<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COLORSMART.COM, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C> <C>
NEVADA 2750 62-17217446
(State or (Primary Standard (I.R.S. Employer
Jurisdiction of Incorporation Industrial Classification Identification
or Organization) Code Number Number)
</TABLE>
------------------------
537 MYATT DRIVE
MADISON, TENNESSEE 37115
615-612-4002
(Address and Telephone Number of Principal Executive Offices)
------------------------------
ROGER D. FINCHUM, SR.
CHIEF EXECUTIVE OFFICER
COLORSMART.COM, INC.
537 MYATT DRIVE
MADISON, TENNESSEE 37115
615-612-4002 (TELEPHONE)
615-612-4005 (FACSIMILE)
(Name, Address, And Telephone Number Of Agent For Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
GREGORY BARTKO, ESQ.
3475 LENOX ROAD
SUITE 400
ATLANTA, GEORGIA 30326
404-238-0550 (TELEPHONE)
404-238-0551 (FACSIMILE)
EDWARD H. BURNBAUM, ESQ. JAY M. KAPLOWITZ, ESQ.
LYNCH ROWIN NOVACK BURNBAUM & CRYSTAL, P.C. ARTHUR MARCUS, ESQ.
300 EAST 42(ND) STREET GERSTEN, SAVAGE & KAPLOWITZ, LLP
NEW YORK, NEW YORK 10017 101 EAST 52(ND) STREET
(212) 682-4001 (TELEPHONE) NEW YORK, NEW YORK 10022
(212) 986-2907 (FACSIMILE) (212) 752-9700 (TELEPHONE)
(212) 980-5192 (FACSIMILE)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE MAXIMUM
BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Shares of common stock, par value $.001 per
share (2).................................. 2,300,000 $12.00 $27,600,000 $7,673
Representative's warrants (4)................ 200,000 $ .001 $ 200 --
Common stock issuable upon exercise of the
representative's warrants (3).............. 200,000 $19.80 $ 3,960,000 $1,101
Total........................................ 2,700,000 -- 31,560,200 $8,774
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act.
(2) Includes 300,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(3) Pursuant to Rule 416, we are registering additional securities as may become
issuable pursuant to the anti-dilution provisions of the representative's
warrants.
(4) No registration fee is required pursuant to Rule 457 of the Securities Act.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 6, 1999
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
[LOGO]
COLORSMART.COM, INC.
2,000,000 SHARES
COMMON STOCK
This is an initial public offering of 2,000,000 shares of
ColorSmart.com, Inc. Before this offering, there has been no public market for
any of our securities. We anticipate that the initial public offering price
range will be $10.00 to $12.00 per share. We intend to make application to quote
our common stock on the NASDAQ National Market System under the symbol "COLR."
These are speculative securities and investors will experience significant
dilution. Investing in the shares involves certain risks. See "Risk Factors"
beginning on page 7.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
- - Price to the public...................................... $12.00 $24,000,000
- - Underwriting discounts and commissions................... $ 1.08 $ 2,160,000
- - Proceeds, before expenses, to ColorSmart................. $10.92 $21,840,000
</TABLE>
The underwriters may, under certain circumstances, purchase an additional
300,000 shares from us at the initial public offering price less the
underwriting discount to cover any over-allotments.
Delivery of the securities offered hereby will be made on or about
, 2000, in New York, New York. The underwriters are offering the
shares on a firm commitment basis.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities, in any state where the offer and sale is not permitted.
NUTMEG SECURITIES, LTD.
Prospectus Dated December 6, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Prospectus Summary.......................................... 1
The Offering................................................ 4
Summary Financial Data...................................... 5
Risk Factors................................................ 7
Cautionary Note Regarding Forward-Looking Statements........ 10
Use Of Proceeds............................................. 11
Dividend Policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Selected Consolidated Financial Data........................ 15
Management's Discussion And Analysis Of Financial Condition
And Results Of
Operations................................................ 17
Business.................................................... 22
Management.................................................. 30
Certain Transactions........................................ 36
Principal Stockholders...................................... 36
Description Of Securities................................... 37
Shares Eligible For Future Sale............................. 39
Underwriting................................................ 40
Legal Matters............................................... 42
Experts..................................................... 42
ColorSmart.com, Inc. Index To Financial Statements.......... F-1
1199 MAC, Inc., d/b/a Magnum Digital Services Table of
Contents to Financial Statements.......................... F-15
Advertising That Works, Inc. Table of Contents to Financial
Statements................................................ F-25
Display Arts, Inc. Table of Contents to Financial
Statements................................................ F-34
ColorSmart.com, Inc. Consolidated Pro Forma Financial
Statements................................................ F-67
</TABLE>
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
INVESTORS SHOULD CONSIDER BEFORE INVESTING IN OUR SECURITIES. INVESTORS SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE FINANCIAL STATEMENTS THAT
ARE A PART OF THIS PROSPECTUS.
OUR BUSINESS
We are positioning ourselves to become a leading consolidator in the digital
graphics industry and we believe we will be one of the largest digital graphics
companies in the Southeastern United States. Our comprehensive electronic
commerce applications allow businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure web site. These products range from full motion video
for the Internet, catalogues on CD-ROM, 100-foot printed billboards, trade show
graphics and retail displays. Each business can receive updated price quotes,
make modifications, authorize production, and generally manage their printing
and multimedia requirements, from any Windows-based, Internet-enabled computer.
Our customers generally should realize a decrease in the length of the
production cycle from price quote to the delivery of their order. We believe our
applications of leading edge Internet and digital technology enables us to be
price-competitive while providing customers with the highest level of security,
selection, speed and support.
We have entered into agreements to acquire the stock of five companies and
the assets of five companies in the digital printing or multimedia businesses.
One of these companies specializes in the design and production of multimedia
advertising, marketing and presentation applications for delivery over the
Internet and CD-ROM. The others are commercial digital printing companies
located in the United States and the Republic of South Africa.
Commercial digital graphics involves the production of a wide range of
marketing, advertising and media imaging and digital printing using cutting-edge
software and digital printing equipment. It is the digitizing of the input that
reduces production time, costs and errors and provides the flexibility to handle
small, specialized jobs as easily as producing simple, mass-produced jobs.
Digital printing and imaging customers include companies of all sizes and in all
industries where full-color imaging and production are required. Our digital
printing technologies enable us to receive and deliver customer services most
effectively through our Internet applications.
OUR INDUSTRY
THE GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet has emerged as a revolutionary force in the way businesses
operate, having evolved from a research medium to a venue for consumer-oriented
commerce. Forrester Research estimates that Internet business-to-business
commerce reached a record $43 billion in 1998. Furthermore, they predict that
business-to-business electronic commerce will grow to a staggering $1.3 trillion
by 2003 and will represent more than 90% of the total e-commerce market.
Advances in computer technology and telecommunications have enabled
businesses to link directly to their suppliers, providing shortened lead times
for purchases and better decision-making controls. The advent of the Internet
and its commercial applications has accelerated the trend of increased
efficiency related to business purchases with a number of additional benefits,
such as:
- Global reach for broader selection of products and services;
- Reduced costs and greater economies of scale;
- Ability to access suppliers from any computer with Internet access; and
- The technology to customize customer interfaces, creating greater
convenience and ease of use.
1
<PAGE>
THE PRINTING INDUSTRY
We believe digital technology in the printing and graphic design industries
is being under utilized. Most digital print operations are small and lack the
requisite capital, equipment and technical expertise to deliver the full range
of benefits offered by digital technology. IT Strategies, an industry
consultant, projects more than $18 billion in total worldwide revenue from all
digital printing services and products by 2001. We believe this growth will be
demand-driven, predicated upon continued advancements in digital technology. As
a prospective leader in the digital graphics industry, we expect to be well
positioned to satisfy this demand.
E-commerce via the Internet offers a tremendous opportunity. The Internet is
an exceptional medium for the delivery of digital graphics in a wide variety of
formats. The synergy between digital technology and the Internet should continue
to transform, and we believe, replace an ever-increasing portion of conventional
printing services and products.
OUR STRATEGY
Our objective is to be the leading Internet-based business-to-business
digital graphics and multimedia company in the world. The key elements of our
business strategy include:
- Focusing primarily on the Internet business-to-business market for digital
printing services, expected to grow to approximately $18 billion by 2001,
up from approximately $5 billion in 1998;
- Continuing to upgrade and enhance the front-end of our e-commerce
presence, while acquiring carefully targeted commercial printing companies
in this highly fragmented industry to support the back-end;
- Utilizing the most current digital graphics and multimedia technology
available to maintain a technological edge over our competition;
- Expanding beyond traditional printing products and services into
multimedia video and audio business-to-business applications primarily
tailored for the Internet and CD-ROM;
- Making the process of creating, approving, ordering and fulfilling
printing jobs more efficient by allowing customers to handle much of this
process from their desktops;
- Tailoring end-to-end business solutions to our customer's needs by
integrating design, production, and distribution services.
ACQUISITIONS
We have entered into agreements to purchase the stock or assets of companies
that have operating histories ranging from startup to 11 years with strong,
experienced management teams, solid customer bases and reputations of providing
the highest levels of quality service and products. These companies further our
goal of providing a full range of digital graphic products and services to other
geographic areas and increasing our market share in the Southeastern United
States and the Republic of South Africa. We will continue to analyze future
acquisitions in the United States, Europe and South Africa. We have entered into
agreements with the following companies:
- Magnum Digital Services specializes in a process known as dye sublimation,
in which digital images are applied to a variety of mediums ranging from
paper to stone and just about any medium in between. The delicate
sublimation process heats the ink until it becomes a gas, at which time
the image is transferred in to, rather than on to, the medium. The company
is located in Coconut Creek, Florida and has been operating for 5 years.
2
<PAGE>
- Advertising That Works is a wholesaler, fabricator, and finisher of
banners and screen printed posters. This company expects to be 100%
digital by the third quarter of 2000. The company is located in Atlanta,
Georgia and has been operating for 10 years.
- Stonehouse Graphics is quickly becoming the largest billboard and backlit
fabricator in the Republic of South Africa. The company accounts for 40%
of the billboard printing done in southern Africa. The company, which is
100% digital, is located in Johannesburg, South Africa and has been
operating for 11 years.
- Display Arts specializes in trade show graphics and trade show display
booths. They are the exclusive regional distributor for Nimlock products,
a leading display manufacturing company. The company has locations in
Nashville, Memphis, and Knoxville, Tennessee and has been operating for
10 years.
- Top Copy specializes in copying services and offset print services. They
cater to small business as well as the retail trade. The company is
located in Cape Town, South Africa and has been operating for three years.
We will be acquiring the assets of Top Copy.
- Virtual Colour Group is one of the leaders in digital services technology
in South Africa. They are a fully digital shop offering both design and
print services for brochures, catalogs, and magazines on an international
basis. The company is located in Cape Town, South Africa and has been
operating for four years. We will be acquiring the assets of four
companies comprising the Virtual Color Group.
- Jamberry Lake Digital Media specializes in producing digital products and
services for use on the Internet, as well as traditional marketing and
promotional campaigns, revolving around CD- and mini CD-ROM. They achieve
this by providing full motion video products and services including real
estate tours, digital catalogues, and e-mail kiosks. The company is
located in Summit, New Jersey and has been operating since August 1999.
A partial list of the clients of the companies listed above include: ABSA
South Africa, Allstate, Autozone, Bank of America, Bell South, Carnival Cruise
Lines, Coca-Cola, Columbia Healthcare, Federal Express, First Union Bank, Fruit
of the Loom, Hewlett Packard, IBM, Ingram Book, McDonalds, MCI WorldCom,
Motorola, Nations Bank, Nissan Motor Corporation, Phillip Morris, RCA Music,
Saturn Corporation, Siemens, South African Breweries, Standard Bank, United
Parcel Service, U.S. Post Office, Visa, Wachovia, and Willis Corroon.
CORPORATE BACKGROUND
We were incorporated on July 18, 1997, as ColorSmart, Inc., in Nevada. On
December 29, 1998, we amended our certificate of incorporation to change our
name to ColorSmart.com, Inc. We have conducted our business under that name
since the amendment. Our executive office is located at 537 Myatt Drive,
Madison, Tennessee. Our telephone number is (615) 612-4002. Our facsimile number
is (615) 612-4005. Our web site address is www.ColorSmart.com. In this
prospectus, "ColorSmart," "we", "us" and "our" refer to ColorSmart.com, Inc.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities that we are offering.................... 2,000,000 shares of our common stock.
Common stock outstanding before this offering...... 4,005,639 shares.
Common stock to be outstanding after this
offering......................................... 6,005,639 shares.
Preferred stock outstanding before this offering... 33,610 shares.
Preferred stock outstanding after the offering..... 33,610 shares.
Use of proceeds.................................... Towards the cash portion of the purchase price
for the acquisitions described above; new
equipment purchases; implementation of a
marketing program; expansion of our business
through the hiring of additional personnel; and,
general corporate purposes.
Proposed NASDAQ National Market System symbols
Common stock..................................... "COLR"
</TABLE>
Unless stated otherwise, all information in this prospectus assumes:
- an initial public offering price of $12.00 per share; and excludes
- the exercise of the underwriter's over-allotment option to purchase
300,000 shares; and
- the exercise of the 200,000 common stock purchase warrants granted
to Nutmeg Securities, Ltd., the representative of the underwriters,
to purchase 200,000 shares of our common stock.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to us and the securities offered by this prospectus,
reference is made to the registration statement and the exhibits and schedules
thereto. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement are
not necessarily complete and are qualified in their entirety by reference to the
exhibits for a complete statement of their terms and conditions. The
registration statement, including all amendments, exhibits and schedules
thereto, may be inspected without charge at the offices of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street NW, Washington, D.C.
20549 and the Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street
NW, Washington, DC. 20549. The Securities and Exchange Commission also maintains
a Web site (http://www.sec.gov) through which the registration statement and
other information can be retrieved.
We intend to apply for listing of our securities on the Nasdaq National
Market System, and upon listing, investors can obtain information about us on
its Web site, (http://www.Nasdaqamex.com.)
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and
intend to furnish our stockholders annual reports containing financial
statements audited by our independent accountants and to make available
quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.
4
<PAGE>
SUMMARY FINANCIAL DATA
The following table summarizes the financial data of our business for the
years ended November 30, 1997 and 1998, and for the nine months ended
August 31, 1998 and 1999. The financial data summarized below on a proforma
basis assumes the consummation of all seven of the acquisitions we have pending
at the date of this prospectus on the terms included in the acquisition
agreements. This information is qualified by reference to, and should be read
together with, the historical financial data for the years ended November 30,
1997 and 1998 and should be read in conjunction with our audited financial
statements included elsewhere in this prospectus. The historical financial data
as of August 31, 1999 and for the nine months ended August 31, 1998 and 1999 are
derived from and should be read in conjunction with our unaudited financial
statements included elsewhere in this prospectus. The data presented below
should also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
accompanying notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------- NINE MONTHS NINE MONTHS
NOVEMBER NOVEMBER AUGUST 31, AUGUST 31,
30, 1997 30, 1998 1998 1999
---------- ---------- ------------ ------------
UNAUDITED
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................ $ 513 $ 127,191 $ 98,856 $ 57,351
Cost of revenues........................ -- 63,886 48,997 19,927
Operating costs and expenses............ 87,157 370,304 253,595 388,459
---------- ---------- ---------- ----------
(Loss) income from operations........... (86,644) (306,999) (203,736) (351,035)
Interest expense (net of interest
income)............................... -- 920 (378) 9,960
---------- ---------- ---------- ----------
Net loss................................ $ (86,644) $(307,919) $ (203,358) $ (360,995)
---------- ---------- ---------- ----------
Basic and diluted earnings (loss) per
share................................. $ (.03) $ (.10) $ (.07) $ (.10)
Shares used in computing basic and
diluted earnings per share............ 2,492,288 2,956,787 2,956,787 3,455,023
</TABLE>
The following table includes a summary of our balance sheet at August 31,
1999:
- on an actual basis;
- on a pro forma basis giving effect to the consummation of all ten of
the acquisitions we have pending at the date of this prospectus on the
terms included in the acquisition agreements; the issuance of 33,610
shares of our preferred stock and 33,610 common stock purchase warrants
exercisable to purchase 33,610 shares of our common stock at $5.00 per
share, which were combined and sold as units at $15.00 per unit in
connection with our private placement conducted in September and
October 1999, which resulted in our receipt of $252,075 in aggregate
offering proceeds;
- as adjusted to give affect to the issuance of 2,000,000 shares of
common stock offered by us at an offering price of $12.00 per share;
the consummation of all ten of the acquisitions we have pending at the
date of this prospectus on the terms included in the acquisition
agreements; the issuance of 33,610 shares of our preferred stock and
33,610 common stock purchase warrants exercisable to purchase 33,610
shares of our common stock at $5.00 per share, which were combined and
sold as units at $15.00 per unit in connection with our private
placement
5
<PAGE>
conducted in September and October 1999, resulting in our receipt of
$252,075 in aggregate offering proceeds.
<TABLE>
<CAPTION>
AUGUST 31, 1999 AS
ACTUAL PRO FORMA ADJUSTED
--------------- ----------- -----------
UNAUDITED
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................ $ 3,903 $ 440,728 $12,280,978
Total working capital (deficit)...................... (247,421) 745,089 12,029,651
Total assets......................................... 821,659 12,245,354 22,433,734
Short term debt, current portion of long term
liabilities and current related party
obligations........................................ 268,324 216,011 216,011
Long term debt....................................... 37,154 147,944 147,944
Total liabilities.................................... 305,478 1,262,563 1,262,563
Stockholders' (deficit) equity....................... $ 516,181 $10,982,791 $21,171,171
--------- ----------- -----------
</TABLE>
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN ADDITION
TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE INVESTING IN OUR SECURITIES.
WE HAVE A LIMITED OPERATING HISTORY AND MAY FACE DIFFICULTIES ENCOUNTERED BY
EARLY STAGE COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS. Although some of our
targeted acquisitions have historical operating histories, we have a limited
operating history and have only been providing our services and digital graphics
products since July 1997. As a result, we have a limited basis upon which you
may evaluate our business and prospects. Our prospects must be considered in
light of the risks, expenses, delays, problems and difficulties frequently
experienced by early stage companies.
WE HAVE INCURRED NET LOSSES SINCE COMMENCING OUR BUSINESS AND EXPECT LOSSES
FROM OPERATIONS IN THE FUTURE. We have not achieved profitability and expect to
continue to incur operating losses for the foreseeable future. For our fiscal
year that ended November 30, 1997, our net loss was $(86,644) on total revenue
of $513. For our fiscal year that ended November 30, 1998, our net loss was
$(307,913) on total revenue of $127,191. Through the interim period ended
August 31, 1999, our net loss was $(360,995) on total revenue of $57,351. We
expect to continue to incur significant operating and capital expenditures and,
as a result, we expect significant net losses in the future and we will need to
generate significant revenues to achieve and maintain profitability.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS. Based on our
current operating plan, we anticipate that the net proceeds of this offering and
cash provided by operations will allow us to meet our cash and capital
requirements for at least 12 months following the date of this prospectus. We
may require additional funding sooner than anticipated. If we raise additional
capital through the sale of equity, including preferred stock, or convertible
debt securities, the percentage of ownership of our stockholders will be
diluted.
We currently do not have a credit facility or any commitments for additional
financing. We cannot be certain that additional financing will be available when
and to the extent required. If adequate funds are not available on acceptable
terms, we may be unable to fund our expansion, develop or enhance our services
or respond to competitive pressures.
SINCE THE E-COMMERCE DIGITAL GRAPHICS MARKET IS RELATIVELY NEW, WE DO NOT
KNOW IF OUR SERVICES WILL GENERATE MARKET ACCEPTANCE. The commercial market for
e-commerce digital graphics services and products is relatively new and we do
not know if our products and services will generate widespread market
acceptance. Several factors may contribute to our products and services not
achieving broad market acceptance, which include:
- Failure to build brand recognition of ColorSmart.com;
- Increased competition among other consolidators; and
- Failure of clientele to use our electronic commerce site.
SINCE WE UTILIZE E-COMMERCE APPLICATIONS OVER THE INTERNET, THERE ARE RISKS
TO OUR BUSINESS THAT ARE ASSOCIATED WITH ONLINE COMMERCE. A significant barrier
to online commerce is the secure transmission of confidential information over
public networks. We rely on encryption and authentication technology licensed
from third parties to effect secure transmission of confidential information.
Advances in computer capabilities, new discoveries in cryptography, or other
developments may result in a breach of the algorithms we use to protect customer
data. If any compromise of our security occurs, it would injure our reputation
and could impact the success of our business.
THE TECHNOLOGIES WE USE IN OUR DIGITAL GRAPHICS BUSINESS ARE SUBJECT TO
RAPID TECHNOLOGICAL CHANGE AND COULD CAUSE US TO MAKE SIGNIFICANT CAPITAL
INVESTMENT IN NEW EQUIPMENT. Our market is characterized by rapid technological
changes. Newer technologies, techniques or products for the delivery of digital
7
<PAGE>
graphics, and the other ancillary services we offer, could be developed with
better performance than the technologies that we use. The availability of new
and better digital graphics technologies could require us to make significant
investments in technology, render our current technology obsolete and have a
significant negative impact on our business and results of operations.
OUR BUSINESS FACES RISKS ASSOCIATED WITH UNCERTAINTIES ASSOCIATED WITH THE
INTERNET AND ELECTRONIC COMMERCE. A number of legislative and regulatory
proposals under consideration by federal, state, local and foreign governmental
organizations may lead to laws or regulations concerning various aspects of the
Internet, including:
- online content;
- user privacy;
- taxation;
- access charges;
- liability for third-party activities; and
- jurisdiction
In addition, the applicability to the Internet of existing laws is
uncertain. The adoption of new laws is uncertain. The adoption of new laws or
the application of existing laws may decrease the use of the Internet, which
would decrease the demand for our services, increase our cost of doing business
or otherwise have an adverse effect on our business.
