any freon-containing
systems or equipment, including, but not limited to,
refrigerators, freezers, supplemental HVAC systems or
self-contained air conditioners.
22.4 Hazardous Materials Defined. "Hazardous Materials", for
purposes of this Section 22, means any substance defined
as "hazardous substances", "hazardous materials",
"hazardous waste", "toxic substances", or related terms
by the California Health and Safety Code, or applicable
Federal law from time to time.
<PAGE>
23.
RELOCATION; PROJECT NAME
23.1 Relocation. Landlord shall have the right, at any
time upon giving Tenant thirty (30) days' notice in
writing, to substitute for the Premises substantially
similar space in the Project. Substantially similar
space shall mean space that is approximately the same
size, and has substantially the same facilities.
Landlord will, as Landlord's sole cost and expense
(including the cost of relocating telephone service and
the reasonable cost of new stationary, should the Tenant
be relocated to another building or floor), move Tenant
to such substituted space. *The parties hereto agree
that, in such event, this Lease shall remain in full
force and effect and be deemed applicable to such space
designated by Landlord and such held space shall
thereafter be the Premises. Should Tenant refuse to
permit Landlord to Move Tenant to such new space at the
end of the thirty (30) day period, Landlord shall have
the right to terminate this Lease effective sixty (60)
days from the date of the original notice from Landlord.
Once Landlord gives Tenant the 30-day notice of intent
to relocate, Tenant may terminate the lease by given
written notice to the Landlord effective either at the
end of the 30-day or 60-day period after the date of the
notice of intent to relocate.
23.2 Project Name. Landlord shall have the right to name the
Project and to change the name or designation by which
the Project is commonly known at any time. Tenant shall
not use the name of the Project for any purpose other
than as the address of the business conducted by Tenant
in the Premises. Landlord shall provide a building
directory in a conspicuous place in the Project.
Landlord shall also provide one suite identification
sign adjacent to the main entry door of the Premises in
Landlord's standard size and form. Tenant shall pay
Landlord's reasonable charges for the initial
installation of the suite identification sign and for
any subsequent changes to the directory listing and
identification sign at Tenant's request.
24.
NOTICES
Any notice, demand or request provided for or permitted
to be given pursuant to this Lease must be in writing
and shall be properly given and effective when
personally served, when sent by prepaid Western Union
telegram or air courier or when deposited in an official
depository under the regular care and custody of the
United States Mail, addressed as specified below, sent
by registered or certified mail, return receipt
requested, with postage prepaid. The time period in
which a response of any such mailed Notice must be
given, however, shall commence to run from the date of
receipt on the return receipt by the Notice by the
addressee thereof. Rejection or other refusal to accept
or the inability to deliver because of changes in
address of which no notice was given shall be deemed to
be receipt of the notice. Notices shall be addressed as
follows:
To Landlord: Southern California Sunbelt
Developers, Inc. - JWA
3230 East Imperial Hwy., Suite 200
Brea, California 92821
With a copy to the leasing agent on the Premises:
Leasing Office
John Wayne Executive Guild
3151 Airway Avenue
Costa Mesa, California 92626
Attention: Property Manager
<PAGE>
To the Tenant at the Premises or to:
_______________________________
_______________________________
Notice of change of address shall be given in the same
manner as prescribed herein for other Notices.
25.
BROKER'S OR AGENT'S COMMISSION
There are no claims for brokerage commission or finder's
fees in connection with the execution of this Lease,
except as listed below, and Tenant agrees to indemnify
Landlord and hold Landlord harmless against all
liabilities and costs arising from such claims,
including without limitation attorneys' fees in
connection therewith.
BROKER/AGENT: Hamilton Cove Realty, Inc.
The parties hereby acknowledge that HAMILTON COVE
REALTY, INC., a California Corporation ("HCR"), DAN W.
BAER, a California licensed real estate broker, has a
valid listing agreement for the subject property at the
JOHN WAYNE EXECUTIVE GUILD, and in the event a lease is
consummated with Landlord and BROKER/AGENT'S client, the
commissions will be divided Fifty-Fifty (50%/50%)
between HCR and BROKER/AGENT.
If there is more than one Tenant, the obligations
hereunder imposed upon Tenant shall be joint and several.