Certain telephone carriers claim that the increasing popularity of the
Internet has burdened the existing telecommunications infrastructure and that
many areas with high Internet use are experiencing interruptions in telephone
service. These carriers have petitioned the Federal Communications Commission to
impose access fees on Internet service providers. If these access fees are
imposed, the costs of communicating on the Internet could increase, which could
decrease demand for our services and increase our cost of doing business.
THE NATURE OF OUR PRINTING AND GRAPHICS BUSINESS IS SUCH THAT OPERATING
RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS, SUCH AS THE SUCCESS OF OUR
ACQUISITIONS, OUR CUSTOMER BUYING PATTERNS AND OVERALL TRENDS IN THE
ECONOMY. Our quarterly operating results have fluctuated as a result of a
number of factors, including overall trends in the economy, acquisitions of the
new businesses that we have under contract and customer buying patterns. We
compete in the commercial graphics arts and design and printing sectors, which
are characterized by individual orders from customers for specific printing
projects rather than long-term contracts, with continued engagement for
successive jobs dependent upon the customers' satisfaction with the services we
provide. As such, we are not able to predict, for more than a few months in
advance, the number, size and profitability of printing jobs in a given period.
Consequently, the timing of projects in any quarter could have a significant
impact on financial results in that quarter. Quarterly results in the future may
be influenced by these or other factors and, accordingly, there may be
significant variations in our quarterly operating results.
WE HAVE RECENTLY ENTERED INTO AGREEMENTS TO ACQUIRE FIVE SEPARATE BUSINESSES
PERFORMING DIGITAL PRINTING AND MULTIMEDIA SERVICES AND THE ASSETS OF FIVE
OTHERS. THESE ACQUISITIONS MAY HAVE ADVERSE EFFECTS ON OUR OPERATING RESULTS. A
significant element of our growth strategy is to expand by acquiring digital
printing companies. Initially, our strategy has been focused on targets located
in the Southeastern United States and in the Republic of South Africa. There can
be no assurance that we will be able to identify and acquire such companies, nor
that we will be able to finance significant acquisitions in the future. Any
acquisition may initially have an adverse effect upon our operating results
while the acquired businesses are adopting our management's practices. In
addition, there can be no assurance that we will be able to establish, maintain
or increase profitability of a business we acquire.
8
<PAGE>
IF WE ARE UNABLE TO IMPLEMENT OUR ACQUISITION STRATEGY, WE MAY NOT SUCCEED
OR MAY BE LESS SUCCESSFUL IN THE FUTURE. A key component of our growth strategy
is accomplished by acquiring digital printing companies located throughout the
United States and overseas. While there are many such companies, we may not
always be able to identify and acquire printing companies meeting our
acquisition criteria on terms acceptable to us. Additionally, some of our
competitors have developed growth strategies similar to ours and thus the
competition for acquisition candidates is constantly increasing within the
printing industry. Financing needed to complete significant acquisitions may not
always be available to us on satisfactory terms. Further, our acquisition
strategy presents a number of special risks to us that we would not otherwise
experience, including possible adverse effects on our earnings, diversion of
management's attention from our core business due to special attention to the
businesses acquired, our failure to retain key acquired personnel and risks
associated with unanticipated events or liabilities arising after our
acquisitions have been completed, some or all of which could have a material
adverse effect on our business, financial condition and results of operations.
WE MAY EXPERIENCE DIFFICULTY IN INTEGRATING THE ACQUIRED BUSINESSES AND
ASSETS INTO OUR OPERATIONS. If we are unable to manage and integrate our
pending acquisitions after we consummate the purchases, we may at some point in
the future experience difficulty in profitably managing all of the acquired
businesses or successfully integrating the acquired businesses as a whole
without substantial costs, delays or other operational or financial problems
that we had not previously experienced. Our acquisitions may also initially have
an adverse effect upon our operating results while the acquired business is
adopting our management practices. We may not in all circumstances be able to
establish, maintain or increase profitability of an acquired entity.
WE MAY NOT COMPETE EFFECTIVELY WITH OTHER DIGITAL GRAPHICS COMPANIES THAT
HAVE MORE RESOURCES AND EXPERIENCE THAN US. Many of our competitors have
substantially greater financial, technical, managerial, marketing and other
resources than we do and they may compete more effectively than we can. We
compete with MasterGraphics, Inc., Consolidated Graphics, Inc., Imagex, Inc.,
and Integrated Graphics, Inc. in offering our services and products. Since we
are a specialty printer, we also have competition from small fragmented print
shops that operate in the same geographic areas as we do. If our competitors
offer digital graphics services at lower prices than we do, we may have to lower
the prices we charge, which will adversely affect our results of operations.
SIGNIFICANT DECREASES IN DIGITAL GRAPHICS PRICES COULD HARM OUR BUSINESS BY
MAKING IT MORE ATTRACTIVE FOR SMALLER PRINT SHOPS AND DIGITAL GRAPHICS
BUSINESSES TO BUY THEIR OWN DIGITAL GRAPHICS EQUIPMENT AND TECHNOLOGIES AND
FORCE US TO LOWER PRICES. A significant reduction in the price of our digital
graphics equipment could reduce the demand for our products and services by
making it economically more attractive for other small businesses to buy their
own digital graphics equipment instead of utilizing our services. Also,
equipment price decreases could force us to reduce our fees in response to this
reduction in demand or as a means to remain competitive with digital graphics
service providers.
OUR MANAGEMENT WILL CONTROL 46.9% OF OUR COMMON STOCK AFTER THIS OFFERING
AND THEIR INTERESTS MAY BE DIFFERENT FROM AND CONFLICT WITH YOURS. Following
this offering, our executive officers and directors will beneficially own a
total of approximately 46.9% of our outstanding common stock assuming that there
is no exercise of the underwriter's over-allotment option, and approximately 50%
if the underwriter's over-allotment option is exercised in full. Accordingly, if
our management acts together, they have the power to control the election of all
of our directors and the approval of significant corporate transactions for
which the approval of our stockholders is required. If you purchase our
securities, you may have no effective voice in our management.
THE MANNER IN WHICH WE OBTAIN OUR DIGITAL GRAPHICS EQUIPMENT INCREASES OUR
LEVERAGE AND FINANCE COSTS. We may finance the purchases of our digital
graphics equipment. The use of leverage to finance our equipment increases our
risk of loss as opposed to if we borrowed a smaller portion or none of the
purchase price of this equipment. Our risk is increased because we must satisfy
these obligations on
9
<PAGE>
specific dates, regardless of our revenues. If we do not meet our debt service
payments when due, we may be forced to forfeit the equipment securing the debt.
OUR SUCCESS DEPENDS UPON THE EFFORTS OF, AND OUR ABILITY TO RETAIN, KEY
PERSONNEL, INCLUDING OUR CHIEF EXECUTIVE OFFICER. We believe that the efforts
of our senior management and key employees, particularly that of our chief
executive officer, Roger D. Finchum Sr., are essential to our operations and
growth. We have entered into a two-year employment agreement with Mr. Finchum,
and we intend to obtain key man life insurance on the life of Mr. Finchum in the
amount of $1,000,000 prior to the completion of this public offering. If we do
not succeed in retaining or motivating our current personnel or in hiring
additional qualified employees, our business will be materially adversely
affected. In addition, competition for personnel in our industry, including the
people that perform our services, is intense and there can be no assurance that
we will be able to attract and retain the necessary personnel.
THE REPRESENTATIVE OF THE UNDERWRITERS WILL CONTINUE TO HAVE INFLUENCE OVER
US FOLLOWING THE COMPLETION OF THIS PUBLIC OFFERING. We have given Nutmeg
Securities, Ltd., the representative of the underwriters, the right, for a
period of two years from the completion of this offering, to designate
Daniel F. Guifoile of Nutmeg Securities, Ltd. as an observer to our board of
directors. Although this designated observer will have no voting privileges as a
director, he will have the right to receive notices of our directors' meetings
and may have some influence over decisions made by our board of directors during
the two-year period. Upon completion of this offering, the representative will
also receive, for nominal consideration, warrants to purchase 300,000 shares of
our common stock.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS. Many current installed computer systems
and software products only accept two digits to identify the year in any date.
Thus, the Year 2000 will appear as "00," which the system might consider to be
the Year 1900 rather than the Year 2000. This could result in system failures,
delays or miscalculations causing disruptions to our operations. The failure of
systems maintained by third parties to be Year 2000 compliant could cause us to
incur significant expense to remedy any problems, reduce our revenues from such
third parties or otherwise seriously damage our business. Our failure to correct
a material Year 2000 problem could result in an interruption in, or a failure
of, some of our normal business activities or operations.
THERE ARE INHERENT RISKS WITH REGARD TO THE COMPANIES' OPERATIONS IN SOUTH
AFRICA. After consolidation, we will be operating three businesses in South
Africa. As with any overseas operations the presiding political and economic
climate may have an impact on our overseas operating subsidiaries. Currently,
the South African economy suffers from both high unemployment and high
inflation. Should the South African economy become severely unstable, this could
have a significant negative impact on our business and results of operations.
THERE MAY BE CURRENCY AND EXCHANGE RATE RISKS WITH OPERATING OUR BUSINESS IN
THE REPUBLIC OF SOUTH AFRICA. Some of the revenues we may generate in South
Africa after we consummate the purchase agreements with our South African
acquisitions will be in South African Rands, not in U.S. dollars. The value of
the currency in South Africa fluctuates as compared to the U.S. dollar, and as a
result, revenues that may be generated from our prospective operations in South
Africa may have more or less value from time to time as compared to the U.S.
dollar. These currency and exchange rate risks associated with our pending South
African acquisitions may have a negative effect on our overall financial
condition and results of operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates, and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
10
<PAGE>
"expects," "intends," "plans," "projects," "beliefs," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We are not obligated to update these statements or publicly release
the result of any revisions to them to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $21,840,000
from our sale of the 2,000,000 shares offered hereby, assuming an initial public
offering price of $12.00 per share and excluding expenses of the offering. If
the underwriters exercise their over-allotment option in full, we will receive
net proceeds of approximately $25,116,000. These amounts are after deducting
estimated underwriting discounts and commissions, and after fees and expenses of
approximately $500,000, payable by us. We intend to use the net proceeds as
follows:
<TABLE>
<CAPTION>
PERCENT
NET OF
PROCEEDS TOTAL
----------- --------
<S> <C> <C>
Acquisitions............................................ $ 8,800,000 40.3%
Equipment and Software Purchases and Upgrades........... 3,000,000 13.7%
Sales and Marketing..................................... 2,500,000 11.4%
Repayment of Debt....................................... 270,000 1.2%
Hiring executive personnel.............................. 1,000,000 4.6%
General corporate and working capital purposes.......... 6,270,000 28.8%
----------- -----
Total............................................. $21,840,000 100.0%
=========== =====
</TABLE>
We intend to use approximately 40.3% of the net proceeds of this offering as
the cash portion of the purchase prices for completion of the seven pending
acquisitions we have under agreements, all of which should be consummated
concurrently with the completion of this offering.
Of our total net proceeds, we have allocated 13.7% of the net proceeds for
the purchase or upgrading of digital printing equipment for the companies we
intend to acquire pursuant to our pending acquisition agreements, as well as for
facilities costs associated with building improvements to be made in several
locations where we will operate the newly acquired companies and their assets.
11.4% of the net proceeds of our offering are allocated to sales and
marketing expenditures that will include advertising and banner costs associated
with our advertising programs on the Internet, expansion and re-design of our
web-site to include descriptions of our newly acquired acquisitions, and a
marketing program intended to inform our prospective customer base of our
products and services.
A small portion of our net proceeds will be utilized for expansion of our
internal corporate operations, which include expanding our computer networks,
equipment for our corporate office facilities, software and new web-site
development costs. Approximately 4.6% of the net proceeds will be allocated for
costs associated with hiring additional personnel.
The proposed allocation of the net proceeds represents our best estimate of
the allocation of the net proceeds of the offering based upon the current status
of our operations, our current plans and current economic conditions. We may
reallocate the net proceeds among the categories listed above. We also may, when
the opportunity arises, acquire or invest in complementary businesses, products
or technologies. However, we have no present understandings, commitments or
agreements with respect to any acquisition
11
<PAGE>
or investment other than our seven pending acquisitions. Any net proceeds
received from the sale of the underwriter's over-allotment option will be
allocated to working capital and general corporate purposes.
We anticipate that the net proceeds of this offering along with cash
provided by operations, will be sufficient to fund our operations and capital
requirements for at least the 12 months following the date of this prospectus.
However, there can be no assurance that the net proceeds of this offering and
cash provided by operations will satisfy our requirements for any particular
period of time. To the extent capital resources are insufficient to meet future
capital requirements, we may have to raise additional funds to satisfy our
requirements. There can be no assurance that such funds will be available on
acceptable terms, if at all.
Pending application of the net proceeds in the manner described above, we
intend to invest the net proceeds in short-term, interest bearing investment
grade securities.
DIVIDEND POLICY
We have never declared or paid any cash or stock dividends on our capital
stock. We intend to reinvest earnings, if any, to fund the growth and expansion
of our business and, therefore, we do not anticipate paying cash dividends on
our common stock in the foreseeable future. The declaration of dividends will be
at the discretion of our board of directors and will depend upon our earnings,
capital requirements, financial position, general economic conditions, and other
pertinent factors.
12
<PAGE>
CAPITALIZATION
The following table sets forth our:
- actual capitalization as of August 31, 1999;
- our pro forma capitalization as of August 31, 1999 giving effect to the
issuance of 198,050 shares of our common stock between January and April
1999 where we received gross aggregate offering proceeds of $1,000,000 and
the issuance of 33,610 shares of preferred stock and 33,610 common stock
purchase warrants offered as units from July to October 1999 from which we
received gross aggregate offering proceeds of $252,075.
- pro forma as adjusted capitalization giving effect to the sale of the
2,000,000 shares offered hereby at an assumed offering price of $12.00 per
share, after deducting underwriting commissions and estimated offering
expenses, and the application of the estimated net proceeds from this
offering.
The following table should be read in conjunction with our financial
statements, related notes and other financial information included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
AUGUST 31, 1999
---------------------------------------
PROFORMA
ACTUAL PROFORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Short term debt, current portion of long term
liabilities and current related party obligations.... $ 263,995 $ 216,011 $ 216,011
========== =========== ===========
Long term debt......................................... $ 37,154 $ 147,944 $ 147,944
========== =========== ===========
Stockholders' (deficit) equity:
Preferred stock, $.001 par value; 1,000,000
authorized, no shares issued....................... $ 0 $ $ 34
---------- ----------- -----------
Common stock, $.001 par value; 24,000,000 shares
authorized; 4,005,639 issued and outstanding,
actual; 4,005,639 issued and outstanding, pro
forma: 6,005,639 issued and outstanding, as
adjusted........................................... 4,006 4,006 6,006
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; 33,610 issued and outstanding, actual;
33,610 issued and outstanding, pro forma 33,610
issued and outstanding as adjusted................. 34 34 34
Additional paid in capital........................... 1,267,733 12,054,807 22,241,153
Accumulated deficit.................................. (755,524) (1,075,988) (1,075,988)
---------- ----------- -----------
Total stockholders' (deficit) equity............... (516,147) 10,982,825 21,171,205
---------- ----------- -----------
Total capitalization............................... $ 821,693 $11,346,780 $21,535,160
========== =========== ===========
</TABLE>
The preceding table does not include the exercise of:
- the underwriter's over-allotment option to purchase 300,000 additional
shares of our common stock;
- 200,000 representative's warrants; and
- 33,610 common stock purchase warrants exercisable at $5.00 per share.
13
<PAGE>
DILUTION
As of August 31, 1999, our net tangible book value (deficit) was $(755,558),
or approximately $(.19) per share of common stock. Net tangible book value
(deficit) per share represents the amount of our total tangible assets less
total liabilities divided by the number of shares of common stock.
After giving effect to the sale of the 2,000,000 shares offered hereby and
after deducting the underwriting discount and estimated offering expenses, net
tangible book value at August 31, 1999, would have been $20,584,442, or
approximately $3.43 per share of our common stock. This represents an immediate
increase in net tangible book value of $3.62 per share of common stock to our
existing stockholders and an immediate dilution in net tangible book value of
$8.57 per share of common stock, or approximately 70%, to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price....................... $ 12.0
Net tangible book value per share prior to the offering..... $(0.19)
Increase in net tangible book value per share attributable
to this offering.......................................... $ 3.62
------
Net tangible book value per share after the offering........ $ 3.43
------
Dilution of net tangible book value per share to new
investors................................................. $ 8.57
======
</TABLE>
If the over-allotment is exercised in full, our pro forma as adjusted net
tangible book value at August 31, 1999 would have been $24,064,000, or $4.28 per
share of common stock. This represents an immediate increase in net tangible
book value of $4.47 per share of common stock to existing stockholders and an
immediate dilution in net tangible book value of $7.53 per share of common
stock, or approximately 62% to new investors.
The following table summarizes, as of August 31, 1999, on a pro forma basis,
the number of shares of common stock purchased from us, the total consideration
paid and the average price per share paid by existing stockholders and investors
in this offering, and after giving effect to the sale of the 2,000,000 shares
offered by this prospectus, assuming an initial offering price of $12.00 per
share. The calculations are based upon total consideration given by new
investors and existing stockholders before any deduction of underwriting
discounts, offering expenses payable by us, and does not include the purchase of
or any exercise of the redeemable common stock purchase warrants offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
------------------------- ------------------------- SHARE
NUMBER PERCENT AMOUNT PERCENT PER
--------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 4,005,639 67% $ 516,181 2% $ 0.13
New investors..................... 2,000,000 33% 24,000,000 98% $12.00
--------- ---------- ----------- ------ ------
Total........................... 6,005,639 100% $24,516,181 100% $ 4.08
========= ========== =========== ====== ======
</TABLE>
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
audited financial statements for the years ended November 30, 1997 and 1998
included elsewhere in the prospectus and Management's Discussion and Analysis of
Financial Condition and Results of Operations. The historical selected financial
data as of August 31, 1999 and for the nine months ended August 31, 1998 and
1999 are derived from and should be read in conjunction with our unaudited
financial statements included elsewhere in the prospectus. The unaudited
financial statements, in our opinion, include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the data for the
periods presented. The results of operations for the nine months ended
August 31, 1999 are not necessarily indicative of results to be expected for the
full year.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 NINE MONTHS ENDED AUGUST 31
--------------------------- -----------------------------
1997 1998 1998 1999
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $ 513 127,191 98,856 57,351
Cost of Revenues......................... 63,886 48,997 19,927
---------- ---------- ---------- ----------
Gross profit............................. 513 63,305 48,859 37,424
Operating costs and expenses:
Sales and marketing.................... 87,157 370,304 253,595 388,459
General and administrative.............
Depreciation...........................
---------- ---------- ---------- ----------
Total operating costs and expenses..... 87,157 370,304 253,595 388,459
---------- ---------- ---------- ----------
(Loss) income from operations............ (86,644) (306,999) (203,736) (351,035)
Interest expense......................... -- 920 (378) 9,960
Expenses relating to debt financing and
agreements to retire stock options in
preparation of proposed public
offering...............................
Minority interest in subsidiary's losses
absorbed by parent.....................
---------- ---------- ---------- ----------
Net loss................................. $ (86,644) $ (307,919) $ (203,358) $ (360,995)
========== ========== ========== ==========
Basic and diluted net loss per share..... $ (.04) $ (.10) $ (.07) $ (.10)
========== ========== ========== ==========
Shares used in computing basic and
diluted earnings per share............. 2,492,288 2,956,787 2,956,787 3,455,023
========== ========== ========== ==========
</TABLE>
The following table includes a summary of our balance sheet at August 31,
1999
- on an actual basis;
- on a pro forma basis giving effect to the consummation of all seven of
the acquisitions we have pending at the date of this prospectus on the
terms included in the acquisition agreements; the issuance of 33,610
shares of our preferred stock and 33,610 common stock purchase warrants
exercisable to purchase 33,610 shares of our common stock at $5.00 per
share, which were combined and sold as units at $15.00 per unit in
connection with our private placement conducted in September and
October 1999, which resulted in our receipt of $252,075 in aggregate
offering proceeds;
- as adjusted to give affect to the issuance of 2,000,000 shares of
common stock offered by us at an offering price of $12.00 per share;
the consummation of all seven of the acquisitions we have pending at
the date of this prospectus on the terms included in the acquisition
agreements; the
15
<PAGE>
issuance of 33,610 shares of our preferred stock and 33,610 common
stock purchase warrants exercisable to purchase 33,610 shares of our
common stock at $5.00 per share, which were combined and sold as units
at $15.00 per unit in connection with our private placement conducted
in September and October 1999, which resulted in our receipt of
$252,075 in aggregate offering proceeds.
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1999
------------------------------------- YEAR ENDED
AS NOVEMBER 30,
UNAUDITED PRO FORMA ADJUSTED 1998
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $ 3,903 $ 440,728 $12,280,978 $ 408
Total working capital (deficit)............. (247,421) 745,089 12,029,654 (86,882)
Total assets................................ 821,659 12,245,354 22,433,734 299,422
Short term debt, current portion of long
term liabilities and current related party
obligations............................... 263,995 216,011 216,011 89,060
Long term debt.............................. 37,154 147,944 147,944 45,604
Total liabilities........................... 305,478 1,262,563 1,262,563 158,704
Total shareholders' (deficit) equity........ $ 516,181 $10,982,791 $21,171,171 140,718
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We were formed to engage in the consolidation of the digital imaging
reproduction industry, with additional emphasis on large format printing and
multimedia applications for the Internet and CD-ROM applications.
We were incorporated in Nevada on July 18, 1997 as ColorSmart, Inc. On
December 29, 1998 we changed our name to ColorSmart.com, Inc. primarily to
reflect our growing emphasis on marketing our products and services over the
Internet and the development of our fully-integrated electronic commerce
applications that allows businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure web site. We have entered into agreements to purchase
seven companies, four of which are located in the United States and three of
which are located in the Republic of South Africa. All seven of these potential
acquisitions significantly expand our ability to offer digital imaging and color
graphics reproduction to our customers and to increase our market share in the
digital imaging business.
Our corporate offices are currently located at 537 Myatt Drive, Madison,
Tennessee, 37115. Each of our acquisitions operates out of facilities that
contain a variety of digital imaging, color graphics equipment used in the
reproduction of artwork, transparencies and scanned images.
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue. The results of operations data
for the nine months ended August 31, 1999 are not necessarily indicative of the
results to be expected for the full year or future periods.
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED YEAR ENDED NINE MONTHS NINE MONTHS
NOVEMBER 30, NOVEMBER 30, ENDED AUGUST 31, ENDED AUGUST 31,
1997 1998 1998 1999
------------ ------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues.......................... 100% 100% 100% 100%
Cost of revenues...................... -- 50% 50% 35%
Gross margin.......................... 100% 50% 50% 65%
Sales and advertising expense......... -- -- -- --
General and administrative expense.... 16,989% 247% 219% 632%
Depreciation expense.................. 0% 44% 37% 45%
Total operating expenses.............. 16,989% 291% 256% 677%
Income (loss) from operations......... (16,889)% (241)% (206)% (612)%
Interest income or expense............
Net income (loss)..................... (16,889)% (241)% (206)% (629)%
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED AUGUST 31, 1999 TO THE NINE MONTHS ENDED
AUGUST 31, 1998
REVENUES
Revenues decreased to $57,351 for the nine months ended August 31, 1999 from
$98,856 for the nine months ended August 31, 1998. This decrease of $41,505, or
42% is primarily a result of our focus turned towards completion of our private
placement offerings and development of e-commerce activity and the
17
<PAGE>
relocation of production equipment to our prospective acquisitions in order to
increase capacity and profits for the target companies, thus decreasing our
revenues.
COST OF REVENUES
Costs of revenues consist primarily of material costs. Costs of revenues
increased to $19,927 or 35% of revenues for the nine months ended August 31,
1999 from $48,997, or 50% of revenues for the nine months ended August 31, 1998.
The decrease of $29,070 or 59% was due to the reduction in revenue and the
related write down of material inventory.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of salaries, wages and
related costs for general corporate functions, including finance, accounting,
facilities and office rent, legal and other fees for professional services.
General and administrative expenses increased to $388,459 for the nine months
ended August 31, 1999 from $253,595 for the nine months ended August 31, 1998.
As a percentage of revenue, general and administrative costs increased from 219%
to 632%. The reasons for this trend were two-fold. First, with the reduction in
sales, the fixed costs increased on a relative basis to revenue. Second, we
incurred substantial start-up costs for the development of our e-commerce
business and for public offering expenses.
SALES AND MARKETING
Sales and marketing expenses increased to $10,035 for the nine months ended
August 31, 1999 from $5,776 for the nine months ended August 31, 1998. As a
percentage of revenues, sales and marketing expenses increased from 6% to 18%
for the same periods. This increase of $4,259 is a result of our efforts to
establish a business presence in the Nashville, Tennessee business community.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased to $26,000 for the nine months ended
August 31, 1999 as compared to $36,911 for the nine months ended August 31,
1998. This decrease of $10,911, or 29.7% was due to .
INTEREST EXPENSE
Interest expense increased from $739 to $9,960 for the nine months ended
August 31, 1998 and 1999, respectively. This increase of $9,221 was a result of
short term borrowings needed to fund operations during the later period.
NET INCOME/LOSS
Our net loss for the nine months ended August 31, 1999 increased $157,637
from $(203,358) for the nine months ended August 31, 1998 to $(360,995) for the
same period in 1999. The increase in our net loss is due to higher general and
administrative expenses, an increase in our costs of revenues, increased
marketing efforts, costs associated with our seven targeted acquisitions, and
debt financing for our digital imaging equipment.
YEAR ENDED NOVEMBER 30, 1998 COMPARED TO THE YEAR ENDED NOVEMBER 30, 1997
REVENUES
Revenues increased to $127,191 for the fiscal year ended November 30, 1998
from $513 for the fiscal year ended November 30, 1997. This increase in revenue
is a result of the fact that the earlier period was our start-up phase during
which we operated for only four months.
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COST OF REVENUES
Cost of revenues increased to $63,886 for the fiscal year ended
November 30, 1998 from $513 for the fiscal year ended November 30, 1997. As a
percentage of revenues, cost of revenues increased from 0% to 50% for the same
periods. This increase of $63,886 is primarily due to the fact that
November 30, 1997 was our start-up year and we generated little revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased to $370,304 for the fiscal
year ended November 30, 1998 from $87,157 for the fiscal year ended
November 30, 1997. As a percentage of revenue, general and administrative
expenses decreased from 16,989% to 247%. This decline, as a percentage of
revenue, is a result of the earlier year being our first full year of operations
and, therefore, we generated more revenue and the later period.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased to $5,776 for the year ended
November 30, 1998 from $0 for the fiscal year ended November 30, 1997. This
increase of $5,776, or 5,776% is due to the fact that in the prior year we had
no marketing expenses during our shortened fiscal year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $55,367 for the fiscal
year ended November 30, 1998 from $0 for the fiscal year ended November 30,
1997. This increase of $55,367, or 55,367% is a result of our equipment not
being in service during fiscal year 1997.
INTEREST EXPENSE
Interest expense increased to $2,060 for the year ended November 30, 1998
from $0 for the fiscal year ended November 30, 1997. This increase of $2,060, or
2,060% is a result of having no borrowings during the period ended November 30,
1997.
NET INCOME/LOSS
Our net loss for the fiscal year ended November 30, 1998 increased $221,275,
or 255% from $(86,644) for the fiscal year ended November 30, 1997 to $(307,919)
for the same period in 1998. This decrease in our net loss is due to higher
operating costs in all departments, and slow revenue growth due to re-focusing
our business plan.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through revenues and
capital raised in two private placements of our common stock and our preferred
stock with common stock purchase warrants attached. As of August 31, 1999, we
had $3,903 in cash. Cash flow used for operating activities was $392,951 for the
nine months ended August 31, 1999. Net cash used for investing activities was
$506,497 during the same period including $204,962 used in the purchase of
equipment as a result of our expanded operations, and $301,535 used in the seven
acquisitions we now have under contract.
In April 1999, we completed a private placement whereby we sold 198,050
shares of our common stock, resulting in gross proceeds of $1,000,000 and net
proceeds of approximately $736,458, after deducting offering, legal, accounting
and finders' fee expenses. From July 1999 to October 1999, we completed another
private placement whereby we sold 33,610 shares of preferred stock and 33,610
common stock purchase warrants, which were offered and sold as units, resulting
in our receipt of $252,075 in gross offering proceeds. Net proceeds of our
private placements were used primarily for legal and
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accounting expenses incurred during the process of negotiating and documenting
our seven targeted acquisitions, partial payments towards the purchase prices on
some of our acquisitions that we now have under definitive agreements, payment
of the costs and expenses associated with our initial public offering and
general corporate expenses in our Madison, Tennessee facility.
We anticipate that the net proceeds of this offering, together with the cash
flow from operations, will be sufficient to fund our anticipated working capital
and capital expenditures for the 12 months following completion of this
offering. Our capital requirements have grown since our inception and we expect
our capital requirements to continue to grow.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and software
products will need to accept four digit entries to distinguish 21(st)century
dates from 20(th) century dates. As a result, computer systems and/or software
used by many companies and governmental agencies may need to be upgraded to
comply with Year 2000 requirements or risk system failure or miscalculations
causing disruptions of normal business activities. Our services, operations,
customers, suppliers and service providers all rely on information technology
systems, using hardware and software, to function properly. This includes
readily apparent systems including those controlling the digital imaging and
printing equipment that we utilize to deliver our products and services to our
customers, including systems required to provide electricity to our facilities.
SUPPLIERS: We have been surveying our suppliers about their Year 2000
compliance. Each of our suppliers has advised us verbally that they believe they
are Year 2000 compliant, but we have not received confirmation from any
suppliers. If our other suppliers do not reply to our Year 2000 inquiries or
cannot provide Year 2000 compliant products, we may need to locate alternative
sources for goods or services.
OPERATIONS: We have been gathering information from our vendors and making
an assessment of Year 2000 compliance for each of the major elements of our
internal information systems. Based upon the representations of these vendors,
we believe:
- Our operating systems, which include Microsoft Windows NT, Microsoft
Windows 98 and Microsoft Windows 95, are all Year 2000 compliant in their
latest versions, which we currently have installed.
- Our key computer applications, which include Unix, Corel, Adobe,
Macromedia, Onyx, and Microsoft Office 97, have been updated to a level of
revision that is Year 2000 compliant. Our Lucent Partner Mail phone system
is also Year 2000 compliant. Our computer hardware, which is all personal
computer based, is Year 2000 compliant. We have received representations
from the owners and managers of our Madison, Tennessee facility that such
facility is Year 2000 compliant with regard to building security, heating
and lighting controls.
COST TO ADDRESS YEAR 2000 ISSUES: We have not incurred significant costs to
date complying with Year 2000 requirements and we do not believe that we will
incur significant costs for these purposes in the foreseeable future. However,
we may spend more money than we have estimated, and this could have a material
adverse impact on our results of operations. At this stage in our assessment
process, we do not believe that the Year 2000 issue will materially impact our
financial position, results of operations or cash flows in future periods.
However, there can be no assurance that operating problems or expenses related
to the Year 2000 issue will not arise with our computer systems and software or
that our customers or suppliers will be able to resolve their Year 2000 issues
in a timely manner.
CONTINGENCY PLANS: Our failure to identify and correct a Year 2000 problem
could result in an interruption of normal business activities and operations. A
worst case Year 2000 scenario would include a total malfunction and shutdown of
our network server and for this situation not to be resolved in a timely manner.
We are prepared to manually record information and to manually prepare any
necessary reports.
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If our internal review and external surveys identifies any other problems that
are reasonably likely to occur, we will develop additional contingency plans to
minimize any impact on our business. However, despite our best efforts, we may
not anticipate all problems that may ultimately arise. We expect to be fully
Year 2000 complaint by the fourth quarter of calendar year 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS
We believe that recently issued financial standards will not have a
significant impact on our results of operations, financial position, or cash
flows.
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BUSINESS
OUR BUSINESS
We are positioning ourselves to become a leading consolidator in the digital
graphics industry and we believe we will be one of the largest digital graphics
companies in the Southeastern United States. Our fully integrated electronic
commerce applications allow businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure Web site. These products range from full motion video
for the Internet, catalogues on CD-ROM, 100-foot printed billboards, trade show
graphics and retail displays. Each business can receive updated price quotes,
make modifications, authorize production, and generally manage their printing
and multimedia requirements, from any Windows-based, Internet-enabled computer.
Our customers generally realize a decrease in the entire production cycle from
price quote to the delivery of their order. We believe our applications of
leading edge Internet and digital technology enables us to be price-competitive
while providing customers with the highest level of security, selection, speed
and support.
We have entered into agreements to acquire the stock of five companies and
the assets of five companies in the digital printing or multimedia businesses.
One of these firms specializes in the design and production of multimedia
advertising, marketing and presentation applications for delivery over the
Internet and CD-ROM. The others are digital commercial printing companies
located in the United States and the Republic of South Africa.
Commercial digital graphics involves the production of a wide range of
marketing, advertising and media imaging and digital printing produced by using
cutting-edge software and digital printing equipment. It is the digitizing of
the input that reduces production time, costs and errors and provides the
flexibility to handle small, specialized jobs as easily as producing simple,
mass-produced jobs. Digital printing and imaging customers include companies of
all sizes and in all industries where full-color imaging and production are
required. Our digital printing technologies enable us to receive and deliver
customer services most effectively through our Internet applications.
OUR INDUSTRY
THE GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet has emerged as a revolutionary force in the way businesses
operate, having evolved from a research medium to a venue for consumer-oriented
commerce. Forrester Research estimates that Internet business-to-business
commerce reached a record $43 billion in 1998. Furthermore, they predict that
business-to-business electronic commerce will grow to a staggering $1.3 trillion
by 2003 and will represent more than 90% of the total e-commerce market.
Advances in computer technology and telecommunications have enabled
businesses to link directly to their suppliers, providing shortened lead times
for purchases and better decision-making controls. The advent of the Internet
and its commercial applications has accelerated the trend of increased
efficiency related to business purchases with a number of additional benefits,
including:
- Global reach for broader selection of products and services;
- Reduced costs and greater economies of scale;
- Ability to access suppliers from any computer with Internet access; and
- The technology to customize customer interfaces, creating greater
convenience and ease of use.
To augment our business to business strategy we have implemented an online
ordering system that will consolidate all products and services produced at all
of our newly acquired locations. This is a full e-commerce site that is entirely
secure. With our online ordering system customers will be provided with a
one-stop solution. In addition to the easy on-line ordering process, ColorSmart
will provide a secure
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individual web-site for each client where they make, place, and check the
progress of their orders. The diagram that follows depicts graphically how our
on-line e-commerce applications works:
[LOGO]
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THE PRINTING INDUSTRY
According to industry statistics, United States commercial printing revenues
exceeded $55 billion in 1998. While the market is large, the industry remains
fragmented with over 40,000 local and regional printers in the United States.
Digital technology in the printing industry is being utilized in the market
place worldwide, but we believe this technology is fragmented in the digital
printing services sector. Most digital print and media operations are small and
limited to certain equipment because of the capital required and lack of
technical expertise. Most digital shops operating today are mom and pop and are
very limited. We believe a large portion of the industry has not effectively
grasped the digital opportunity. IT Strategies projects that by the year 2001,
over $18 billion in total annual revenue from all digital printing services and
products, is possible on a worldwide basis. This growth is possible because of
consolidation involving digital specialist firms such as ours, continuing
innovations in technology, along with end users' education of digital printing
technologies that provide services and products on demand.
E-commerce, also provides a tremendous opportunity for digital pringing and
multimedia companies. The Internet is uniquely suited as a medium for the
delivery of a wide variety of print, media communications, and digital graphics.
Digital printing and the Internet have synergies that will replace a large
portion of conventional marketing of digital print services and products. We
recognized the synergies between digital printing and the delivery of our
products and services on the Internet and we plan to continue to expand our
digital image library of over 10,000 images for our e-commerce customers, and
expand our technological capabilities in delivering our products and services
through the E-commerce side of our business.
DIGITAL PRINTING
We believe digital technology in the printing and graphic design industries
is being under-utilized. Most digital print and media operations are small and
lack the requisite capital, equipment, and technical expertise to deliver the
full range of benefits offered by digital technology. IT Strategies, an industry
consultant located in Hanover, Massachusetts, projects more than $18 billion in
total worldwide revenue from all digital printing services and products by 2001.
We believe this growth will be demand driven, predicated upon continued
advancements in digital technology. As a leader in the digital graphics
industry, ColorSmart expects to be well positioned to satisfy this demand
E-commerce over the Internet offers us a tremendous opportunity and provides
us with a competitive advantage. The Internet is an exceptional medium for the
delivery of digital graphics in a wide variety of formats. The synergy of
digital technology and the Internet will continue to transform, and we believe,
replace, an ever-increasing portion of conventional printing services and
products.
We believe the industry suffers from the following inefficiencies:
- Excess capacity hinders profitability;
- Production inefficiencies resulting in high error rates and increased
costs;
- Despite the technological advances in the industry, there is a serious
lack of integration through all stages of production;
- Local printers typically offer a limited range of products requiring
businesses to use several different printers to satisfy their needs;
- Many printers lack the technological resources to provide customized
products in a cost-effective manner.
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OUR STRATEGY
Our objective is to be the leading Internet-based business-to-business
digital graphics and multimedia company in the world. The key elements of our
business strategy include:
- Focusing primarily on the Internet business-to-business market for digital
printing services, expected to grow to approximately $18 billion by 2001,
up from approximately $5 billion in 1998;
- Continuing to upgrade and enhance the front-end of our e-commerce
applications, while acquiring carefully targeted commercial printing
companies in this highly fragmented industry to support the back-end;
- Utilizing the most current digital graphics and multimedia technology
available to maintain a technological edge over our competition;
- Expanding beyond traditional printing products and services into
multimedia video and audio business-to-business applications primarily
tailored for the Internet and CD-ROM;
- Making the process of creating, approving, ordering and fulfilling
printing jobs more efficient by allowing customers to handle much of this
process from there desktops; and
- Tailoring end-to-end business applications to our customer's needs by
integrating creative, production, and distribution services into
customer-specific solutions.
OUR RECENT ACQUISITIONS
A key component of our growth strategy is accomplished by acquiring digital
printing companies located throughout the United States and overseas. During our
current fiscal year, we entered into agreements to acquire seven targeted
companies for acquisition. They are described as follows:
- Jamberry Lake Digital Media, Inc., of Summit, New Jersey is a start-up
company focused on producing digital multimedia products and services for
use on the Internet, as well as traditional marketing and promotional
campaigns. Utilizing streaming video and audio, Jamberry can produce high
quality multi-media presentations for Internet advertising and
instructional purposes for e-commerce companies, as well as short, high
impact advertisements, similar to television commercials. These same
technologies also have wide applications for the consumer side of
e-commerce. We plan on integrating Jamberry's services with digital print
products offered by our entire group of companies. We signed an agreement
on December 2, 1999 to purchase all of the outstanding shares of Jamberry
from Jamberry Lake, L.L.C., its sole shareholder. We agreed to pay
$1,000,000 as follows: 125,000 of our shares at the completion of this
public offering and additional of our shares having a value equal to 10%
of the amount by which the average equity market capitalization exceeds
$75,000,000 on each of the 30th, 60th and 90th day after the completion of
this offering. We are also required to make a monthly capital contribution
to Jamberry of $100,000 from August 15, 1999 until we close this public
offering. At the date of this prospectus we have paid $245,000 to Jamberry
under this agreement. With each payment of $100,000, 10% of Jamberry's
shares are being placed in escrow for our benefit. If we do not close this
public offering, we are entitled to receive 1% of the issued and
outstanding stock of Jamberry for each $20,000 that we have paid to
Jamberry under this agreement.
- Magnum Digital Services, Inc. located in Coconut Creek, Florida. Magnum
Digital specializes in dye sublimation, which is applying digital images
in full color on fabrics, textiles and specialized substrates. This area
of digital printing is the fastest growing segment of the industry
overall. We signed an agreement on September 3, 1998 to purchase of all of
the outstanding shares of Magnum Digital with Robert McDowell, Magnum
Digital's sole shareholder and president. We agreed to pay $500,000 in
cash and deliver 200,000 shares of our stock to Mr. McDowell and to pay up
to $275,000 for balances due on Magnum Digital's equipment leases. By
letter agreement dated September 8,
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1999, the amount of our stock to be delivered to Mr. McDowell was adjusted
to 66,667 shares. By letter agreement dated September 7, 1999 the closing
of this acquisition was extended until we complete this public offering.
The cash purchase price will be paid from a portion of this public
offering.
- Advertising That Works, Inc. located in East Point, Georgia. We acquired a
wholesaler, fabricator, and finisher of banners and screen-printed
posters. This company enjoys several national accounts and a high profile
customer base. After many years as a screen printer, this company has
begun the process of changing over to a 100% digital operation. We signed
an agreement on September 23, 1998 for the purchase of all shares of
Advertising That Works with Chris England, its sole shareholder and
president. We agreed to pay $1,000,000 in cash for the stock and $500,000
for the real estate in East Point, Georgia where the company is located.
By letter agreement dated December 2, 1999, the closing of this
acquisition has been extended until January 31, 2000. The purchase price
will be paid from a portion of this public offering.
- Stonehouse Graphics, (Pty) Ltd., located in Johannesburg, South Africa, is
Africa's second largest producer of large format digital printing. With
12 years in the industry, Stonehouse has gone from a small screen printer
to a fully integrated digital fabricator. It accounts for almost 40% of
all billboard printing and backlit signage in Southern Africa. Stonehouse
Graphics has a full compliment of sales, design and production staff
utilizing only the latest in digital technology. We signed an agreement on
October 12, 1998 to purchase all of the outstanding shares of Stonehouse
from its sole shareholder, Nolan Weight. We agreed to pay 15,000,000 South
African Rands (presently convertible into approximately $2,450,980 U.S.
dollars) less all of the outstanding loans (including loans to
shareholders) and liabilities of Stonehouse (about 5,000,000 Rands or
approximately $816,992 U.S. dollars). By letter agreement dated
December 2, 1999, the consummation of this agreement has been extended
until January 31, 2000. The purchase price will be paid from a portion of
this public offering.
- Display Arts, Inc., located in Nashville, Tennessee, is a 12-year old
company specializing in trade show graphics and trade show display booths.
Display Arts is an exclusive regional distributor for Nimlok, a premier
manufacturer of these products. With locations in Nashville, Memphis, and
Knoxville, Tennessee, Display Arts brings a new dimension to the
integration of customer products and services for our entire group and our
existing customer base. We signed an agreement on June 23, 1999 to
purchase all of the outstanding shares of Display Arts, Inc. from its sole
shareholders Donovan J. McNamee, Jr., and Pamela M. McNamee. We agreed to
pay $1,300,000 at the closing that will be used first to pay off Display
Arts' debt and the balance for the stock of the selling shareholders. The
agreement called for a closing on October 1, 1999 that was extended to
December 15, 1999 in an extension agreement dated October 1, 1999, and was
further extended until January 31, 2000 in a second extension agreement
dated December 15, 1999. The closing is contingent upon the completion of
this public offering. The purchase price will be paid from a portion of
this public offering.
- Top Copy, (Pty), Ltd., located in Cape Town, South Africa, is a small but
highly efficient digital, color copy shop that offers full offset
printing. Catering to smaller businesses as well as the retail trade, Top
Copy, which is similar to Kinko's in the U.S., provides an ideal platform
to spearhead expansion in this segment of the digital copy and printing
industry in South Africa. We signed an agreement on May 20, 1999 to
purchase all of the assets of Top Copy. We agreed to pay 2,560,000 South
African Rands (presently convertible into approximately $418,300 U.S.
dollars). Under the agreement, the closing was scheduled for August 25,
1999. By letter agreement dated December 2, 1999, the date for closing of
this acquisition has been extended to January 31, 2000. At the closing, we
will also have to pay interest on the purchase price at the rate of 6.5%
per annum from August 25, 1999. The purchase price will be paid from a
portion of this public offering.