26.
GENERAL
26.1 Equal Employment Opportunity. The provisions of
Executive Order 11246 (as amended) of the President of
the United States on Equal employment opportunities and
the rules and regulations issued pursuant thereto are
incorporated in this lease, and Landlord represents that
it will comply with those provisions unless exempted.
26.2 Place of Performance - Governing Law. Tenant shall
perform all covenants, conditions and agreements
contained herein, including, but not limited to payment
of Rent, in Orange County, California. Any suit arising
from or relating to this Lease shall be brought in
Orange County, California. This Lease shall be governed
by and construed in accordance with the laws of the
State of California.
26.3 Severability. If any clause or provision of this Lease
is illegal, invalid or unenforceable under present or
future laws effective during the Term, then, and in that
event, the parties intend that the remainder of this
Lease shall not be affected thereby, and the parties
also intend that in lieu of each clause or provision of
this Lease that is illegal, invalid or unenforceable,
there is added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid,
or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
26.4 Inurement. Subject to the provisions of this Lease
governing assignments and transfers by Landlord and
Tenant, respectively, the terms, provisions, covenants,
and conditions contained in this Lease shall apply to,
insure to the benefit of, and be binding upon the
parties hereto, and upon their respective successors in
<PAGE>
interest and legal representatives.
26.5 Integration. This Lease and the Exhibits thereto
constitute the entire understanding between Landlord and
Tenant. All previous conversations, memorandums, and
writings pertaining to leasing of the Premises not
incorporated or referenced in this Lease are suspended
hereby. Any modification hereto must be made by a
separate written instrument. No officer, employee or
representative of Landlord, of Landlord's Manager or of
Tenant has the authority to make any representation or
promise not already contained herein or made pursuant to
the within provisions, and Landlord and Tenant expressly
agree that by executing this Agreement, and any other
document required herein or caused to be executed hereby
that it is not doing so in reliance upon any
representation or promise which is not set forth herein.
26.6 No Waiver. No delay or failure of Landlord in
exercising any right, privilege or remedy hereunder or
any single or partial exercise of any right, power or
privilege shall preclude other or future exercise
thereof or the exercise of any other right, power or
privilege. Any waiver, permission or consent of any
kind by Landlord must be in writing and shall be
effective only to the extent provided herein.
26.7 Attorneys' Fees and Arbitration. If any litigation,
arbitration or other legal proceeding is commenced
between any of the parties or their personal
representatives concerning any provision of this lease,
or the rights and duties of any party in relation
thereto, the prevailing party in such litigation or
arbitration shall be entitled, in addition to such other
relief as may be granted, to recover their costs and
reasonable attorney's fees and expenses, as costs, in
such litigation or arbitration. If any judgment results
from such litigation or arbitration, then the prevailing
party shall be entitled to recover reasonable attorney's
fees, expenses and costs of enforcing such judgment and
this post-judgment right to attorney's fees is intended
to be severable from the other provisions of this
Agreement, to survive any judgment contained hereunder,
and it is not deemed merged into the judgment. As used
herein, "reasonable attorney's fees", "expenses", and
"costs" shall mean the full and actual costs of any
legal services actually performed, calculated on the
basis of the usual fees charged and expenses and costs
incurred by the attorney performing such services.
26.8 Captions. Captions used in this Lease are for ease
of reference only and do not define or limit provisions.
26.9 Authority. If Tenant is a corporation, partnership,
trust, association or other entity, Tenant and each
person executing this Lease on behalf of Tenant hereby
covenant and warrant that (a) Tenant is duly
incorporated or otherwise established or formed and
validly existing under the laws of its state of
incorporation, establishment or formation, (b) Tenant is
duly qualified to do business in California, (c) Tenant
has full corporate, partnership, trust, association or
other appropriate power and authority to enter into this
Lease and to perform all Tenant's obligations hereunder,
and (d) each person (and all of the persons is more than
one signs) signing this Lease on behalf of Tenant is
duly and validly authorized to do so.
26.10 Submission of Lease. The submission of this Lease to
Tenant for examination or execution does not constitute
a reservation of or option on the Premises or an
agreement to lease the Premises or any other space.