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- Virtual Colour Group, (Pty), Ltd. of Cape Town, South Africa was
originally formed in 1996. Virtual Colour has become the leader in digital
printing technology in South Africa. Designers work with both PC and Mac
files and produce high end, full color brochures, catalogues, and
magazines. A fully integreated, 100% digital, full color operation,
Virtual Colour's forty-plus employees rely mainly on it's Heidelberg
Digital Press. This company garners approximately 65% of its business over
the Internet and has built a strong customer base even in Western and
Central Europe, as well as Africa. We have agreed to purchase the assets
of four businesses comprising the Virtual Colour Group.
We signed an agreement on September 11, 1999 to purchase the assets of
Virtual Colour Property and agreed to pay 920,996 South African Rands
(presently convertible into approximately $150,489 U.S. dollars). At the
closing, certain liabilities will be paid from the closing proceeds of this
public offering. We also signed an agreement to purchase the assets of
Virtual Colour Printing cc and agreed to pay 836,178 South African Rands
(presently convertible into $136,630 U.S. dollars). At the closing, certain
liabilities will be paid from the closing proceeds of this public offering.
We also signed an agreement on September 11, 1999 to purchase the assets of
Virtual Support cc and agreed to pay 200,000 South African Rands (presently
convertible into $32,679 U.S. dollars). At the closing, certain liabilities
will be paid from the closing proceeds of this public offering. We also
signed an agreement to purchase the assets of Virtual Colour cc and agreed
to pay 473,418 South African Rands (presently convertible into $77,355 U.S.
dollars). At the closing, certain liabilities will be paid from the closing
proceeds of this public offering.
The agreements with Virtual Colour Property, Virtual Colour Printing,
Virtual Support and Virtual Colour require that we enter into management
agreements with Keith Redman, Herbert Trischler and Alois Koch prior to the
closing. The agreement with Virtual Support requires us to enter into a
management agreement with Messrs. Redman, Trischler, Koch and Aardt Davidtz
prior to the closing. It is also a condition precedent to the closing of
each agreement that we become listed on the Nasdaq National Market System.
The closing date of each agreement is January 31, 2000. The purchase prices
for all of the assets of the Virtual Color Group being purchased, as well
as the liabilities to be satisfied at the closings, will be paid from a
portion of this public offering.
We intend to pursue an acquisition strategy that seeks to consolidate the
highly fragmented digital printing industry. We believe these acquisitions will
be comprised of two types of potential target businesses: larger companies with
existing management that is well versed in the digital printing industry; and
smaller businesses that can easily be consolidated with our existing
infrastructure. Our approach in the past has been to stay in those geographical
areas that our management is familiar with, such as the Southeastern and Eastern
United States and the Republic of South Africa.
Our approach to acquiring companies in new markets will be to identify at
least one larger acquisition in that new market and then compliment it with
smaller acquisitions in areas that are in close proximity to the first
acquisition. We will be generally unwilling to enter a new market through an
acquisition unless the target company being acquired is one of the market share
leaders and provides the critical mass necessary to act as a platform for us to
build within that new market. We believe that there are attractively priced
target acquisitions in the Southeastern United States and abroad, and that for
the foreseeable future, our growth by acquisition strategy will be concentrated
within that geographic area as well as additional acquisitions in the Republic
of South Africa.
We believe that acquisitions and consolidation of other digital printing
businesses will offer the following cost savings and synergies associated with
our business:
- Decreased operating costs through elimination of duplicative
administrative costs;
- Decreased production and distribution costs through integration with a
larger, geographically adjacent entity;
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- Decreased purchasing costs through realization of economies of scale;
- Improved management control through centralized accounting and reporting
systems;
- Improved marketing and advertising efficiencies.
We are not currently negotiating any additional acquisitions, and there can
be no assurance that we can successfully negotiate any additional acquisitions
in the future.
OUR SALES AND MARKETING STRATEGY
We intend to focus our sales and marketing strategy as follows:
- We will utilize both traditional and Internet marketing approaches to
selling our digital products. Our primary means of marketing will be
focused on the Internet. We take orders on-line. While a few printers do
offer on-line ordering, they are limited to traditional business printing.
We offer a wide range of digital services not confined to printing alone.
We believe this gives us a unique marketing edge and the ability to build
a strong brand name.
- Internet and traditional marketing means will be implemented by us with an
aggressive sales staff coupled with a targeted corporate, regional, and
national marketing campaign. Our immediate focus will be primarily on
advertising agencies, large retailers, mass merchandisers, truck fleet
operators, trade show and convention organizations, municipalities,
political organizations, and large corporate customers, all of which have
many digital needs besides printing.
COMPETITION
We compete with numerous commercial digital printers, some of which are
larger, more established and have greater financial and other resources. Our
competitors include MasterGraphics, Inc., Consolidated Graphics, Inc.,
Integrated Graphics, Inc., Omni Graphics and Imagex, Inc. Our main competition
is the small to medium sized digital print shop.
We believe we can be competitive in the digital printing market by
differentiating ourselves in the areas of quality, the versatility of our
products, turnaround time, technology, full-service capability, flexibility,
service and price.
EMPLOYEES
As of December 1, 1999, we had approximately eight full-time employees, of
whom one was in sales, services and distribution, four were in our technical and
graphics design areas, and three in administration. Our employees are
non-unionized and we believe that we enjoy good relations with them. As of the
date of this prospectus, we have hired a systems administrator for our in-house
server and Internet operations. We have also hired two new designers and are
currently interviewing additional hires, including a position for a national
sales manager.
FACILITIES
Our main executive office facility is located in Madison, Tennessee, where
we lease approximately 5,500 square feet of office space for $3,500 per month
under a lease agreement entered into in March, 1997, which lease expires in
March, 2001. We have 15 months remaining on the term of our current lease with
an option to renew the lease for an additional three-year term. We believe this
facility is satisfactory for our uses for the foreseeable future.
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FACILITIES ASSOCIATED WITH OUR ACQUISITIONS
Stonehouse Graphics, one of our target acquisitions in Johannesburg, South
Africa, leases a brand new, all brick, modern business facility, which is the
subject of a lease agreement entered into by Stonehouse Graphics on October,
1999, providing for a five-year lease at R35,000 (South African Rands) per month
(US$5,800), with an option to renew the lease for an additional five-year term.
This facility consists of approximately 2,700 square feet of office space,
20,000 square feet of production area, 2,000 square feet of design area, and
5,000 square feet of covered area for vehicle and bus installations, and
billboard applications. The Stonehouse facility is adequate for current and
prospective operations.
Magnum Digital Services, Inc., located in Coconut Creek, Florida, also
leases its office and manufacturing facility under a three-year lease agreement
entered into in October 1997, which provides for a monthly rental payment of
$2,480 per month. The Magnum Digital facility is 3,000 square feet, 2,400 square
feet of which is used as a production area. The remaining 600 square feet is
used as office space. The lease agreement has two years remaining in the
original term of the lease. The facilities are adequate for current and future
operations.
Advertising That Works, Inc., located in East Point, Georgia has its
business facility located on 1.125 acres of prime commercial real estate located
near Atlanta, Georgia. The facility includes four concrete block buildings
totaling approximately 16,000 square feet of which 10,500 square feet are used
for production, with the balance used as office and design space. This entire
facility includes a one-story metal building with 6,000 square feet of space
also available. These premises are financed through a promissory note and deed
of trust with approximately 13 years remaining on the term. Monthly payments of
$2,600 per month are current.
Virtual Colour Group currently has three locations. There are two locations
in Cape Town, South Africa and one in Paarl, South Africa. The main office for
Virtual Color is owned by that company. This home office consists of
approximately 8,000 square feet of usable space. The remaining locations are
approximately 4,000 square feet each and are leased at approximately R12,000
($US 2,000) per month with approximately two years remaining on each lease. This
facility is adequate for current and prospective operations.
Top Copy is located in Cape Town, South Africa in a retail center. The lease
is for approximately 3,000 square feet with an additional 3,000 square feet
currently undergoing leasehold improvements, under a lease agreement entered
into in September 1999. There is currently three years remaining on the lease at
approximately R20,000 per month (US$3,267). This facility is adequate for
current and prospective operations.
Our Jamberry Lake Digital Media facility is located in Summit, New Jersey.
The lease is for approximately 2,500 square feet under a lease agreement entered
into in October 1999. There is currently almost 3 years left on a three year
lease at approximately $3,500 per month. This facility is adequate for current
and prospective operations.
LEGAL PROCEEDINGS
Neither we, nor the companies we intend to acquire are involved in any
material pending, or to our knowledge threatened, legal proceedings. From time
to time, we may become a party to various legal proceedings arising in the
ordinary course of business.
29
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
Our executive officers, directors, key employees and our nominees for
directors, and their ages as of December 1, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------------------------------------------------------
<S> <C> <C>
Roger D. Finchum, Sr. ............... 52 Chairman of the Board, Chief Executive Officer,
President and Director;
Roger D. Finchum, Jr. ............... 31 Vice-President of U.S. Operations, and Director;
Erich J. Fischer..................... 28 Vice-President of Design;
Lee Watson........................... 47 Chief Financial Officer;
Reginald W.H. Burrows................ 53 Vice-President of Foreign Operations; and Director;
Greg E. Dukoff....................... 35 Director-Nominee;
William P. Jones..................... 53 Director-Nominee;
Richard W. Weachter.................. 59 Director-Nominee.
</TABLE>
ROGER D. FINCHUM, SR., is our founder and has served as our chief executive
officer, president and chairman of our board of directors since our formation in
July 1997. From June 1996 to July 1997, Mr. Finchum was president of Express
Signs and Graphics, Inc., a small digital printing company located in Madison,
Tennessee, and also served as a director of Media Arts & Graphics Pty, Ltd., of
Cape Town, South Africa. Between September 1994 and June 1995, Mr. Finchum
served as vice president of The Poster Factory, Inc. and Digital Arts &
Graphics, Inc., both of Hendersonville, Tennessee. Mr. Finchum has served in
several corporate positions over the years in sales, marketing and advertising
for various printing and graphic arts companies. For several years prior to
that, Mr. Finchum was involved in various management capacities with Monarch
Minerals & Mining, a mineral extraction concern headquartered in the United
States and South Africa with hard rock mining extractions in South Africa and
neighboring countries.
ROGER D. FINCHUM, JR., has been our vice-president and a director since we
were formed in July 1997. Mr. Finchum has worked as a digital print specialist
for various companies in the Nashville, Tennessee area during the five years
prior to joining us. From January 1992 to June 1994, Mr. Finchum was a print
specialist with ColorQuick, Inc. From February 1994 to September 1995,
Mr. Finchum was a print specialist with Fast Signs, Inc., and from October 1995
to January 1996, Mr. Finchum was a print specialist with Signs Now, Inc.
Mr. Finchum served in the Marine Corps from 1987 to 1991. During which time he
served as a special operations team leader. He is also a Gulf War Veteran.
Mr. Finchum has been a part-time student at Belmont University in Nashville,
Tennessee and expects to graduate in December 2000 with Bachelor of Arts degrees
in both History and Philosophy.
ERICH J. FISCHER, is our vice president of design. Mr. Fischer became our
vice-president in March 1996. From 1994-1996 Mr. Fischer served as manager and
head designer for Signs Now in Nashville, Tennessee. From 1992-1994 Mr. Fischer
was the assistant supervisor of marketing for Elrick & LaVange. Mr. Fischer has
been a freelance graphic artist, writer, musician and photographer since 1990,
and a graphics designer in the sign industry since 1994 with a national
franchise company [name the company], and has done design work for such events
as the Super Bowl, the Grammy Awards, CMA Awards, Dove Awards, and Nashville's
Summer Lights Festival. Mr. Fischer received his Bachelor of Science degree in
marketing and management from McNeese State University in Lake Charles,
Louisiana in May 1992.
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<PAGE>
LEE WATSON, is a certified public accountant and has been our chief
financial officer since joining us in January 1999. Since June 1989, Mr. Watson
has served as an independent consultant performing financial consulting services
to Tennessee-based companies with annual revenues between $5,000,000 and
$20,000,000. Prior to 1989, Mr. Watson served as the controller for Northern
Lumber, a large hardwood lumber manufacturer and exporter. From June 1973 until
September 1975, Mr. Watson was employed as an accountant with Coopers & Lybrand.
In 1973, Mr. Watson received his bachelor of science degree from Manchester
College, Detroit, Michigan, in 1973
REGINALD W. H. BORROWS, has been one of our directors since July 1999.
Mr. Burrows graduated from the South African Institute of Industrial
Engineering. After having held several positions with some of South Africa's
leading industrial companies, he founded Sigma Graphics Ltd. in 1979. After many
years of successful operations, he sold the business to the Walton Group, South
Africa's largest stationer. After selling his business Mr. Burrows was retained
as a senior manager within the group. He served on their board and held
responsibility for operating 19 locations in the Western Cape Region, including
Namibia, where he was a major part of Walton's acquisitions in that country.
From 1993-1998 Mr. Burrows served as a senior manager for Walton Group in South
Africa.
GREG DUKOFF, will become a director upon the completion of the company's
public offering. Mr. Dukoff has been the President and Chief Executive Officer
of Jamberry Lake Digital Media, Inc. since its inception in August 1999. He
served as the Chief Financial Officer and as a Director of Rolling Pin Kitchen
Emporium, Inc. since July, 1998 and as its Chief Executive Officer since
March 1999. Prior to joining Rolling Pin's predecessor (Gaylord
Companies, Inc.) to re-organize the Company out of bankruptcy, he spent the
first 13 years of his career in the managed funds and hedge funds industry, most
recently as the head of ABN AMRO Chicago Corporation's Managed Funds Department
and as the Director of Managed Futures and Hedge Funds at Prudential
Securities, Inc. before that. Mr. Dukoff has a Bachelor of Business
Administration with a concentration in banking, finance and investment from
Hofstra University, Hempstead, New York.
WILLIAM P. JONES, will become a director upon completion of the public
offering. Mr. Jones has been engaged in the private practice of law in
Hendersonville, Tennessee since 1974. Mr. Jones received a bachelor of arts
degree from The Citadel in Charleston, South Carolina, in 1968 and attended
Tulane University School of Law in New Orleans, Louisiana, from 1971 through
1974 and received a doctor of jurisprudence degree in 1974. Since 1983,
Mr. Jones has owned and operated several Bonanza Restaurants in the states of
Kentucky, Georgia and Tennessee and two mortgage companies dealing in commercial
and residential lending.
RICHARD W. WEACHTER, will become a director upon completion of the public
offering. From March 1997 to December 1999, Mr. Weachter served as the chief
financial officer and a director of Northstar Environmental Group, Inc. From
January 1995 to March 1997, Mr. Weachter was the president of Nationwide
Studios, Inc. Mr. Weachter received his bachelor of science in business
administration from Youngstown University in 1963 and attended graduate school
in business administration at the University of Detroit in Detroit, Michigan.
DIRECTORS' COMPENSATION
Any non-employee directors will receive $1,000 for attendance at each
meeting of the board of directors or any committee thereof and will be
reimbursed for their out-of-pocket expenses in connection with their attendance
at any such meeting. We anticipate that our board will meet at least twice each
year. No directors' fees have been paid to date.
BOARD COMPOSITION
Our board of directors presently consists of three members who serve as
directors for one-year terms or until their successors are duly elected by our
shareholders and then qualify as directors. We anticipate
31
<PAGE>
expanding the board of directors to six members at the time that we complete our
initial public offering. We have three nominees that we intend to elect as
directors at the time our public offering is completed and our pending
acquisitions consummated. Two of our board members are related as father and
son. Vacancies in the office of any director may be filled by a majority of the
directors then in office.
Our board appoints our chief executive officer, and all other executive
officers, including our president, are appointed by our chief executive officer.
We have agreed that for two years from the completion of this offering, that
Nutmeg Securities, Ltd. may appoint Daniel F. Guilfoile as an observer to our
board of directors, without any voting rights or privileges that our directors
have. If the representative chooses to designate Mr. Guilfoile to attend our
directors' meetings as an observer, we have agreed to reimburse him for
out-of-pocket expenses in connection with his attendance.
COMMITTEES OF THE BOARD
Upon completion of this offering, the board of directors will establish two
standing committees; an audit committee and a compensation committee. Our audit
committee will recommend to our entire board of directors the independent public
accountants to be engaged by us, review the plan and scope of our annual audit,
review our internal controls and financial management policies with our
independent public accountants and review all related party transactions. The
compensation committee will review and recommend to our board, the compensation
and benefits to be paid to our officers and directors, administer the stock
option plan we intend to put in place, approve the grant of options under the
stock option plan and establish and review general policies relating to
compensation and benefits of our employees.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid during our fiscal
year ended November 30, 1998 to our chief executive officer, Roger D. Finchum,
Sr. No other executive officer received a salary and bonus in excess of $100,000
in this year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------------- OTHER COMPENSATION
SALARY($) BONUS($) -----------------------------
------------------- ------------------- OTHER ANNUAL ALL OTHER
NAME AND POSITION 1998 1999 1998 1998 COMPENSATION COMPENSATION
- ----------------- ---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Finchum, Sr., chief
executive officer......... -0- -0- -0- -0- -- --
</TABLE>
The aggregate compensation paid to all persons who served in the capacity of
a director or executive officer during the fiscal years that ended November 30,
1998 and 1997, 3 persons, was $60,000 and $ , respectively.
32
<PAGE>
OPTION GRANTS DURING THE YEARS
ENDED NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
PERCENT OF TOTAL OPTIONS
-----------------------------------------------------------------------------
NUMBER OF
SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN
GRANTED FISCAL YEAR
----------------------- ----------------------- EXERCISE EXPIRATION
NAME 1998 1997 1998 1997 PRICE($/SH) DATE
- ---- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Finchum, Sr., chief
executive officer........... -0- -0- -- -0- -- --
</TABLE>
No options were granted to any person who served as an officer or director
during the fiscal year that ended November 30, 1997 or 1998.
EMPLOYMENT AGREEMENTS
On September 16, 1999, we entered into a series of employment agreements
with the following people:
Roger D. Finchum, Sr. was employed as our chief executive officer and
president for a term of two years. Mr. Finchum's employment will automatically
be extended for additional two year periods unless he is terminated according to
the terms of his employment agreement. Mr. Finchum will have a base salary in
1999 of $160,000 per year. The following year his salary shall increase by 10%.
Subsequent increases in Mr. Finchum's salary are subject to review by our
compensation committee which will be established after we receive the full
proceeds of this public offering. Mr. Finchum is eligible for both cash and
stock bonuses within the discretion of our board of directors. The agreement
also has provisions that, for a period of one year after the termination of his
employment, Mr. Finchum will not compete with us, nor solicit our employees or
customers.
Roger D. Finchum, Jr. was employed as the vice president for our U.S.
operations for a term of two years. Mr. Finchum's employment will automatically
be extended for additional two year periods unless he is terminated according to
the terms of his employment agreement. Mr. Finchum will have a base salary in
1999 of $78,000 per year. The following year his salary shall increase by 10%.
Subsequent increases in Mr. Finchum's salary are subject to review by our
compensation committee which will be established after we receive the full
proceeds of this public offering. Mr. Finchum is eligible for both cash and
stock bonuses within the discretion of our board of directors. The agreement
also has provisions that, for a period of one year after the termination of his
employment, Mr. Finchum will not compete with us, nor solicit our employees or
customers.
Erich Fischer was employed as our vice president of marketing for a term of
two years. Mr. Fischer's employment will automatically be extended for
additional two year periods unless he is terminated according to the terms of
his employment agreement. Mr. Fischer will have a base salary in 1999 of $48,000
per year. The following year his salary shall increase by 10%. Subsequent
increases in Mr. Fischer's salary are subject to review by our compensation
committee which will be established after we receive the full proceeds of this
public offering. Mr. Fischer is eligible for both cash and stock bonuses within
the discretion of our board of directors. The agreement also has provisions
that, for a period of one year after the termination of his employment,
Mr. Fischer will not compete with us, nor solicit our employees or customers.
Lee Watson was employed as our chief financial officer for a term of two
years. Mr. Watson's employment will automatically be extended for additional two
year periods unless he is terminated according to the terms of his employment
agreement. Mr. Watson will have a base salary in 1999 of $72,000 per year. The
following year his salary shall increase by 10%. Subsequent increases in
Mr. Watson's salary
33
<PAGE>
are subject to review by our compensation committee which will be established
after we receive the full proceeds of this offering. Mr. Watson is eligible for
both cash and stock bonuses within the discretion of our board of directors. The
agreement also has provisions that, for a period of one year after the
termination of his employment, Mr. Watson will not compete with us, nor solicit
our employees or customers.
The following employment agreements are to become effective on the
completion of this public offering and the closing of the stock and assets
acquisitions described in this prospectus:
Chris England is to be employed as president of Advertising That Works, Inc.
for a term of two years. Mr. England's employment will automatically be extended
for additional two year periods unless he is terminated according to the terms
of his employment agreement. Mr. England will be paid $100,000 per year
commencing from the closing of the purchase of the outstanding stock of the
company. The $100,000 is divided into $80,000 for salary and $20,000 as advance
compensation for not competing with us should Mr. England's agreement not be
renewed or extended, or should his agreement be terminated according to its
provisions. Mr. England is eligible for both cash and stock bonuses within the
discretion of our board of directors. The agreement also has provisions that,
for a period of two years after the termination of his employment, Mr. England
will not compete with us, nor solicit our employees or customers.
Stonehouse Graphics (Pty) Limited entered into an agreement to employ Nolan
Weight as its general manager for a term of two years. Mr. Weight's employment
will automatically be extended for additional two year periods unless he is
terminated according to the terms of his employment agreement. Mr. Weight will
be paid a base salary of South African Rands 200,000 per year, commencing from
the closing of the purchase of the outstanding stock of Stonehouse.
Mr. Weight's base salary will be reviewed after one year. Additionally,
Mr. Weight will be paid South African Rands 100,000 per year, for not competing
with us should Mr. Weight's agreement not be renewed or extended, or should his
agreement be terminated according to its provisions. Mr. Weight is eligible for
cash bonuses within the discretion of our board of directors. The agreement also
has provisions that, for a period of two years after the termination of his
employment, Mr. Weight will not compete with us, nor solicit our employees or
customers.
Reginald Burrows is to be employed as a the vice president for a term of two
years. Mr. Burrows's employment will automatically be extended for additional
two year periods unless he is terminated according to the terms of his
employment agreement. Mr. Burrows will have a base salary in 1999 of $96,000 per
year. The following year his salary shall increase by 10%. Subsequent increases
in Mr. Burrows's salary are subject to review by our compensation committee
which will be established after we receive the full proceeds of this offering.
Mr. Burrows is eligible for both cash and stock bonuses within the discretion of
our board of directors. The agreement also has provisions that, for a period of
one year after the termination of his employment, Mr. Burrows will not compete
with us, nor solicit our employees or customers.
Greg E. Dukoff is to be employed as president of Jamberry Lake Digital
Media, Inc. for a term of three years. Mr. Dukoff's employment will
automatically be extended for additional one year periods unless he is
terminated according to the terms of his employment agreement. Mr. Dukoff will
have a base salary in 1999 of $120,000 per year. In any renewal period, his
salary shall increase no less than 15%. Mr. Dukoff is eligible for a minimum
cash bonus of $30,000 in any fiscal year that the gross revenues of Jamberry
exceed $2.5 million. The agreement also grants Mr. Dukoff certain stock options.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation and our by-laws contain provisions that
eliminate the personal liability of our directors to us or our stockholders for
monetary damages for breach of their fiduciary duty as a director to the fullest
extent permitted by the Nevada General Statutes, except for liability for:
- any breach of their duty of loyalty to us or our stockholders;
34
<PAGE>
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions;
- any act or omission occurring prior to the date of our incorporation; and
- any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation and by-laws also contain provisions that
require us to indemnify our directors and permits us to indemnify our
incorporators, directors and officers to the fullest extent permitted by Nevada
law, including circumstances where indemnification would be discretionary.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and persons controlling us pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is therefore, unenforceable.
35
<PAGE>
CERTAIN TRANSACTIONS
Since inception, we have borrowed working capital from time to time from our
founding shareholder, Roger D. Finchum, Sr. During our fiscal year ended
November 30, 1997, Mr. Finchum advanced the sum of $7,500 for working capital.
During our fiscal year ended November 30, 1998, Mr. Finchum advanced a total of
$580,975 in working capital. During that same fiscal year, we repaid a total of
$510,470 of the advances made for that year to Mr. Finchum from the proceeds of
our private placements and from our revenues during that period.
These advances to us for working capital by Mr. Finchum were unsecured
borrowings by us. At the end of each of the fiscal years we borrowed money, we
entered into a form of promissory note in the amount of the advances outstanding
at the end of each year. We entered into a promissory note dated November 30,
1997 in the amount of the advances due to Mr. Finchum at that date. We also
entered into a promissory note dated November 30, 1998 in the amount of the
cumulative advances due to Mr. Finchum at that date. Each note accrued interest
at the rate of 7% per annum and are due on demand by the note holder.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus. The information
in this table provides the beneficial ownership for:
- each person known by us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock;
- each of our directors and director-nominees and executive officers; and
- our executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner is the same
as our principal office location at 537 Myatt Drive, Madison, Tennessee 37115.
Unless otherwise indicated, the individuals in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
Beneficial ownership is determined in accordance with the rules and regulations
of the Securities and Exchange Commission. The number of shares beneficially
owned by a person and the percentage ownership of that person includes shares of
our common stock issuable upon exercise of warrants held by that person, but not
those held by any other person, that are currently exercisable or exercisable
within 60 days from the date of this prospectus.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
NAMES AND ADDRESS OF NUMBER OF SHARES ---------------------------------
BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING*
- -------------------- ------------------ --------------- ---------------
<S> <C> <C> <C>
Roger D. Finchum, Sr.............................. 2,511,668 62.9% 41.6%
Roger D. Finchum, Jr.............................. 103,334 2.6% 1.7%
Erich Fischer..................................... 15,000 .37% .25%
Lee Watson........................................ 33,333 0.8% .55%
William P. Jones.................................. 166,667 4.1% 2.8%
Richard W. Weachter............................... -0- -0- -0-
Max Herzog........................................ 408,000 10.1% 6.8%
SchlobPlatz 1
D-83684
Tegerrsee, Germany
All directors and executive officers as a group
(5) persons).................................... 2,830,002 70.6% 46.9%
</TABLE>
- ------------------------
* After Offering Assumes 6,039,249 shares.
36
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 24,000,000 shares of common stock,
$.001 par value per share and 1,000,000 shares of preferred stock, $.001 par
value per share, the rights and preferences of which may be established from
time to time by our board of directors. As of December 1, 1999, there were
4,005,639 shares of our common stock issued and outstanding, and 33,610 shares
of our preferred stock outstanding.
The description of our securities are summaries and do not contain all the
information that may be important to you. For more complete information, you
should read our certificate of incorporation and all amendments, which are all
filed as exhibits to the registration statement of which this prospectus forms a
part.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and there are no cumulative voting
rights. Accordingly, holders of a majority of the shares of our common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by our board of directors out of
funds legally available therefore, subject to any preferential dividend rights
of any outstanding shares of preferred stock. Upon the liquidation, dissolution
or winding up of us, holders of our common stock are entitled to share in our
assets remaining after the payment of all liabilities and liquidation
preferences on any outstanding shares of preferred stock. Holders of our common
stock have no preemptive, subscription, redemption or conversion rights, and
there are no redemption or sinking fund provisions applicable to our common
stock. All outstanding shares of common stock are, and the shares offered by us
in this offering will be, when issued and paid for, duly authorized, validly
issued, fully paid and non-assessable. The rights, preferences and privileges of
holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.
PREFERRED STOCK
We have 33,610 shares of preferred stock outstanding. Our board of directors
has the authority, without stockholder approval, to issue up to an aggregate of
1,000,000 shares of preferred stock, in one or more series. The board may fix
the rights, preferences, privileges and restrictions of the shares of each
series, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, and to fix the number of shares
constituting any series and the designations of these series. These shares may
have rights senior to our common stock. The issuance of preferred stock may have
the effect of delaying or preventing a change of control of us. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of our common stock or could adversely affect the
rights and powers, including voting rights, of the holders of our common stock.
We have no present plans to issue any shares of preferred stock.
The holders of the issued and outstanding shares of preferred stock are
entitled to receive dividends only as declared on a discretionary basis by the
board of directors. Dividends, if any, payable on the preferred stock are in
preference to dividends payable on the common stock and are non-cumulative. The
holders of the outstanding preferred stock have a liquidation preference to
holders of our common stock, which is an amount equal to $7.50 per share plus
any declared but unpaid dividends.
Two years after the date we issued our preferred stock, we may elect to
redeem the outstanding preferred stock by paying the amount of the liquidation
preference. Our outstanding preferred stock is automatically converted, on a
one-for-one basis, in the event that we conduct and underwritten public offering
of our common stock equal to or greater than $11.25 per share and the amount of
the public
37
<PAGE>
offering exceeds $7,500,000. Holders of our outstanding preferred stock have
voting rights in parity with our common stockholders.
The holders of our outstanding preferred stock are entitled to piggyback
registration rights on any registration statement filed by us after this public
offering, subject to the right of our underwriters, in view of market
conditions, to reduce the number of shares proposed to be registered in our
subsequent public offerings. We have agreed to pay the expenses of two piggyback
registrations, exclusive of underwriting discounts and special fees of counsel
representing the selling shareholders. Expenses associated with any other
registrations are to be borne pro rata among the selling shareholders and us, if
we participate in the offering.
COMMON STOCK PURCHASE WARRANTS
We issued 33,610 common stock purchase warrants to our private placement
investors, which are exercisable for a five-year term at a price of $5.00 per
share of common stock. None of these warrants have been exercised as of the date
of this prospectus. These warrants include provisions requiring an adjustment in
the exercise price and the number in the event that we have a stock split,
recapitalization or a similar event that alters our outstanding capitalization.
THE UNDERWRITER'S WARRANTS
In connection with the offering, we have agreed to issue and sell to the
representative and/or its designees, at the closing of this offering, for
nominal consideration, five year warrants to purchase 200,000 shares of common
stock. The representative's warrants are exercisable at any time during a period
of four years commencing at the beginning of the second year after their
issuance and they are exercisable at a price that is equal to 165% of the
initial public offering price of the common stock in this offering. The shares
of common stock issuable upon exercise of the representative's warrants are
identical to those offered to the public. The representative's warrants contain
anti-dilution provisions providing for adjustment of the number of securities
issuable upon the exercise of the warrants under certain circumstances,
including stock dividends, stock splits, mergers, acquisitions and
re-capitalization's. The holders of the representative's warrants will have no
voting, dividend or other stockholder rights with respect to the warrants.
We have agreed to provide the holders of the representative's warrants
certain registration privileges. During the four year period beginning one year
after the effective date of our registration statement, we have agreed to use
our best efforts to register, on one occasion, all of the representative's
warrants and all of the common stock to be issued upon exercise of the
representative's warrants, when and if requested by the representative. Our
agreement includes granting to the representative a one-time demand registration
right covering the common stock during the four year period and maintaining the
effectiveness of the registration statement for at least nine months, at our
sole expense, except for commissions and selling brokers' costs. In addition to
this one time demand registration right, we agreed to piggyback registration
rights if requested by the representative, during the term of the
representative's warrants, to include in our registration statement next filed,
the shares of common stock underlying the representative's warrants for
registration, and to maintain a current registration statement covering those
shares for a 12 month period.
TRANSFER AGENT AND REGISTRAR
We intend to make application to appoint American Stock Transfer & Trust
Company, New York, New York as our transfer agent and registrar.
38
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for any of our
securities and there can be no assurance that a significant public market for
any of our securities will be developed or sustained after this offering. Sales
of substantial amounts of our common stock in the public market after this
offering, or the possibility of those sales occurring could adversely affect the
prevailing market price for our securities and our ability to raise equity
capital in the future.
Upon completion of this offering, there will be 6,305,639 shares of our
common stock outstanding, assuming the full exercise of the underwriter's
over-allotment option. The 2,000,000 shares of common stock being offered by
this prospectus, plus the 300,000 shares of our common stock if the
overallotment option is exercised, will be freely tradable without restriction
under the Securities Act, unless purchased by an affiliate of ours, as that term
is defined under the rules and regulations of the Securities Act, which will be
subject to the resale limitations of Rule 144 under the Securities Act.
The remaining 4,005,639 shares of our common stock are considered
"restricted securities" as defined in Rule 144. These shares were issued in
private transactions and have not been registered under the Securities Act and,
therefore, may not be sold unless registered under the Securities Act or sold
pursuant to an exemption from registration, such as the exemption provided by
Rule 144.
In general, under Rule 144, beginning 90 days after the completion of this
offering, a person, or persons whose shares are aggregated, who has beneficially
owned restricted shares for at least one year, including the holding period of
any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of:
- one percent, or approximately 600,000 shares following this offering, of
the number of shares of our common stock then outstanding; or
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
ours at any time during the 90 days preceding a sale, and who has beneficially
owned the shares for at least two years, including the holding period of any
prior owner who is not an affiliate of ours, would be entitled to sell those
shares under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Beginning 90 days after the completion of this offering, shares of common
stock issuable upon exercise of options granted by us prior to the effective
date of the registration statement will be eligible for sale in the public
market pursuant to Rule 701 under the Securities Act, subject to the lock-up
agreements described below. In general, Rule 701 permits re-sales of shares
issued under certain compensatory benefit plans commencing 90 days after the
issuer becomes subject to the reporting requirements of the Securities Exchange
Act in reliance upon Rule 144, but without compliance with restrictions,
including the holding period requirements, contained in Rule 144.
Our existing stockholders, our executive officers and directors, have agreed
that, for a period of 12 months from the completion of this offering, they will
not, without the prior written consent of Nutmeg Securities, Ltd.:
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock.
39
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below,
severally and not jointly, have agreed through Nutmeg Securities, Ltd. as the
representative of the underwriters, to purchase from us, and we have agreed to
sell to the underwriters, the aggregate number of shares set forth opposite
their respective names:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Nutmeg Securities, Ltd......................................
Total:.................................................. 2,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters under that agreement are subject to certain conditions precedent,
including the absence of any material adverse change in our business and the
receipt of certain certificates, opinions and letters from our counsel and our
independent public accountants. The underwriters are committed to take and to
pay for all of the shares offered hereby, if any are purchased. In the event of
a default by any of the underwriters, the purchase commitments of the
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated.
The underwriters will offer the shares to the public at the public offering
price set forth on the cover page of this prospectus. The underwriters may allow
some dealers concessions of not more than $ per share. The underwriters also
may allow, and those dealers may re-allow, a concession of not more than $ per
share to some other dealers. The public offering price, concessions, and
re-allowances may be changed after the completion of this offering.
We granted to the underwriters an option, exercisable within 45 days after
the effective date of the registration agreement, to purchase up to an
additional 300,000 shares of common stock at the initial public offering price
less the underwriting discounts and non-accountable expenses allowance. The
underwriters may exercise this option only to cover over-allotments, if any. If
any shares and/or warrants are purchased pursuant to this option, the
underwriters will severally purchase the shares and/or warrants in approximately
the same proportion as set forth above.
We agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments the underwriters and their controlling persons may be
required to make in respect thereof.
We also agreed to pay to the representative, a non-accountable expense
allowance equal to three percent of the gross proceeds of this offering, $25,000
of which has been paid to date.
We also agreed to pay all expenses in connection with qualifying the
securities under the laws of those states that the representative may designate,
including fees and expenses of counsel retained for these purposes by the
representative, and the costs and expenses in connection with qualifying the
offering with the National Association of Securities Dealers, Inc.
The representative of the underwriters has informed us that the underwriters
do not expect sales of the shares offered by this prospectus to be made to
discretionary accounts to exceed five percent of the total number of shares
offered.
Our existing stockholders, our executive officers and directors, have agreed
that, for a period of 12 months from the completion of this offering, they will
not, without the prior written consent of Nutmeg Securities, Ltd.:
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of,
40
<PAGE>
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock.
We have agreed to issue and sell to the representative of the underwriters
and/or its designees, for nominal consideration, five-year warrants to purchase
200,000 shares of our common stock. The representative's warrants are
exercisable for a period of four years commencing one-year after the date of
issuance at a price equal to 165% of the initial public offering price per share
of common stock. The representative's warrants contain anti-dilution provisions
providing for adjustments of the exercise price and the number of shares
issuable upon exercise, upon the occurrence of certain events, including stock
dividends, stock splits, and recapitalizations. The representative's warrants
contain certain demand and piggyback registration rights relating to the shares
of common stock issuable thereunder. For the life of the representative's
warrants, the representative will have the opportunity to profit from a rise in
the market price of our shares of common stock. The representative's warrants
are restricted from sale, transfer, assignment or hypothecation for the one year
period from the date of this prospectus, except to officers or partners of the
underwriters and members of the selling group and/or their officers or partners.
We agreed to grant the representative a right of first refusal to act as
underwriter, placement agent or investment banker for a period of 12 months
after the completion of this offering for any sale of securities made by us in
transactions which are valued equal to or greater than $5,000,000 in the
aggregate.
We agreed that for two years from the completion of this offering, the
representative may designate Daniel F. Guilfoile of Nutmeg Securities, Ltd. as
an observer to the board of directors. This observer will have no voting
privileges as a director but will be entitled to receive notice of our
directors' meetings and a right to receive information considered by our board.
The representative has not yet exercised this right to designate this observer.
We have agreed to reimburse the board observer for all out-of-pocket expenses
incurred in connection with the observer's attendance at meetings of our board
of directors.
Prior to this offering, there has been no public market for any of our
securities. The initial public offering price of the shares offered hereby will
be determined by negotiations between the representative and us. Among the
factors considered in determining the price, include the prevailing market
conditions, including the history of and the prospects for the industry in which
the company competes, an assessment of our management, our prospects, and our
capital structure. The offering price does not necessarily bear any relationship
to our assets, results of operations or net worth. There can be no assurance
that an active trading market will develop for any of the securities offered by
this prospectus, or that such securities will trade in the public market at or
above the initial public offering price.
The representative, on behalf of the underwriters, may engage in
over-allotments, stabilizing transactions, syndicate covering transactions and
penalty bids. An over-allotment involves syndicate sales in excess of this
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the shares of common stock and/or warrants
being offered so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the shares of common stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representative to reclaim a
selling concession from a syndicate member when the shares of common stock and
warrants originally sold by the syndicate member are purchased in a syndicate
covering transaction and penalty bids may cause the price of the shares of
common stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on the Nasdaq National Market
System or otherwise, and if commenced, may be discontinued at any time. In
addition, the underwriters may engage in passive market making transactions in
our securities on the Nasdaq National Market System in accordance with Rule 103
of Regulation M. Neither the underwriters nor we make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the securities offered by this
prospectus.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of our securities offered
in this prospectus. These actions include purchasing the securities to cover
some or all of a short position of any of the securities maintained by the
representative and the imposition of penalty bids.
41
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock being offered by this prospectus
will be passed upon for us by Gregory Bartko, Esq., of the Law Offices of
Gregory Bartko, Atlanta, Georgia, and Lynch Rowin Novack Burnbaum & Crystal,
P.C., New York, New York our legal counsel. Certain legal matters will be passed
upon for the underwriters by Gersten, Savage & Kaplowitz, LLP, New York, New
York.
EXPERTS
Our financial statements as of November 30, 1998 and for the year ended
November 30, 1998 included in this prospectus have been so included in reliance
on the report of Daszkal, Bolton & Manela, Certified Public Accountants, A
Partnership of Professional Associations, Boca Raton, Florida independent
auditors, given on the authority of such firm as experts in auditing and
accounting.
Our financial statements as of November 30, 1997 and for the year ended
November 30, 1997 included in this prospectus have been so included in reliance
on the report of Lee Watson, CPA, an independent auditor, of Nashville,
Tennessee.
The financial statements for Advertising That Works, Inc., 1199 MAC, Inc.
d/b/a Magnum Digital Services, Inc., and Display Arts, Inc. for the two year
period ended December 31, 1998 included in this prospectus have been so included
in reliance on the report of Daszkal, Bolton & Manela, Certified Public
Accountants, A Partnership of Professional Associations, Boca Raton, Florida
independent auditors, given on the authority of such firm as experts in auditing
and accounting.
The financial statements for Stonehouse Graphics (Pty), Ltd. for the
two-year period ended February 28, 1998 and 1999 included in this prospectus
have been so included in this prospectus in reliance on the report of Snyders &
Co., Chartered Accounts S.A., independent public accountants, given on the
authority of such firm as experts in auditing and accounting.
42
<PAGE>
COLORSMART.COM, INC.
F/K/A COLORSMART, INC.
FINANCIAL STATEMENTS
YEAR ENDED NOVEMBER 30, 1998
AND FROM
FEBRUARY 2, 1997 (INCEPTION) TO NOVEMBER 30, 1997
F-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-3 - F-4
Financial Statements:
Balance Sheets as of November 30, 1998 and 1997, and
unaudited for the Nine Months Ended August 31, 1999 and
1998...................................................... F-5
Statements of Operations for the Year Ended November 30,
1998, the period from February 2, 1997 (inception) to
November 30, 1997, and unaudited for the Nine Months Ended
August 31, 1999 and 1998.................................. F-6
Statements of Changes in Stockholders' Equity for the Year
Ended November 30, 1998, the period from February 2, 1997
(inception) to November 30, 1997, and unaudited for the
Nine Months Ended August 31, 1999 and 1998................ F-7
Statements of Cash Flows for the Year Ended November 30,
1998, the period from February 2, 1997 (inception) to
November 30, 1997, and unaudited for the Nine Months Ended
August 31, 1999 and 1998.................................. F-8
Notes to Financial Statements............................... F-9 - F-14
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Colorsmart.com, Inc.
We have audited the accompanying balance sheet of Colorsmart.com, Inc.