This Lease shall become effective as a lease and
Landlord shall become obligated to rent space to Tenant
only upon the execution and delivery of this Lease by
Landlord and Tenant.
<PAGE>
26.11 Exhibits. The following Exhibits are part of this
lease.
A Project Rules and Regulations
B Condominium / Sublease Rider
C Site Plan of Project
D Floor Plan of Premises
E Tenant Improvements
Landlord:
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS,
INC.-JWA, a California corporation
By:_/s/ Dan W. Baer_____________ ____6/1/98________
DAN W. BAER, President Date
Tenant:
GEN-TEL COMMUNICATIONS ("GTC")
By:___/s/ Paul Sandhu____________________ ___5/22/98________
PAUL SANDHU, President & CEO Date
____/s/ Paul Sandhu______________________ ____5/22/98________
PAUL SANDHU Date
_____/s/ Eric Clemons____________________ ____5/22/98_________
ERIC CLEMONS Date
<PAGE>
EXHIBIT "A"
PROJECT RULES AND REGULATIONS
EXHIBIT "A" to that Lease dated May 21, 1998 between SOUTHERN
CALIFORNIA SUNBELT DEVELOPERS, INC. ("Landlord"), and GEN-TEL
COMMUNICATIONS ("GTC"); ERIC CLEMONS; AND PAUL SANDHU, JOINTLY
AND SEVERALLY ("Tenant") for the premises at 3151 Airway
Avenue, Suite P-3, Costa Mesa, California 92626, consisting of
approximately 2,712 rentable square feet.
1) Tenant will refer all contractors, contractors'
representatives and installation technicians rendering
any service for Tenant to Landlord for Landlord's
supervision and/or approval before performance of any
such contractual services. This shall apply to all work
performed in the Project, including but not limited to
installation of telephones, telegraph equipment,
electrical devices and attachments, and installations of
any and every nature affecting floors, walls, woodwork,
trim, windows, ceilings, equipment, or any other
physical portion of the Project. No such work shall be
done by Tenant without Landlord's written approval first
had and obtained.
2) The work of the janitor 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, book cases, map cases, etc.,
necessary to prevent unreasonable hardship to Landlord
in discharging its obligations regarding cleaning service.
3) Movement in or out of the Project of furniture or office
equipment, or dispatch or receipt by Tenant of any
merchandise or materials which requires the use of
elevators or stairways, or movements through the Project
entrances or lobby shall be restricted to the hours
designated by Landlord from time to time. All such
movement shall be directed by Landlord and in a manner
to be agreed upon between Tenant and Landlord by
prearrangement before performance. Such prearrangement
initiated by Tenant shall include determination by
Landlord and be subject to its decision and control of
the time, method, and routing of movement. Limitations
are imposed by safety or other concerns which may
prohibit any articles, equipment or any other item from
being brought into the Project. Tenant expressly
assumes all risk of loss or damage to any and all
articles so moved, as well as injury to any person or
persons or the public engaged or not engaged in such
movement, including, without limitations, equipment,
property, and personnel of Landlord if damaged or
injured as a result of any acts done or undertaken in
connection with carrying out this service for Tenant
from the time of entering property to completion of the
work; and Landlord shall not be liable for the act or
acts of any person or persons so engaged in, or any
damage or loss to any property of persons resulting
directly or indirectly from any act done or undertaken
in connection with such service performed by or for Tenant.
4) No sign or signs will be allowed in any form on the
exterior of the Project or on any window or windows
inside or outside of the Project and so sign or signs,
except in uniform location and uniform style fixed by
Landlord, will be permitted in the public corridors or
on corridor doors or entrances of Tenant's space. All
"special" or large signs will be contracted for by
Landlord for Tenant at the rate fixed by Landlord from
time to time, and Tenant
will be billed and pay for such service accordingly.
Written consent from Landlord is an absolute
prerequisite for any such sign or signs Tenant may be so
permitted to use.
5) Tenant shall not operate a wholesale or retail
establishment such
<PAGE>
as food, drink, clothing, etc.,
without the written consent of Landlord first had and
obtained.
6) Tenant shall not place, install or operate on the
Premises or in any part of the Project, any engine or
machinery, or conduct mechanical operations, or place or
use in or about the Premises any explosives, gasoline,
kerosene, oil, acids, caustics, or any other flammable,
explosive or hazardous material without the written
consent of Landlord first had and obtained.
7) Landlord will not be responsible for any lost or stolen
personal property, equipment, money or jewelry from
Tenant's area public rooms regardless of whether such
loss occurs when the area is locked against entry or not.
8) No birds, animals, or bicycles shall be brought into or
kept in or about the Project.
9) Landlord may permit entrance to Tenant's offices by use
of pass keys controlled by Landlord or employees,
contractors, or service personnel supervised or employed
by Landlord.
10) None of the entries, passages, doors, elevators,
elevators doors, hallways, or stairways shall be
blocked, or obstructed, nor shall any rubbish, litter,
trash or materials of any nature be placed, emptied or
thrown into these areas, nor shall such areas be used at
any time except for access or egress by Tenant, Tenant's
agents, employees or invitees.
11) Any plant brought into the Project shall be subject to
inspection by Landlord's maintenance personnel. Any
plants found to be carrying disease or pests shall be
removed from the Project immediately upon request by the
Landlord.
12) No Tenant shall at any time occupy any part of the
Project as sleeping or lodging quarters.
13) The water closets and other water fixtures shall not be
used for any purpose other than those for which they
were constructed. No person shall waste water by
interfering with the faucets or otherwise.
14) No person shall disturb the occupants of the Project by
the use of any musical instruments, the making of
raucous noises, or other unreasonable use.
15) Nothing shall be thrown out of the windows of the
Project, or down the stairways or other passages.
16) Tenant shall not store any materials, equipment,
products, etc, outside the premises as shown on the
plats attached hereto.
17) Tenant shall comply with all local and federal codes and
ordinances. In the event of fire or code problems,
Tenant shall comply with said requirements.
18) Tenant and its agents, employees and invitees shall
observe and comply with the driving and parking signs
and markers on the Project grounds and surrounding areas.
19) Directories will be placed by the Landlord at
Landlords's expense, in the Project and no other
directories shall be permitted.
20) No signs, draperies, shutters, window coverings,
decorations, hangings or obstructions of any type shall
be placed on any skylights or any doors or windows which
are visible from outside the premises without prior
written consent of the Landlord.
<PAGE>
21) "Project Operating Hours" shall be from 7:00 a.m. to
5:30 p.m. Monday through Friday, and 8:00 a.m. to 12:00
p.m. on Saturday, but
not on Sundays, New Year's Day, Memorial Day, July 4th,
Labor Day, thanksgiving, Christmas or other legal
holidays. Landlord reserves the right to restrict entry
to the Project by unidentified persons during the hours
5:30 p.m. to 7:00 a.m., all hours Saturdays after 12:00
p.m., and all hours Sundays and legal holidays.
22) The roof is a restricted and unsafe area for
unauthorized persons. Only those specifically
authorized by Project management may enter the roof area.
23) Only those with specific authority from Project
management may enter the elevator, electrical, machine
and janitor rooms.
24) Tenant will be furnished, free of charge, two keys to
each of the following: (a) All door locks to each
Tenant premises. Extra keys may be furnished at a
reasonable charge. Tenant may not (a) copy entrance
keys; (b) Alter lock or install additional locks in any
door, unless agreed to in writing by Project management.
In such a case, work and materials will be at Tenant's
expense and Landlord will be furnished a key to the
lock. All keys furnished Tenants will be returned to
Landlord upon termination of the lease.
25) Only trucks or similar material handling equipment with
soft rubber wheels and side guards will be allowed in
the Project. No other vehicle of any kind will be
brought in by the Tenants or kept in its premises.
26) Cooking by any method other than a microwave is
prohibited. Brewing coffee, tea, hot chocolate and
similar beverages is provided: (a) Underwriter's
laboratory approved equipment are used for brewing
beverages; (b) Applicable Federal, State and City laws,
codes, ordinances, rules and regulations are followed.
27) Only telephone company technicians authorized by Project
management may enter and work in any telephone room.
Tenants who hire a telephone company to work in the
Project are responsible for notifying the company to
instruct their technicians to obtain authority from
Project management to enter telephone rooms and other
parts of the Project.
28) Packages, messages, mail, etc., must be delivered direct
to Tenant suites. Project management will not receive
or accept them for Tenants.