(f/k/a Colorsmart, Inc.) as of November 30, 1998, and the related statement of
operations, changes in stockholders' equity and cash flows for the year then
ended. 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 Colorsmart.com, Inc., as of
November 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
May 21, 1999
F-3
<PAGE>
COLORSMART.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, AUGUST 31,
1998 1997 1999 1998
------------ ------------ ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................ $ 408 $ 33,529 $ 3,903 $ 42,708
Accounts receivable......................... 10,910 -- -- 8,000
Inventories................................. 15,500 7,765 17,000 13,000
Loans receivable -- other................... -- -- -- --
--------- -------- ---------- ---------
Total current assets...................... 26,818 41,294 20,903 63,708
--------- -------- ---------- ---------
Property and equipment, net:.................. 268,729 193,735 447,691 243,601
--------- -------- ---------- ---------
Other Assets:
Security deposits........................... 3,875 250 51,530 3,875
Acquisition Costs........................... -- -- 301,535 --
--------- -------- ---------- ---------
Total other assets........................ 3,875 250 353,065 3,875
--------- -------- ---------- ---------
Total Assets.............................. $ 299,422 $235,279 $ 821,659 $ 311,184
========= ======== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................ $ 3,000 $ 65,204 $ -- $ --
Checks outstanding in excess of bank
balance................................... 8,410 -- -- --
Accrued expenses............................ 12,630 1,960 4,329 5,255
Current maturities of notes payable......... 3,489 3,000 116,690 13,119
Current maturities of capital leases........ 7,566 -- 73,757 --
Notes payable, stockholder.................. 78,005 7,500 73,548 40,261
--------- -------- ---------- ---------
Total current liabilities................. 113,100 77,664 268,324 58,635
--------- -------- ---------- ---------
Note payable, net of current portion........ 10,174 13,602 -- --
Capital lease obligations, net of current
portion................................... 35,430 -- 37,154 --
--------- -------- ---------- ---------
Total long term liabilities............... 45,604 13,602 37,154 --
--------- -------- ---------- ---------
Stockholders' equity:
Common stock, $.001 par value; authorized
24,000,000 shares; 3,326,583 and 2,452,288
shares issued and outstanding in 1998 and
1997, respectively........................ 3,329 2,492 4,006 3,329
Preferred stock, $.001 par value; authorized
1,000,000 shares, 0 shares issued and
outstanding............................... -- -- -- --
Additional paid-capital..................... 531,952 228,165 1,267,733 539,222
Accumulated deficit......................... (394,563) (86,644) (755,558) (290,002)
--------- -------- ---------- ---------
Total stockholders' equity................ 140,718 144,013 516,181 252,549
--------- -------- ---------- ---------
Total liabilities and stockholders'
equity.................................. 299,422 235,279 821,659 311,184
========= ======== ========== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
COLORSMART.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FEBRUARY 2, 1997 NINE MONTHS ENDED
YEAR ENDED (INCEPTION) AUGUST 31,
NOVEMBER 30, TO NOVEMBER 30, -----------------------
1998 1997 1999 1998
------------ ---------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................. $ 127,191 $ 513 $ 57,351 $ 98,856
Costs of goods sold........................ 63,886 -- 19,927 48,997
---------- ---------- ---------- ----------
Gross profit............................... 63,305 513 37,424 49,859
General and administrative expenses........ 370,304 87,157 388,459 253,595
---------- ---------- ---------- ----------
Loss from operations....................... (306,999) (86,644) (351,035) (203,736)
---------- ---------- ---------- ----------
Other income (expense):
Interest income.......................... 1,140 -- -- 1,117
Interest expense......................... (2,060) -- (9,960) (739)
---------- ---------- ---------- ----------
Total other income (expense)........... (920) -- (9,960) 378
---------- ---------- ---------- ----------
Net loss................................... $ (307,919) $ (86,644) $ (360,995) $ (203,358)
========== ========== ========== ==========
Net loss per share (basic and diluted)..... $ (0.10) $ (0.04) $ (0.10) $ (0.07)
---------- ---------- ---------- ----------
Weighted average common shares
outstanding.............................. 2,956,787 2,492,288 3,455,023 2,956,787
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
COLORSMART.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 1, 1996................ -- $ -- $ -- $ -- $ --
Common stock issued...................... 2,492,288 2,492 228,165 -- 230,657
Net loss - 1997.......................... -- -- -- (86,644) (86,644)
--------- ------ --------- --------- ---------
Balance, November 30, 1997............... 2,492,288 2,492 228,165 (86,644) 144,013
Issuance of common stock................. 836,295 837 357,382 -- 358,219
Stock issuance costs..................... -- -- (53,595) -- (53,595)
Net loss - 1998.......................... -- -- -- (307,919) (307,919)
--------- ------ --------- --------- ---------
Balance, November 30, 1998............... 3,328,583 $3,329 $ 531,952 $(394,563) $ 140,718
(UNAUDITED):
Issuance of common stock................. 677,056 677 850,848 -- 851,525
Stock issuance cost...................... -- -- (115,067) -- (115,067)
Net loss - August 31, 1999............... -- -- -- (360,995) (360,995)
--------- ------ --------- --------- ---------
Balance, August 31, 1999................. 4,005,639 4,006 1,267,733 (755,558) 516,181
========= ====== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
COLORSMART.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FEBRUARY 2, 1997 NINE MONTHS ENDED
YEAR ENDED (INCEPTION) AUGUST 31,
NOVEMBER 30, TO NOVEMBER 30 -----------------------
1998 1997 1999 1998
------------- ----------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $ (307,919) $ (86,644) $ (360,995) $ (203,358)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization........ 55,367 -- 26,000 36,911
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................. (10,910) -- 10,910 (8,000)
Inventory............................ (7,735) (7,765) (1,500) (5,235)
Security deposits.................... (3,625) (250) (47,655) (3,625)
Increase (decrease) in:
Accounts payable..................... (62,204) 65,205 (3,000) (65,204)
Accrued expenses..................... 10,670 1,960 (8,301) 3,295
Checks in excess of bank balances.... 8,410 -- (8,410) --
---------- ---------- ---------- ----------
Net cash used by operating activities...... (317,946) (27,494) (392,951) (245,216)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition costs.................... -- -- (301,535) --
Purchase of property and equipment... (86,778) (177,132) (204,962) (86,776)
---------- ---------- ---------- ----------
Net cash used by investing activities...... (86,778) (177,132) (506,497) (86,776)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Issuance of common stock, net........ 304,625 230,655 736,458 311,894
Repayment of capital leases.......... (587) -- -- --
Proceeds from capital leases......... -- -- 67,915 --
Repayment of note payable............ (2,940) (1,397) -- (3,484)
Borrowings of notes payable.......... -- 1,397 103,027 --
Increase (decrease) in stockholder
loan............................... 70,505 7,500 (4,457) 32,761
---------- ---------- ---------- ----------
Net cash provided by financing
activities:.............................. 371,603 238,155 902,943 341,171
---------- ---------- ---------- ----------
Net increase (decrease) in cash............ (33,121) 33,529 3,495 9,179
Cash at beginning of period................ 33,529 -- 408 33,529
---------- ---------- ---------- ----------
Cash at end of period...................... $ 408 $ 33,529 $ 3,903 $ 42,708
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS
Colorsmart.com, Inc. (the "Company") specializes in digital imaging, the
sale of stock photographic images and large format digital printing. The Company
is focusing on Internet commerce, but also provides textile-printing services.
Customers are primarily wholesale to the trade. The Company has been in this
business since 1997. Prior to its formation as a corporation, the Company
existed as a partnership that began on February 2, 1997.
On December 28, 1998, the Company changed its name from Colorsmart, Inc., to
Colorsmart.com, Inc.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated using
the straight-line method, one half years over the estimated useful lives of
three to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset. Depreciation expense includes the amortization of capital lease
assets.
USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
REVENUE RECOGNITION
Generally, revenues from sales of products are recognized when products are
shipped.
INVENTORY
Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The Company incurred
approximately $5,700 in advertising costs during the year ended November 30,
1998.
UNAUDITED INTERIM INFORMATION
The information presented as of August 31, 1999 and 1998, and for the
nine-month periods ended August 31, 1999 and 1998, has not been audited. In the
opinion of management, the unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of August 31, 1999 and 1998,
and the results of its operations and its cash flows for the nine months ended
August 31, 1999 and 1998, and the stockholder's equity for the nine months ended
August 31, 1999.
F-9
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Software............................................... $ 9,139 $ 9,139
Leasehold improvements................................. 5,100 --
Equipment.............................................. 285,847 160,586
Automobile............................................. 24,010 24,010
--------- --------
Total property and equipment....................... $ 324,096 $193,735
Less: accumulated depreciation......................... 55,367 --
--------- --------
Property and equipment, net........................ $ 268,729 $193,735
========= ========
</TABLE>
Depreciation expense for the year ended November 30, 1998 was $55,367.
NOTE 4--RELATED PARTY TRANSACTIONS
At November 30, 1998, the Company had an outstanding payable to a
stockholder in the amount of $78,005, payable on demand.
The transactions involving the stockholder/officer are summarized below:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Balance at December 1, 1997............................ $ 7,500 $ --
Advances to company.................................... 580,975 7,500
Repayment to stockholder/officer....................... (510,470) --
--------- --------
Balance at November 30, 1998........................... $ 78,005 $ 7,500
========= ========
</TABLE>
NOTE 5--NOTE PAYABLE
The Company has an automobile note payable with a bank requiring monthly
payments of $379 through May 2002. The loan accrues interest at 8.75% and is
collateralized by the automobile.
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Note payable........................................... $ 13,663 $ 16,602
Less: current portion.................................. (3,489) (3,000)
--------- --------
Total.............................................. $ 10,174 $ 13,602
========= ========
</TABLE>
F-10
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--NOTE PAYABLE (CONTINUED)
Maturities of notes payable are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
NOVEMBER 30,
- ------------
<S> <C>
1999........................................................ $ 3,489
2000........................................................ 3,807
2001........................................................ 4,154
2002........................................................ 2,213
--------
Total................................................... $ 13,683
========
</TABLE>
NOTE 6--LEASE COMMITMENTS
Certain non-cancelable leases are classified as capital leases, and the
leased assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment................................................ $ 43,584 $ --
Less: accumulated amortization........................... (4,358)
-------- -------
Total................................................ $ 39,226 $ --
======== =======
</TABLE>
The Company leases it's facility under an operating lease with a term of
three years, payable in monthly installments. Total lease expense for the year
ended November 30, 1998 was $38,454.
At November 30, 1998, the future minimum lease payments under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
NOVEMBER 30, LEASES LEASES
- ------------ -------- ---------
<S> <C> <C>
1999..................................................... $ 14,331 $42,000
2000..................................................... 13,724 42,000
2001..................................................... 11,904 14,000
2002..................................................... 11,904 --
2003..................................................... 11,904 --
-------- -------
Total minimum lease payments............................. $ 63,767 $98,000
=======
Less: amount representing interest....................... (20,771)
--------
Present value of net minimum lease payments.............. 42,996
Less: current maturities................................. (7,566)
--------
Long-term obligation................................... $ 35,430
========
</TABLE>
F-11
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS EQUITY
COMMON STOCK ISSUED FOR CASH
During the year ended November 30, 1998, the Company issued 836,295 shares
(after reverse split) of common stock. The price of the stock ranged from $0.10
per share to $1.00 per share. The total amount obtained from the issuance of
these common shares was $304,624, net of $53,595 cost of issuance.
Subsequent to November 30, 1998, the company issued 173,950 shares of common
stock through a Regulation D offering, and issued an additional 503,106 shares
of common stock to date. The total amount obtained from the issuance of these
shares was $964,664 net of $113,817 cost of issuance.
REVERSE STOCK SPLIT
On December 28, 1998, the Company's Board of Directors authorized a 1-for-3
reverse stock split effective December 28, 1998, for stockholders on record on
December 28, 1998. This resulted in a reduction in the number of shares of
common stock.
NOTE 8--CONCENTRATION OF CREDIT RISK
The Company maintains its cash in what it believes to be credit worthy
financial institutions. The balances, at times, may exceed federally insured
limits. At November 30, 1998, the Company was within the insured limit. The
Company routinely assesses the financial strength of its customers and, as a
consequence, believes its trade accounts receivable exposure is limited.
NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments approximates the
fair market value, due to their short-term maturities and interest rates.
NOTE 10--INCOME TAXES
Deferred income taxes (benefits) are provided for certain income and
expenses, which are recognized in different periods for tax and financial
reporting purposes. There are no significant temporary or permanent differences
between the financial statement income and taxable income. Sources of temporary
differences and the resulting tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX
ASSETS
------------
<S> <C>
Net operating loss carryforwards............................
Federal and State......................................... $ 307,919
Applicable tax rate (34% Federal, 6% State)................. 40%
123,167
Valuation allowance......................................... $(123,167)
---------
Amount per balance sheet.................................... $ --
=========
</TABLE>
F-12
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current................................................. $ -- $ --
Deferred................................................ $ -- $ --
</TABLE>
The Company has a net operating loss carryover of $307,919, which expires in
2013. The Company existed as a partnership prior to its reorganization as a
corporation on November 30, 1997. Therefore, no provision for income taxes has
been made for the period ended November 30, 1997.
NOTE 11--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is supplemental information of cash flow information for the
periods ended November 30, 1998 and the period February 2, 1997 (inception)
through November 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS
FEBRUARY 2, ENDED
1997 AUGUST 31,
YEAR ENDED (INCEPTION) (UNAUDITED)
NOVEMBER 30, TO NOVEMBER 30, -------------------
1998 1997 1999 1998
------------ --------------- -------- --------
<S> <C> <C> <C> <C>
Cash paid during the year for:
Interest.......................................... $ 2,060 $ -- $9,960 $739
------- ------- ------ ----
Non cash transactions affecting investing and
financing activities:
Equipment acquired under capital lease............ $43,584 $ -- $ -- $ --
------- ------- ------ ----
Equipment acquired under note payable............. $ -- $16,603 $ -- $ --
------- ------- ------ ----
</TABLE>
NOTE 12--MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
As shown in the accompanying financial statements, the Company incurred a
net loss of $307,919 during the year ended November 30, 1998. The ability of the
Corporation to continue as a going concern is dependent on the successful
completion of the Company's initial public offering or raising additional
capital. The financial statements do not include any adjustments that might be
necessary if the Corporation is unable to continue as a going concern. The
Company has completed a private placement and raised $964,664 as of May 31,
1999.
NOTE 13--ACQUISITIONS
The Company has entered into ten (10) separate agreements to acquire
unrelated corporations within the printing industry. These acquisitions are
contingent upon the successful completion of the Company's initial public
offering, which is planned for fiscal year ending 1999. There can be no
assurance that the initial public offering will be successful, which would
materially adversely affect the Company's ability to close these acquisitions.
In September 1998, the Company executed a definitive agreement to purchase
all of the outstanding common shares of Advertising That Works, Inc. As
consideration, the Company will pay $1,500,000 in cash to the shareholder of
Advertising That Works, Inc. The acquisition will be accounted for as a purchase
and
F-13
<PAGE>
COLORSMART.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--ACQUISITIONS (CONTINUED)
the results of operations will be included in the consolidated financial
statements beginning with the date of closing.
Additionally in September 1998, the Company executed an agreement to
purchase all of the common stock of Magnum Digital Services Corporation. As
consideration, the Company will pay $775,000 in cash and issue 66,667 shares of
Colorsmart.com, Inc., common stock. The value of the stock will be determined
when the transaction is closed and is contingent on the Company successfully
completing the initial public offering. In addition, approximately $275,000 of
the cash will be used to reduce the outstanding liabilities of Magnum Digital
Services. The acquisition will be accounted for as a purchase and the results of
operations and goodwill will be included in the consolidated financial
statements beginning with the date of closing.
In October 1998, the Company entered into an agreement to purchase all of
the common stock of Stonehouse Graphics (Pty), Ltd., a South African graphics
printing company. In consideration, the Company will pay approximately
$2,500,000 and is contingent upon the successful completion of the initial
public offering. Approximately $816,992 of the cash paid to acquire Stonehouse
Graphics will be used to retire certain liabilities of Stonehouse Graphics. The
acquisition will be accounted for as a purchase and the results of operations
and goodwill will be included in the consolidated financial statements beginning
with the date of closing.
In May 1999, the Company agreed to purchase Top Copy CC, a South African
printing company for approximately $430,000 in cash of which approximately
$30,000 will be used to pay off Top Copy CC's outstanding liabilities and is
contingent upon the initial public offering. The acquisition will be accounted
for as a purchase and the results of operations and goodwill will be included in
the consolidated financial statements at the date of closing.
In June 1999, the Company agreed to acquire Display Arts, Inc., for
approximately $1,300,000 of which approximately $300,000 will be used to retire
the outstanding liabilities of Display Arts, Inc., the purchase will be
contingent upon the successful initial public offering. The acquisition will be
accounted for as a purchase and the results of operations and goodwill will be
included in the consolidated financial statements at the date of closing.
In 1999 the Company agreed to purchase Jamberry Lake Digital Media, Inc.,
for approximately $1,000,000 and is contingent upon the successful completion of
the initial public offering. The acquisition will be accounted for as a purchase
and the results of operations and goodwill will be included in the consolidated
financial statements at the date of closing.
In 1999 the Company agreed to purchase Virtual Colour Group, Pty (Limited)
for approximately $1,800,000 and is contingent upon the successful completion of
the initial public offering. The acquisition will be accounted for as a purchase
and the results of operations and goodwill will be included in the Consolidated
Financial Statements at the date of closing.
F-14
<PAGE>
1199 MAC, INC.
D/B/A MAGNUM DIGITAL SERVICES
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
F-15
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-17
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 and
unaudited at August 31, 1999 and 1998................... F-18
Statements of Operations for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-19
Statements of Changes in Stockholder's Equity (Deficit)
for the Years Ended December 31, 1998 and 1997 and
unaudited for the eight months ended August 31, 1999 and
1998.................................................... F-20
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-21
Notes to Financial Statements............................... F-22 - F-24
</TABLE>
F-16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
1199 MAC, Inc.
d/b/a Magnum Digital Services
Coconut Creek, Florida
We have audited the accompanying balance sheets of 1199 MAC, Inc. d/b/a
Magnum Digital Services as of December 31, 1998 and 1997, and the related
statements of operations, changes in stockholder's equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 1199 MAC, Inc. d/b/a Magnum
Digital Services, as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
April 2, 1999
F-17
<PAGE>
1199 MAC, INC.
D/B/A MAGNUM DIGITAL SERVICES
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
------------------------- -------------------------
1998 1997 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................... $ 3,942 $ 7,132 $ 2,919 $ 12,786
Accounts receivable...................... 71,614 138,021 53,348 74,457
Inventories.............................. 8,000 8,000 -- 8,000
----------- ----------- ----------- -----------
Total curent assets.................... 83,556 153,153 56,267 95,243
----------- ----------- ----------- -----------
Property and equipment, net: .............. 287,258 422,819 221,971 337,957
----------- ----------- ----------- -----------
Other Assets:
Note receivable.......................... 12,538 3,558 12,538 11,429
Security deposits........................ 3,977 3,053 3,977 3,977
----------- ----------- ----------- -----------
Total other assets................... 16,515 6,611 16,515 15,406
----------- ----------- ----------- -----------
Total Assets........................... $ 387,329 $ 582,583 $ 294,753 $ 448,606
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Obligations under capital leases......... $ 107,548 $ 101,863 $ 106,735 $ 116,607
Current maturities of long-term debt..... 4,538 1,217 32,330 13,543
Accounts payable......................... 138,200 36,505 174,462 111,544
----------- ----------- ----------- -----------
Total current liabilities.............. 250,286 139,585 313,527 241,694
----------- ----------- ----------- -----------
Obligations under capital leases........... 278,618 388,112 227,078 349,749
Long term debt............................. 5,247 -- 3,672 --
----------- ----------- ----------- -----------
Total long term debt................... 283,865 388,112 230,750 349,749
----------- ----------- ----------- -----------
Stockholders' equity (deficit):
Common stock, $1.00 par value; 7,000
shares authorized; 1,000 shares issued
and outstanding........................ 1,000 1,000 1,000 1,000
Additioal paid-in capital................ 1,854,050 1,701,178 1,952,341 1,739,768
Accumulated deficit...................... (2,001,872) (1,647,292) (2,202,865) (1,883,605)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit)... (146,822) 54,886 (249,524) (142,837)
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity............................... $ 387,329 $ 582,583 $ 294,753 $ 448,606
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
1199 MAC, INC.
D/B/A MAGNUM DIGITAL SERVICES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
------------------------- -------------------------
1998 1997 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................. $ 608,891 $ 459,947 $ 349,904 $ 431,618
Costs of goods sold........................ 454,976 331,884 273,483 302,476
----------- ----------- ----------- -----------
Gross profit............................... 153,915 128,063 76,421 129,142
----------- ----------- ----------- -----------
General and administrative expenses........ 484,325 468,181 258,126 349,157
Loss from operations....................... (330,410) (340,118) (181,705) (220,015)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 351 1,663 790 --
Interest expense (24,521) (40,476) (20,078) (16,298)
Loss on disposal of equipment............ -- (28,199) -- --
----------- ----------- ----------- -----------
Total other expense.................... (24,170) (67,012) (19,288) (16,298)
Loss before income taxes................... (354,580) (407,130) (200,993) (236,313)
Provision for income taxes................. -- -- -- --
----------- ----------- ----------- -----------
Net loss................................... $ (354,580) $ (407,130) $ (200,993) $ (236,313)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
1199 MAC, INC.
D/B/A/ MAGNUM DIGITAL SERVICES
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997.................. 1,000 $1,000 $1,402,244 $(1,240,162) $ 163,082
Capital contribution...................... -- -- 298,934 -- 298,934
Net loss--1997............................ -- -- -- (407,130) (407,130)
----- ------ ---------- ----------- ---------
Balance, December 31, 1997................ 1,000 1,000 1,701,178 (1,647,292) 54,886
Capital contribution...................... -- -- 152,872 -- 152,872
Net loss--1998............................ -- -- -- (354,580) (354,580)
Balance, December 31, 1998................ 1,000 $1,000 $1,854,050 $(2,001,872) $(146,822)
UNAUDITED
Net loss--August 31, 1999................. -- -- -- (200,993) (200,993)
Capital contribution...................... -- -- 98,291 -- 98,291
----- ------ ---------- ----------- ---------
Balance--August 31, 1999.................. 1,000 $1,000 $1,952,341 $(2,202,865) $(249,524)
===== ====== ========== =========== =========
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
1199 MAC, INC.
D/B/A MAGNUM DIGITAL SERVICES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
--------------------- ---------------------
1998 1997 1999 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss)..................................... $(354,580) $(470,130) $(200,993) $(236,313)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization.............. 152,097 147,399 68,288 101,398
Net loss on disposal of fixed assets....... -- 28,199 -- --
Changes in assets and liabilities:
(Increase) decrease in:
Inventory.................................. -- -- 8,000 --
Accounts receivable........................ 66,407 (138,021) 18,266 63,564
Notes receivable........................... (8,980) 57,906 -- (7,871)
Security deposits.......................... (924) -- -- (924)
Increase (decrease) in:
Accounts payable........................... 101,695 33,020 36,262 75,039
--------- --------- --------- ---------
Net cash (used) by operating activities.......... (44,285) (278,627) (70,177) (5,107)
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment............. (2,961) (43,285) (3,000) (4,210)
--------- --------- --------- ---------
Cash flows from financing activities:
Capital contribution........................... 152,872 298,934 98,291 38,590
Repayment of capital leases.................... (103,809) -- (52,353) (23,619)
Proceeds from capital leases................... -- 32,152 -- --
Repayment of long-term debt.................... (5,007) (4,290) -- (1,199)
Proceeds from long-term debt................... -- -- 26,216 1,199
--------- --------- --------- ---------
Net cash provided by financing activities:....... 44,056 326,796 72,154 14,971
--------- --------- --------- ---------
Net increase (decrease) in cash.................. (3,190) 4,884 (1,023) 5,654
Cash at beginning of year........................ 7,132 2,248 3,942 7,132
--------- --------- --------- ---------
Cash at end of year.............................. $ 3,942 7,132 2,919 12,786
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
MAGNUM DIGITAL SERVICES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS
1199 MAC, Inc. d/b/a Magnum Digital Services (the "Company") specializes in
large format digital printing worldwide. The Company also provides
textile-printing services. Customers are primarily wholesale to the trade. The
Company has been in this business since 1996.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of two
to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset. Depreciation expense includes the amortization of capital lease
assets.
USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
REVENUE RECOGNITION
Generally, revenues from sales of products are recognized when products are
shipped.
INVENTORY
Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Equipment............................................. $ 27,517 $ 27,009
Equipment under capital lease......................... 137,987 619,560
Automobile............................................ 483,388 --
Total property and equipment........................ 16,190 13,321
--------- ---------
665,082 659,890
Less: accumlated depreciation......................... (377,824) (237,071)
--------- ---------
Property and equipment, net......................... $ 287,258 $ 422,819
========= =========
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1998
and 1997, was $152,097 and $147,399, respectively.
F-22
<PAGE>
MAGNUM DIGITAL SERVICES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--LEASE COMMITMENTS
Certain non-cancelable leases are classified as capital leases, and the
leased assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment............................................... $483,388 $483,388
Less: accumulated amortization.......................... 260,154 130,022
-------- --------
Total................................................. $223,234 $353,366
======== ========
</TABLE>
The Company leases it's facility under an operating lease with a term of
three years, payable in monthly installments. Total lease expense for the years
ended December 31, 1998 and 1997, was $27,104 and $26,275, respectively.
At December 31, 1998, the future minimum lease payments under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
DECEMBER 31, LEASESE LEASES
- ------------ -------- ---------
<S> <C> <C>
1999.................................................... $129,124 $28,188
2000.................................................... 113,099 29,316
2001.................................................... 112,379 --
2002.................................................... 77,342 --
-------- -------
$431,944 $57,504
======== =======
Total minimum lease payments
Less: amount reprsenting interest....................... 45,778
--------
Present value of net minimum lease payments............. 386,166
Less: current maturities................................ 107,548
--------
Long-term obligation.................................. $278,618
========
</TABLE>
NOTE 5--INCOME TAXES
The Company has an unused net operating loss carryforward of $1,910,044
available for use on its future corporate federal and state income tax returns.
The net operating loss carryforward originated from December 31, 1987 to
December 31, 1998. Expiration occurs from 2002 through 2013. The Company's
evaluation of the tax benefit of its net operating loss carryforward is
presented in the following table. The tax amounts have been calculated using the
34% federal and 5.5% state income tax rates.
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
DEFERRED TAX ASSET:
Tax benefit of net operating loss................... $ 754,467 $ 614,408
Less: valuation allowance........................... (745,467) (614,408)
--------- ---------
Deferred tax asset.................................... $ -- $ --
========= =========
</TABLE>
F-23
<PAGE>
MAGNUM DIGITAL SERVICES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--LONG-TERM DEBT
Note payable of $9,785 consists of a note payable to Navy Federal Credit
Union with monthly payments of $420 including interest at 6.9% until
December 2000. An automobile secures this note.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1999................................................ $4,538
2000................................................ $5,247
</TABLE>
NOTE 7--MANAGEMENT'S PLAN AND ACQUISITION
As shown in the accompanying financial statements, the Corporation incurred
a net loss of $354,580 during the year ended December 31, 1998, and $407,130 for
the year ended December 31, 1997. The ability of the corporation to continue as
a going concern is dependent on the Company being successfully acquired by
Colorsmart, Inc. The Company has entered into a stock and asset purchase
agreement with Colorsmart, Inc. Colorsmart shall deliver at closing the sum of
$500,000 to the sole shareholder, and Colorsmart will pay the balances due on
all outside equipment leases, not to exceed $275,000. Further, Colorsmart shall
also deliver 200,000 of Colorsmart ordinary shares to the sole shareholder of
1199 MAC, Inc. d/b/a Magnum Digital Services, Inc.
NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information for the year ended December 31, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash payment for interest................................ $24,571 $ 40,476
------- --------
</TABLE>
Non-cash transactions affecting investing and financing activities:
<TABLE>
<S> <C> <C>
Equipment acquired under capital lease................... $ -- $205,561
======= ========
Refinancing of note payable.............................. $13,525 $ --
======= ========
</TABLE>
NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments approximates the
fair market value, due to their short-term maturities and interest rates.
F-24
<PAGE>
ADVERTISING THAT WORKS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
F-25
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-27
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 and
unaudited at
August 31, 1999 and 1998................................ F-28
Statements of Operations for the Years Ended December 31,
1998 and 1997 and
unaudited for the eight months ended August 31, 1999 and
1998.................................................... F-29
Statements of Changes in Stockholder's Equity for the
Years Ended December 31, 1998 and 1997 and unaudited
for the eight months ended August 31, 1999 and 1998..... F-30
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-31
Notes to Financial Statements............................... F-32--F-33
</TABLE>
F-26
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Advertising That Works, Inc.
East Point, Georgia
We have audited the accompanying balance sheets of Advertising That
Works, Inc. as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our 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 audits provide 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 Advertising That
Works, Inc. as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
April 16, 1999
F-27
<PAGE>
ADVERTISING THAT WORKS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
DECEMBER 31, (UNAUDITED)
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.............................................. $ 8,384 $ 9,231 $ 12,387 $ 16,438
Accounts receivable............................... 65,270 145,047 81,087 104,195
Inventories....................................... 47,085 -- 73,287 87,414
-------- -------- -------- --------
Total current assets............................ 120,739 154,276 166,761 208,047
-------- -------- -------- --------
Property and equipment, net......................... 25,357 6,522 27,800 4,523
-------- -------- -------- --------
Total Assets.................................... $146,096 $160,800 $194,561 $212,570
======== ======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable.................................. $ 61,138 $ 49,270 $ 90,303 $102,174
Due to stockholder................................ 44,962 59,407 16,692 82,406
-------- -------- -------- --------
Total current liabilities....................... 106,100 108,677 106,995 184,580
-------- -------- -------- --------
Stockholder's equity:
Common stock, no par value; 100,000 shares
authorized; 500 shares issued and outstanding... 15,574 15,574 15,574 15,574
Retained earnings................................. 24,422 36,549 71,992 12,416
-------- -------- -------- --------
Total stockholder's equity.................... 39,996 52,123 87,566 27,990
-------- -------- -------- --------
Total liabilities and stockholder's equity.... $146,096 $160,800 $194,561 $212,570
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE>
ADVERTISING THAT WORKS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED AUGUST 31,
DECEMBER 31, (UNAUDITED)
--------------------- -------------------
1998 1997 1999 1998
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net Sales.......................................... $967,275 $1,137,760 $535,082 $653,337
Costs of goods sold................................ 594,211 740,571 265,281 414,417
-------- ---------- -------- --------
Gross profit....................................... 373,064 397,189 269,801 238,920
-------- ---------- -------- --------
General and administrative expenses................ 390,438 292,118 223,609 259,274
Income (loss) from operations...................... (17,374) 105,071 46,192 (20,354)
-------- ---------- -------- --------
Other income (expense):
Interest Income.................................. 111 144 1,746 5,666
Miscellaneous income............................. 5,547 -- -- --
Interest expense................................. (411) (4,990) (368) (9,445)
-------- ---------- -------- --------
Total other income (expense)................... 5,247 (4,846) 1,378 (3,779)
-------- ---------- -------- --------
Net income (loss).................................. $(12,127) $ 100,225 $ 47,570 $(24,133)
======== ========== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE>
ADVERTISING THAT WORKS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------- -------------------
SHARES AMOUNT EARNINGS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1997................................ 500 $15,574 $ -- $ 15,574
Shareholder distributions............................... 0 0 (63,676) (63,676)
Net income--1997........................................ -- -- 100,225 100,225
--- ------- -------- --------
Balance, December 31, 1997.............................. 500 15,574 36,549 52,123
Net loss--1998.......................................... -- -- (12,127) (12,127)
--- ------- -------- --------
Balance, December 31, 1998.............................. 500 15,574 24,422 39,996
UNAUDITED:
Net income, August 31, 1999............................. -- -- 47,570 47,570
--- ------- -------- --------
Balance, August 31, 1999................................ 500 $15,574 $ 71,992 $ 87,566
=== ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE>
ADVERTISING THAT WORKS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
-------------------- -------------------
1998 1997 1999 1998
-------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................. (12,127) 100,225 47,570 (24,133)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation.................................... 17,513 16,443 4,543 2,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............................. 79,777 (145,047) (15,817) 40,852
Inventory....................................... (47,085) -- (26,202) (87,414)
Increase (decrease) in:
Accounts payable................................ 11,868 49,270 29,163 52,903
-------- --------- -------- --------
Net cash provided (used) by operating activities: 49,946 20,891 39,257 (15,792)
-------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment................ (36,348) (22,965) (6,984) --
-------- --------- -------- --------
Cash flows from financing activities:
Shareholder advances.............................. -- 59,407 -- 22,999
Shareholder distributions......................... (14,445) (63,676) (28,270) --
Issuance of common stock.......................... -- 15,574 -- --
-------- --------- -------- --------
Net cash provided (used) by financing activities.... (14,445) 11,305 (28,270) 22,999
Net cash increase (decrease)........................ (847) 9,231 4,003 7,207
-------- --------- -------- --------
Cash, beginning of period........................... 9,231 -- 8,384 9,231
-------- --------- -------- --------
Cash, end of period................................. $ 8,384 $ 9,231 $ 12,387 $ 16,438
======== ========= ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................ $ 411 $ 4,990 $ 368 $ 9,445
======== ========= ======== ========
</TABLE>
See accompanying notes to financial statements
F-31
<PAGE>
ADVERTISING THAT WORKS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS
Advertising That Works, Inc. (the "Company") specializes in finishing custom
and blank banners, screen and digital printing, worldwide. The Company derives a
majority of its revenue through the sale of materials and blank banners to
retail sign stores. Their customers are primarily wholesale to the trade.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of two
to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset.
USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
REVENUE RECOGNITION
Generally, revenues from sales of products are recognized when products are
shipped.
INVENTORY
Inventory consists primarily of materials used in the production of banners,
and is stated at the lower of cost or market, with cost determined on the
first-in, first-out (FIFO) method.
INCOME TAXES
Advertising That Works, Inc., with the consent of its' stockholder, has
elected to be taxed under S corporation provisions of the Internal Revenue Code.
Under these provisions, the taxable income of this entity is reflected by the
stockholder on his personal income tax return.
F-32
<PAGE>
ADVERTISING THAT WORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Leasehold improvements.................................. $ 595 $ --
Equipment............................................... 53,219 17,463
Automobile.............................................. 5,500 5,500
-------- --------
Total property and equipment.......................... 59,314 22,963
Less: accumulated depreciation.......................... (33,957) (16,441)
-------- --------
Property and equipment, net........................... $ 25,357 $ 6,522
======== ========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997 was
$17,513 and $16,443, respectively.
NOTE 4--ACQUISITION
The Company has entered in to a stock and asset purchase agreement with
Colorsmart, Inc. Colorsmart shall deliver at closing the sum of $1,500,000 to
the sole shareholder.
NOTE 5--DUE TO STOCKHOLDER AND RELATED PARTY
The stockholder has lent money to the Company as required. At December 31,
1998 and 1997, the Company owes the stockholder $44,962 and $59,407,
respectively. The note is due on demand and currently non-interest bearing.
The Company leases its operating facility from the stockholder; the term of
the lease is one year, payable in monthly installments of $2,700. At
December 31, 1998 and 1997, rent expense was $33,402 and $27,800, respectively.
F-33
<PAGE>
DISPLAY ARTS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
F-34
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-36
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 and
unaudited at August 31, 1999 and 1998................... F-37
Statements of Operations for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-38
Statements of Changes in Stockholder's Equity (Deficit)
for the Years Ended December 31, 1998 and 1997 and
unaudited for the eight months ended August 31, 1999
and 1998................................................ F-39
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-40
Notes to Financial Statements............................... F-41--F-45
</TABLE>
F-35
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Display Arts, Inc.
Nashville, Tennessee
We have audited the accompanying balance sheets of Display Arts, Inc., as of
December 31, 1998 and 1997, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Display Arts, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
May 26. 1999
F-36
<PAGE>
DISPLAY ARTS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current Assets:
Cash.............................................. $ 25,139 $ 422 $ 45,385 $ 24,918
Accounts receivable, less allowance of $31,900 in
1998 and $23,128 in 1997........................ 249,728 245,075 146,005 208,241
Inventories....................................... 19,385 18,475 29,385 28,475
-------- -------- -------- --------
Total current assets............................ 294,252 263,972 220,775 261,634
-------- -------- -------- --------
Property and equipment, net......................... 243,276 296,592 197,544 308,247
-------- -------- -------- --------
Other Assets:
Security deposits................................. 15,414 6,075 16,977 6,179
Deferred income taxes............................. 20,031 46,439 51,441 21,509
-------- -------- -------- --------
Total other assets.............................. 35,445 52,514 68,418 27,688
-------- -------- -------- --------
Total Assets.................................... $572,973 $613,078 $486,737 $597,569
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Due to shareholder................................ $187,542 $178,535 $187,542 $178,259
Obligations under capital leases.................. 55,495 56,767 32,737 56,232
Current maturities of long-term debt.............. 27,621 25,003 31,846 28,828
Line of credit.................................... 31,774 48,338 -- 55,037
Accounts payable.................................. 82,738 47,435 73,916 29,026
Accrued expenses.................................. 3,237 16,382 68,028 40,014
-------- -------- -------- --------
Total current liabilities....................... 388,407 372,460 394,069 387,396
-------- -------- -------- --------
Obligations under capital leases.................. 813 56,345 -- 19,150
Long term debt.................................... 128,334 155,915 106,029 124,530
Deferred rent..................................... 7,397 10,261 -- --
-------- -------- -------- --------
Total long term debt............................ 136,544 222,521 106,029 143,680
-------- -------- -------- --------
Stockholders' equity (deficit):
Common stock, $.10 par value; 100 shares
authorized, issued and outstanding.............. 10 10 10 10
Additional paid-in capital........................ 990 990 990 990
Retained earnings (deficit)....................... 47,022 17,097 (14,361) 65,493
-------- -------- -------- --------
Total stockholders' equity (deficit)............ 48,022 18,097 (13,361) 66,493
-------- -------- -------- --------
Total liabilities and stockholders equity
(deficit)..................................... $572,973 $613,078 $486,737 $597,569
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE>
DISPLAY ARTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
----------------------- -----------------------
1998 1997 1999 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales..................................... $1,660,753 $1,306,718 $ 969,316 $1,053,234
Costs of goods sold........................... 812,563 695,954 506,610 470,439
---------- ---------- ---------- ----------
Gross profit.................................. 848,190 610,764 462,706 582,795
General and administrative expenses........... 770,986 693,228 544,873 491,530
---------- ---------- ---------- ----------
Income (Loss) from operations................. 77,204 (82,464) (82,167) 91,265
---------- ---------- ---------- ----------
Other income (expense):
Miscellaneous income........................ 4,764 1,353 655 570
Interest expense............................ (25,635) (55,012) (10,871) (18,509)
Loss on disposal of equipment............... -- (1,360) -- --
---------- ---------- ---------- ----------
Total other expense....................... (20,871) (55,019) (10,216) (17,939)
Income (loss) before income taxes............. 56,333 (137,483) (92,383) 73,326
Provision (benefit) for income taxes.......... 26,408 (46,439) (31,000) 24,930
---------- ---------- ---------- ----------
Net income (loss)............................. $ 29,925 $ (91,044) $ (61,383) $ 48,396
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE>
DISPLAY ARTS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997....................... 100 $10 $990 $108,141 $109,141
Net loss - 1997................................ -- -- -- (91,044) (91,044)
--- --- ---- -------- --------
Balance, December 31, 1997..................... 100 10 990 17,097 18,097
Net income - 1998.............................. -- -- -- 29,925 29,925
--- --- ---- -------- --------
Balance, December 31, 1998..................... 100 10 990 47,022 48,022
(UNAUDITED):
Net loss - August 31, 1999..................... -- -- -- (61,383) (61,383)
--- --- ---- -------- --------
Balance, August 31, 1999....................... 100 $10 $990 $(14,361) $(13,361)
=== === ==== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE>
DISPLAY ARTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
-------------------- -------------------
1998 1997 1999 1998
-------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 29,925 $ (91,044) $(61,383) $ 48,396
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization.................... 79,303 96,027 45,732 21,602
Deferred income taxes............................ 26,408 (46,439) (31,410) 24,930
Net loss on disposal of fixed assets............. -- 1,360 -- --
Changes in assets and liabilities:
(Increase) decrease in:
Inventory.................................... (910) 7,719 (10,000) (10,000)
Accounts receivable.......................... (4,657) (111,573) 103,723 36,834
Security deposits............................ (9,339) 18,660 (1,563) (104)
Increase (decrease) in:
Accounts payable............................. 35,303 19,883 (8,822) (18,409)
Accrued expenses............................. (13,145) (25,095) 64,791 23,632
Deferred rent................................ (2,864) 10,261 (7,397) (10,261)
-------- --------- -------- --------
Net cash provided (used) by operating activities... 140,024 (120,241) 93,671 116,620
-------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (25,983) (74,924) -- (33,257)
-------- --------- -------- --------
Cash flows from financing activities:
Shareholder advances (distributions)............. 9,007 30,662 -- (276)
Repayment of line of credit...................... (16,564) (3,610) (31,774) --
Proceeds from line of credit..................... -- 51,948 -- 6,699
Repayment of capital leases...................... (56,804) (50,327) (23,571) (37,730)
Proceeds from capital leases..................... -- 33,603 -- --
Repayment of long-term debt...................... (24,963) (19,082) (18,080) (27,560)
Proceeds from long-term debt..................... -- 115,000 -- --
-------- --------- -------- --------
Net cash provided (used) by financing
activities:...................................... (89,324) 158,194 (73,425) (58,867)
-------- --------- -------- --------
Net increase (decrease) in cash.................... 24,717 (36,971) 20,246 24,496
-------- --------- -------- --------
Cash, beginning of period.......................... 422 37,393 25,139 422
-------- --------- -------- --------
Cash, end of period................................ $ 25,139 $ 422 $ 45,385 $ 24,918
======== ========= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
DISPLAY ARTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS
Display Arts, Inc., is a Nashville, Tennessee based design firm and digital
service bureau that serves clients with a balance of management, creative and
technical skills. The Company specializes in the creation of high impact,
affordable graphics and displays utilizing state-of-the-art methods and
equipment. All work is handled in-house to provide the highest quality and quick
turnaround.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of two
to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset. Depreciation expense includes the amortization of capital lease
assets.
USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
REVENUE RECOGNITION
Generally, revenues from sales of products are recognized when products are
shipped.
INVENTORY
Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.
INCOME TAXES
The Company accounts for income taxes under SFAS 109, ACCOUNTING FOR INCOME
TAXES, which requires that deferred income taxes be recognized for the tax
consequences in future years of differences between the tax basis of assets and
liabilities and their financial reporting basis at rates based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Current income tax expense
represents the tax payable for the period. The deferred income tax expense
(benefit) represents the change during the period in the balance of deferred
taxes.
F-41
<PAGE>
DISPLAY ARTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Equipment............................................. $ 19,145 $ 16,521
Equipment under capital lease......................... 350,601 327,629
Automobile............................................ 188,027 188,027
Total property and equipment...................... 13,990 13,990
--------- ---------
571,763 546,167
Less: accumulated depreciation and amortization....... (328,487) (249,575)
--------- ---------
Property and equipment, net....................... $ 243,276 $ 296,592
========= =========
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1998
and 1997, was $79,303 and $96,027, respectively.
NOTE 4--LEASE COMMITMENTS
Certain non-cancelable leases are classified as capital leases, and the
leased assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized.
Details of the capitalized leased assets are as follows:
<TABLE>
<S> <C> <C>
Equipment............................................. $ 188,027 $ 188,027
Less: accumulated amortization........................ (79,024) (50,461)
--------- ---------
Total............................................. $ 109,003 $ 137,566
========= =========
</TABLE>
The Company has four facilities located throughout Tennessee. The Company
leases it's facilities under operating leases with terms of three to five years,
payable in monthly installments. Total lease expense for the years ended
December 31, 1998 and 1997, was $80,674 and $72,640, respectively.
At December 31, 1998, the future minimum lease payments under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
- ------------ --------- ---------
<S> <C> <C>
1999.................................................. $ 59,798 $ 117,751
2000.................................................. 823 117,751
2001.................................................. -- 117,751
2002.................................................. -- 103,433
2003.................................................. -- 57,607
--------- ---------
$ 60,621 $ 514,293
=========
Total minimum lease payments
Less: amount representing interest.................... 4,313
---------
Present value of net minimum lease payments........... 56,308
Less: current maturities.............................. (55,495)
---------
Long-term obligation.............................. $ 813
=========
</TABLE>
F-42
<PAGE>
DISPLAY ARTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Taxes currently payable.................................. $ -- $ --
Deferred income benefit taxes............................ 26,408 (46,439)
Change in beginning valuation allowance.................. -- --
------- --------
Provision (benefit) for income taxes..................... $26,408 $(46,439)
======= ========
</TABLE>
Reconciliation of the Federal statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computed at the Statutory rates.......................... $19,153 $(46,475)
Increase (decrease) resulting from:
Non-deductible expenses................................ 5,723 1,102
State income taxes, net of federal income tax benefit.... 1,532 (1,066)
------- --------
Net operating loss carryforward.......................... $26,408 $(46,439)
======= ========
</TABLE>
The components of the deferred tax asset were as follows at December 31,:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net operating loss carryforward......................... $ 18,137 $ 48,392
Allowance for bad debts................................. 13,398 9,714
-------- --------
Total deferred tax asset............................ 31,535 58,106
Deferred tax liabilities:
Depreciation expense.................................. (11,504) (11,667)
-------- --------
Net deferred tax asset.................................. 20,031 46,439
-------- --------
Valuation allowance:
Beginning of year..................................... -- --
Decrease (increase) during year....................... -- --
Ending balance........................................ -- --
-------- --------
Net deferred taxes...................................... $ 20,031 $ 46,439
======== ========
</TABLE>
At December 31, 1998 and 1997, the Company has unused net operating loss
carryforwards of approximately $51,918 and $120,808, respectively, expiring
primarily in 2013 and 2012, which is available for use on its future corporate
Federal and State tax returns.