29) Tenants shall store their trash and garbage in their
premises in receptacles which facilitate disposal
methods in the City of Costa Mesa. Boxes, receptacles,
etc., which are used in moving Tenants in the Project
will be removed from the Project by the moving company
or Tenant will absorb the cost of removal. Disposal
cost of excessive trash or garbage beyond the normal and
ordinary garbage of an office facility will be the cost
of the Tenant.
30) Tenant shall not place a load upon any floor of the
Premises exceeding 50 lbs. of live load per square foot.
Tenant will pay the fees of the structural engineer of
the Project if structural engineering advice is
necessary in planning the positioning of heavy loads.
Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in
settings sufficient to absorb and prevent vibration,
noise and annoyance. Safes and other heavy equipment,
the weight of which will not constitute a hazard or
damage the Project or its equipment, shall be moved
into, from or about the Project only during such hours
and in such manner as shall be prescribed by Landlord.
31) The Landlord reserves the right to rescind any of these
rules and
<PAGE>
make such other and further rules and
regulations as in the judgment of Landlord shall from
time to time be needed for safety, protection, care and
good order therein, and in protection and
comfort of its Tenants, their agents, employees and
invitees, including, but not limited to rules and
regulations regarding hours of access to the Project,
which rules when made and notice thereof given to a
Tenant shall be binding upon him in like manner as if
originally herein prescribed. In the event of any
conflict, inconsistency or other difference between the
terms and provisions of these rules and regulations and
any lease now or hereafter in effect between Landlord
and any Tenant in the Project, Landlord shall have the
right to rely on the term or provision in either such
lease or such Rules and Regulations which is most
restrictive on such Tenant and most favorable to Landlord.
32) Landlord desires to maintain high standards of
environment, comfort, and convenience for its Tenants.
It will be appreciated if any undesirable conditions or
lack or courtesy or attention by its employees is
reported directly to Landlord.
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<PAGE>
EXHIBIT "B"
CONDOMINIUM / SUBLEASE RIDER
EXHIBIT "B" to that Lease dated May 21, 1998 between SOUTHERN
CALIFORNIA SUNBELT DEVELOPERS, INC. ("Landlord"), and GEN-TEL
COMMUNICATIONS ("GTC"); ERIC CLEMONS; AND PAUL SANDHU, JOINTLY
AND SEVERALLY ("Tenant") for the premises at 3151 Airway
Avenue, Suite P-3, Costa Mesa, California 92626, consisting of
approximately 2,712 rentable square feet.
RECITALS
A. Premises is a condominium which is a part of that
certain condominium project known as Executive Guild -
Costa Mesa Business Park - Phase II (the "Project").
B. The real property upon which the Project is constructed
was owned by The Irvine Company, a Michigan Corporation,
and is now assigned to the Corp. of the Presiding Bishop
of the Latter Day Saints and had been leased to Shearson
American Express Mortgage Corporation ("Shearson") and
is now assigned to GE Capital under that certain
unrecorded Ground Lease, dated March 1, 1981, between
the Irvine Company, as lessor and Shearson as lessee; a
Memorandum of which was recorded on April 16, 1981, in
Book 14022, Pages 858 to 860 of Official Records of
Orange County, California (said Ground Lease and the
recorded Memorandum are hereinafter collectively
referred to as the "Ground Lease"). Landlord is a
subtenant of GE Capital Corporation as assignee under
that certain Sublease dated October 1984 (the "Shearson
Lease").
C. There has been recorded upon the Project that certain
Declaration of Restrictions, which was recorded on June
8, 1981, in Book 14091, Pages 437, et seq., of Official
Records of Orange County, California ("the Declaration
of Restrictions"); and the Declaration of Annexation,
which was recorded on June 17, 1983, as Instrument No.
83-024927 of Official Records of said County, and
Amendment there to recorded on February 14, 1983, as
Instrument No. 83-070391 of Official Records of said
County (collectively the "Declaration of Annexation, as
amended").
Accordingly, Landlord and Tenant agree as follows:
1. This Lease is a sublease and is subject and
subordinate to the terms and provisions of the
Ground Lease, the Shearson Lease, the
Declaration of Restrictions, the Declaration of
Annexation, and the Association Management
Documents. The rights of Tenant to use, occupy
and possess the Premises are subject to
Landlord's right to use, occupy, and possess the
Premises as set forth in the Ground Lease, the
Shearson Lease, the Declaration of Restrictions,
the Declaration of Annexation and the
Association Management Documents.
2. Tenant agrees to comply with all applicable
provisions of the Ground Lease, the Shearson
Lease, the Declaration of Restrictions, the
Declaration of Annexation and the Association
Management Documents. Tenants shall neither
suffer nor permit any breach of the terms and
provisions of the Ground Lease, the Shearson
Lease, the Declaration of Restrictions, the
Declaration of Annexation, or the Association
Management Documents; any breach of or default
under such terms and provisions shall represent
a material default under this lease.
3. Although care has been taken so that terms and
provisions of the Lease, and Tenant's rights
hereunder, are not in conflict under the terms
and provisions of the Ground Lease, the
<PAGE>
Shearson
Lease, the Declaration of Restrictions, the
Declaration of Annexation and/or the Association
Management Documents, to the extent that
Landlord subsequently determines that any duty
of Landlord under this lease would require acts
or omissions by Landlord which would result in a
breach of a term or provision of the Ground
Lease, the Shearson Lease, the Declaration of
Restrictions, the Declaration of Annexations
and/or Association Management Documents,
Landlord shall be excused from performance of
any duty under this lease.
4. Landlord agrees to use its best efforts to
maintain the Ground Lease and the Shearson Lease
in full force and effect during the entire Term
of this Lease; provided, however, that if the
Ground Lease or the Shearson Lease shall for any
reason whatsoever terminate prior to its entire
Term, this Lease shall concurrently terminate.
5. In the event that Landlord is in default under
the terms or provisions of the Ground Lease, the
Shearson Lease, Declaration of Restrictions,
Declaration of Annexation and/or the Association
Management Documents by reason of the existence
or non-existence of any particular term or
provision of this Lease (but not by reason of
any act or omission taken under, or in violation
of, any particular term or provision of this
Lease), then in that event Landlord and Tenant
agree that they shall execute an amendment to
this Lease to cause the deletion or addition of
such particular term or condition as may be
required under the terms of the Ground Lease;
provided, however, that Tenant may terminate
this Lease if any amendment would materially
increase the obligations of Tenant hereunder
(for such purposes and without limitation of the
materiality standard, any amendment which would
increase Tenant's cost of occupying the Premises
more than One Thousand Dollars ($1,000.00) in
any one (1) year or which would deny Tenant the
substantial use and enjoyment of the Premises
shall be deemed material.
6. The "Premises", as it pertains to this Lease,
shall include a non-exclusive right to use the
common area of the Project, such as landscaping
and driveways, in accordance with the Ground
Lease, the Shearson Lease, the Declaration of
Restrictions, the Declaration of Annexation and
the Association Management Documents.
Landlord:
SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC.-JWA
By: /s/ Dan W. Baer___________6/1/98_______________
DAN W. BAER, President
Tenant:
GEN-TEL COMMUNICATIONS ("GTC")
By: /s/ Paul Sandhu__________________ __5/22/98________
PAUL SANDHU, President & CEO Date
/s/ Paul Sandhu____________________ ___ 5/22/98_______
PAUL SANDHU Date
/s/ Eric Clemons_________________ ____5/22/98_________
ERIC CLEMONS Date
<PAGE>
EXHIBIT "E"
TENANT IMPROVEMENTS
GEN-TEL COMMUNICATIONS ("GTC"); A CALIFORNIA CORPORATION;
ERIC CLEMONS; AND PAUL SANDHU
JOINTLY AND SEVERALLY
Suite P-3
The following Tenant improvements to be provided to Tenant by
the Landlord, at Landlord's sole cost and expense.
Landlord shall paint the suite throughout; install new carpet
and carpet padding throughout; install new linoleum in the
areas specified; install new floor covering in the entry way,
such as wood grain floor tile; blinds will be installed where
none now exist.
[Diagram of Leased Premises]
<PAGE>
[Diagram of Site Plan]
EXHIBIT "C"
<PAGE>
[Diagram of Leased Premises]
EXHIBIT "D"
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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