NOTE 6--BORROWINGS
The note payable of $155,955 and $180,918 at December 31, 1998 and 1997,
respectively, consists of a note payable to a financial institution with monthly
payments of $3,498 including interest at 10% until August 2003. This note is
personally guaranteed by the shareholder of the corporation.
F-43
<PAGE>
DISPLAY ARTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--BORROWINGS (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
1998
--------
<S> <C>
1999........................................................ $ 27,621
2000........................................................ 30,523
2001........................................................ 33,708
2002........................................................ 37,328
2003........................................................ 26,735
--------
Total................................................... $155,915
========
</TABLE>
Revolving line-of-credit:
In August of 1996, the Company secured a revolving line-of-credit allowing
for maximum borrowing of $50,000. The loan bears interest at prime rate plus
three percent (10.75% at December 31, 1998 and 11.50% at December 31, 1997) and
is due on demand. The line-of-credit is collateralized by the Company's accounts
receivables, inventory and equipment. Approximately $18,000 is available under
this line-of-credit at December 31, 1998.
NOTE 7--ACQUISITION
The Company has entered in to a stock and asset purchase agreement with
Colorsmart.com, Inc., whereas Colorsmart.com, Inc. shall acquire 100% of the
Company's stock. Colorsmart.com, Inc. shall deliver at closing approximately
$1,300,000. The closing of the deal is contingent upon the successful initial
public offering by Colorsmart.com, Inc.
NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash payment for interest................................ $25,635 $ 43,348
======= ========
</TABLE>
Non-cash transactions affecting investing and financing activities:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment acquired under capital lease................... $ -- $121,028
======= ========
</TABLE>
NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS
THE CARRYING VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS APPROXIMATES THE
FAIR MARKET VALUE, DUE TO THEIR SHORT-TERM MATURITIES AND INTEREST RATES.
F-44
<PAGE>
DISPLAY ARTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--DUE TO SHAREHOLDER
The majority shareholder has lent money to the Company as needed. At
December 31, 1998 and 1997, the Company owes the shareholder $187,542 and
$178,535, respectively. The note is due on demand and bears interest at 10%. In
1998, interest on this note was deferred.
NOTE 11--LITIGATION
The Company is party from time-to-time to various legal proceedings. None of
these proceedings are expected to have a material impact on its financial
position or results of operations.
NOTE 12--SUBSEQUENT EVENT
In January 1999, the Company entered into a five year operating lease, with
options to renew for three consecutive five year terms. The lease is for 3,700
square feet of office space, calling for $22,200 of annual rent.
F-45
<PAGE>
STONEHOUSE GRAPHICS (PTY) LIMITED
REGISTRATION NUMBER 97/19446/07
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 1999
F-46
<PAGE>
STONEHOUSE GRAPHICS (PTY) LIMITED
REGISTRATION NUMBER 97/19446/07
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 1999
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- -----------------
<S> <C>
Report of the independent auditors.......................... F-48
Director's report........................................... F-49
Income statement............................................ F-51
Balance sheet............................................... F-52
Cash flow statement......................................... F-53
Notes to the annual financial statements.................... F-55--F-59
Detailed income statement................................... F-60
</TABLE>
APPROVAL OF ANNUAL FINANCIAL STATEMENTS
The annual financial statements which appear on pages 3 to 10 have been
approved by the board of directors and are signed on its behalf by:
- ----------------------------
DIRECTOR
Germiston
30 March 1999
F-47
<PAGE>
COLORSMART.COM, INC.
PRO FORMA FINANCIAL STATEMENTS
The following Pro Forma Combined Balance Sheet of the Registrant has been
prepared by management of the Registrant based upon the balance sheets of the
Registrant as of November 30, 1998 and August 31, 1999. The Pro Forma Combined
Statement of Operations was prepared based upon the statement of operations for
the Registrant for the twelve months ended November 30, 1998, and the nine
months ended August 31, 1999. The pro forma statement of operations also
includes the proposed acquisition's statements of operations for the twelve
months ended December 31, 1998, and the eight months ended August 31, 1999. The
pro forma statements give effect to the transactions under the purchase method
of accounting and the assumptions and adjustments in the accompanying notes to
the pro forma combined financial statements. The pro forma combined balance
sheets give effect to the acquisition as if they had occurred as of
November 30, 1998 and August 31, 1999. The pro forma combined statement of
operations for the year ended November 30, 1998, gives effect to the
acquisitions as if they had occurred as of December 1, 1997. The pro forma
combined statement of operations for the nine months ended August 31, 1999,
gives effect to the acquisitions as if they had occurred December 1, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma combined
financial statements do not purport to represent what the combined companies'
financial position or results of operations would actually have been had the
acquisition occurred on such date or as of the beginning of the period
indicated, or to project the combined companies' financial position or results
of operations for any future period.
F-64
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Exhibit 2.01
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STOCK AND ASSET PURCHASE AGREEMENT
Dated September 3, 1998
By and Between
COLORSMART, INC.
and
MAGNUM DIGITAL SERVICES CORPORATION
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TABLE OF CONTENTS
INTRODUCTION 5
RECITALS 5
ARTICLE I. PLAN OF REORGANIZATION 5
1.01 Sale and Transfer of MAGNUM Stock 5
1 .02 Consideration at Closing 5
<PAGE>
1.02 Consideration at Closing 5
1.03 Assignment of Contracts and Assumption of
Obligations 6
1.04 Plan of Reorganization 6
ARTICLE II. CLOSING
2.01 Closing 6
Date 6
2.02 Delivery 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER 7
3.01 Title to Shares 7
3.02 Authorization 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF MAGNUM 7
4.01 Organization 8
4.02 Capitalization 8
4.03 MAGNUM Subsidiaries 8
4.04 Validity of Agreement 8
4.05 MAGNUM Financial Statements 8
4.06 Events Since Date of MAGNUM Balance Sheet 9
4.07 Properties 11
4.08 Accounts Receivable 11
4.09 Taxes 12
4.10 Compensation 12
4.11 Compliance with Law 12
Litigation 13
4.13 Contracts 13
4.14 Real Property 14
4.15 Proprietary Rights 15
4.16 Toxic Wastes; Employee Safety, etc 15
4.17 Insurance 15
4.18 Bank Accounts 16
4.19 No Conflict 16
4.20 No Default 16
4.21 Certain Advances 16
4.22 Related Parties 17
4.23 Copies of Certain Documents 17
4.24 Underlying Documents 17
4.25 Disclosure 17
4.26 Effect of Agreement 17
4.27 Indemnification of ColorSmart 18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF COLORSMART 19
5.01 Organization 19
5.02 Validity of Agreement 19
5.03 Effect of Agreement 19
5.04 Indemnification of MAGNUM and
the Shareholder 21
ARTICLE VI. ACCESS TO INFORMATION; CONFIDENTIALITY 22
6.01 Access 22
<PAGE>
6.02 Confidentiality 23
ARTICLE VII. COVENANTS OF MAGNUM AND THE SHAREHOLDER 23
7.01 Conduct of Business 23
7.02 Notice of Certain Adverse Changes, Defaults
or Claim 24
7.03 Actions Requiring Consent 24
7.04 Implementation of Representations and Warranties 24
7.05 Communications 24
7.06 Other Negotiations 24
7.07 Cooperation 25
7.08 Facilitation of Public Offering
ARTICLE VIII. COVENANTS OF COLORSMART 25
8.01 Implementation of Representations and Warranties 25
8.02 Communications 25
8.03 Registration of ColorSmart Stock 25
8.04 Additional SEC Documents 26
ARTICLE IX. SECURITIES LAW MATTERS 26
9.01 Securities Act Exemptions 26
9.02 Stock Restrictions 26
9.03 Representations of ColorSmart 26
9.05 Legend Restrictions 27
ARTICLE X. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER 27
10.01 Accuracy of Representations and Warranties 27
10.02 Fulfillment of Covenants 27
10.03 Approval of Sale 27
10.04 No Litigation 27
ARTICLE XI. CONDITIONS TO OBLIGATIONS OF COLORSMART 28
11.01 Accuracy of Representations and Warranties 28
11.02 Fulfillment of Covenants 28
11.03 Approval of Sale 28
11.04 Consents Obtained 28
11.05 No Litigation 28
11.06 Accountant's Review 28
11.07 Accounting Treatment 29
11.08 ColorSmart Review 29
11.09 Resignation of Directors 29
11.10 Sale of MAGNUM Stock 29
ARTICLE XII. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS 29
ARTICLE XIII. PAYMENT OF EXPENSES 29
13.01 Expenses 29
<PAGE>
13.02 Brokers 30
ARTICLE XIV. GENERAL PROVISIONS 30
14.01 Notices 30
14.02 Headings 31
14.03 Counterparts 31
14.04 Assignment 31
14.05 Waiver 31
14.06 Entire Agreement 31
14.07 Good Faith 31
14.08 Applicable Law 32
14.09 Severability 32
SCHEDULE OF EXHIBITS 33
STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT ("Agreement") is made and entered
into as of the day of September 3, 1998, by and between ColorSmart, Inc., a
Nevada corporation ("ColorSmart") and Magnum Digital Services Corp., a Florida
corporation ("MAGNUM"); and the sole shareholder of Magnum, Robert McDowell (the
"Shareholder").
RECITALS:
A. The Shareholder is the holder of one-hundred percent (100%) of the
outstanding voting stock of MAGNUM (the "MAGNUM Stock") and the owner in fee
simple title of certain real property upon which the MAGNUM business is
currently conducted ("MAGNUM Real Estate");
B. ColorSmart desires to purchase from the Shareholder, and the Shareholder
desires to sell to ColorSmart, all of the outstanding MAGNUM Stock owned by
Shareholder in exchange for the consideration described herein; and
C. The parties desire to effect the transaction pursuant to plan of
reorganization under Section 368(a)(1)(B), of the Internal Revenue Code of 1986,
as amended (the "Code") [it is unclear to me whether this transaction needs to
be accounted for as a reorganized for IRS purposes--I don't think so].
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
ARTICLE I.
PLAN OF REORGANIZATION
<PAGE>
1.01 Sale and Transfer of MAGNUM Stock. Subject to the terms and
conditions of this Agreement, on the Closing Date (as hereinafter defined) the
Shareholder agrees to sell, and ColorSmart agrees to purchase, all of the shares
of MAGNUM Stock owned by the Shareholder, and Shareholder agrees to convey
ownership free and clear of any liens or encumbrances.
1.02 Consideration. As payment for the MAGNUM Stock, ColorSmart shall
deliver at closing as hereinafter defined, to the Shareholder by certified bank
check or wire transfer, the sum of $500,000.00 ("Purchase Price") in cash. In
addition to the cash payment to seller, ColorSmart will pay the balances due on
all outside equipment leases, of which is not to exceed $275,000.00. Further, to
the aforementioned ColorSmart shall also delivery to the seller 200,000 of
ColorSmart ordinary shares, each share shall carry one (1) vote which is
consistent with all ColorSmart shareholders.
1.03 Assignment of Contracts and Assumption of Obligations.
[are there any special assignments or assumptions contemplated?]
1.04 Plan of Reorganization. The parties hereby adopt this Agreement as a
plan of reorganization under Section 368(a)(l)(B) of the Code.
ARTICLE II.
CLOSING
2.01 Closing Date. The closing of the purchase and sale of the MAGNUM
Stock,(the "Closing") shall be held at the offices of MAGNUM on or before
November 30, 1998 or at such other time and place upon which ColorSmart and
MAGNUM may agree in writing (the "Closing Date"); provided, however, that any
agreement postponing the Closing Date beyond November 30, 1998 shall also
require the consent of all the parties hereto.
2.02 Delivery. At the Closing, the Shareholder shall deliver to ColorSmart
a stock certificate or certificates, duly endorsed with signatures guaranteed,
representing the shares of MAGNUM Stock to be purchased from such Shareholder
and totaling an aggregate of_____________thousand (______) shares, duly endorsed
with appropriate signature guarantees for transfer. Upon receipt of the stock
certificate or stock certificates referenced in the preceding sentence, and all
other conditions to Closing are satisfied, ColorSmart shall cause to be
delivered to the Shareholder the Purchase Price.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to ColorSmart as set forth below
that:
3.01 Title to MAGNUM Stock. Shareholder is the owner, beneficially and of
record, of all of the outstanding shares of capital stock issued by MAGNUM and
to be sold by such Shareholder thereunder, free and clear of any liens,
encumbrances, security agreements, options, claims, charges or restrictions of
any nature whatsoever. Further, that such Shareholder shall cause his shares to
be voted in favor of the consummation of the transactions contemplated by this
Agreement, at any meeting of such Shareholder which may be required hereunder.
3.02 Authorization. Such Shareholder has the full power and authority to
execute and deliver this Agreement and to execute and deliver any and all other
collateral agreements hereto and which are referred to as a part hereof. This
Agreement constitutes the valid and binding obligation of such Shareholder,
<PAGE>
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally and by principles of equity.
ARTICLE IV.
JOINT REPRESENTATIONS AND WARRANTIES OF
MAGNUM AND THE SHAREHOLDER
Subject to and except for the information which is set forth in a list of
exceptions, identified by the Section in this Article to which they pertain, and
contained in a schedule delivered to ColorSmart prior to the execution of this
Agreement and signed for identification on behalf of ColorSmart and MAGNUM (the
"MAGNUM Schedule"), MAGNUM and the Shareholder jointly and severally represent
and warrant to ColorSmart that:
4.01 Organization. MAGNUM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida, and has
full corporate power and authority to carry on its business as it is now being
conducted. MAGNUM is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or properties make such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on MAGNUM.
4.02 Capitalization. The authorized capital stock of MAGNUM consists
of____________ shares of Common Stock all of which is issued and outstanding.
All such outstanding shares have been duly authorized, are validly issued, fully
paid and nonassessable and not subject to preemptive rights created by statute,
MAGNUM's Articles of Incorporation or Bylaws or any agreement to which MAGNUM is
a party or by which it is bound. All such outstanding shares have been issued in
accordance with all applicable state and federal securities laws. Except as set
forth herein, there are no options, warrants, calls, rights, commitments or
agreements of any character to which MAGNUM is a party or by which it is bound
obligating MAGNUM to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating MAGNUM to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
4.03 MAGNUM Subsidiaries. MAGNUM owns no shares of capital stock directly
or indirectly, of any other corporation, partnership or joint venture interest.
4.04 Validity of Agreement. MAGNUM has corporate power and authority to
execute and deliver this Agreement. This Agreement constitutes the valid and
binding obligation of MAGNUM, enforceable in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy laws or other similar
laws affecting creditors' rights generally and by principles of equity. The
execution and delivery of this Agreement by MAGNUM, and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action, and such execution and delivery do not require the consent,
approval or authorization of any person, public authority or other entity.
4.05 MAGNUM Financial Statements. MAGNUM has furnished to ColorSmart true
and correct copies of its unaudited statements of operations, statements of
shareholders' equity and statements of changes in financial condition for its
fiscal year ended December 31, 1997, and for the interim period from January
1,1998 to June 30, 1998, and MAGNUM's unaudited balance sheets as of the end of
such fiscal period (the balance sheet as of December 31, 1997, and as of June
30, 1998, hereinafter referred to as the "MAGNUM Balance Sheets", and all such
financial statements, together with the notes thereto, being hereinafter
referred to collectively as the "MAGNUM Financials"). All of the MAGNUM
Financials: (i) are in accordance with MAGNUM's books and records; (ii) present
fairly the financial position of MAGNUM and the results of its operations as of
the respective dates and for the periods indicated thereon (subject to normal
adjustments);
<PAGE>
and (iii) have been prepared in accordance with generally accepted accounting
principles, applied on a consistent basis. At the date of the MAGNUM Balance
Sheets, MAGNUM had no material liabilities or obligations, fixed, contingent or
otherwise, not set forth on or reserved against in the MAGNUM Financials, or the
accompanying notes thereto, or in the MAGNUM Schedule. For purposes of this
Agreement, "materiality" shall mean amounts in excess of $10,000 either
individually or in the aggregate.
4.06 Events Since Date of MAGNUM Balance Sheets. Since the date of the
MAGNUM Balance Sheet, except as otherwise contemplated by this Agreement, and
except as described in the MAGNUM Schedule, MAGNUM has conducted its business
only in the ordinary and usual course and, without: (i) limiting the generality
of the foregoing:
(a) MAGNUM has not sustained any damage, destruction or loss by reason of
fire, explosion, earthquake, casualty, labor trouble, requisition or taking of
property by any government or agency thereof, windstorm, embargo, riot, act of
God or public enemy, flood, accident, revocation of license or right to do
business, total or partial termination, suspension, default or modification of
contracts, governmental restriction or regulation, other calamity, or other
similar or dissimilar event (whether or not covered by insurance) materially and
adversely affecting the condition (financial or otherwise), business, net worth,
assets, properties or operations of MAGNUM taken as a whole.
(b) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, properties, operations, obligations or liabilities
(fixed or contingent) of MAGNUM which, in the aggregate, have had or may be
reasonably expected to have (whether before or after the Closing Date) a
materially adverse effect on the condition (financial or otherwise), business,
net, worth, assets, properties or operations of MAGNUM as a whole.
(c) MAGNUM has not issued, or authorized for issuance, any equity
security, bond, note or other security or granted, or entered into, any
commitment or obligation to issue or sell any such equity security, bond, note
or other security, whether pursuant to offers, stock option agreements, stock
bonus agreements, stock purchase plans, incentive compensation plans, warrants,
calls, conversion rights or otherwise.
(d) MAGNUM has not incurred additional debt for borrowed money, nor
incurred any obligation or liability (fixed, contingent or otherwise) except in
the ordinary and usual course of business.
(e) MAGNUM has not declared or made any dividend, payment or other
distribution on or with respect to any share of its capital stock.
(f) MAGNUM has not purchased, redeemed or otherwise acquired or committed
itself to acquire for a consideration, directly or indirectly, any share or
shares of its capital stock.
(g) MAGNUM has not mortgaged, pledged, otherwise encumbered or subjected
to lien any of its assets or properties, tangible or intangible, nor committed
itself to do any of the foregoing, except for liens for current taxes which are
not yet due and payable and purchase money liens arising out of the purchase or
sale of products or services made in the ordinary and usual course of business.
(h) MAGNUM has not disposed of, or agreed to dispose of, any asset or
property, tangible or intangible, except in the ordinary and usual course of
business, and in each case for a consideration at least equal to the fair value
of such asset or property, nor leased or licensed to others (including officers
and directors), or agreed to lease or license, any asset or property.
(i) MAGNUM has not purchased or agreed to purchase or otherwise acquire
any debt or equity securities of any corporation, partnership, joint venture,
firm or other entity.
<PAGE>
(j) MAGNUM has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of business
and not involving an amount in any case in excess of $10,000 nor waived any
right of substantial value or canceled any debt or claim or voluntarily suffered
any extraordinary loss.
(k) MAGNUM has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Right (as defined in
Section 4.15).
(l) MAGNUM has not effected or agreed to any amendment or supplement to
any employee profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement.
(m) MAGNUM has not effected or agreed to effect any change in its
directors or executive management.
(n) MAGNUM has not effected or committed itself to effect any amendment or
modification to its Articles of Incorporation or Bylaws.
4.07 Properties. The MAGNUM Balance Sheets reflects all of the assets and
properties, real and personal, used by MAGNUM in its business or otherwise held
by it, except for: (i) property acquired or disposed of in the ordinary and
usual course of business since the date of such balance sheet; and (ii) property
not required under generally accepted accounting principles to be reflected
thereon; and (iii) the MAGNUM Real Estate. Except as set forth in the MAGNUM
Schedule, MAGNUM has good and marketable title to all assets and properties
listed on the MAGNUM Balance Sheet and thereafter acquired, free and clear of
any imperfections of title, lien, claim, encumbrance, restriction, charge or
equity of any nature whatsoever, except for the lien of current taxes not yet
due and payable. All of the fixed assets and properties listed on the MAGNUM
Balance Sheet and thereafter acquired are in good operating condition and are
free from any material defect. Attached hereto and made a part hereof as Exhibit
4.07 is a full and complete legal description of the MAGNUM Real Estate.
4.08 Accounts Receivable. All of the accounts receivable of MAGNUM shown
on the MAGNUM Balance Sheet or thereafter acquired arose and are collectible in
the ordinary and usual course of MAGNUM's business, except that the value of any
account receivable the collection of which is doubtful or which is subject to a
defense or set-off has been written down to an amount not in excess of
realizable market value or adequate reserves or allowances therefor have been
provided. The values at which accounts receivable are carried reflect the
accounts receivable valuation policy of MAGNUM, which is consistent with its
past practice and in accordance with generally accepted accounting principles
applied on a consistent basis.
4.09 Taxes. MAGNUM has duly filed with the appropriate United States,
state, local and foreign governmental agencies, all tax returns and reports
required to be filed and has paid or accrued in full all taxes, interest,
penalties, assessments or deficiencies, if any, due to, or claimed to be due by,
any taxing authority. The MAGNUM Balance Sheet includes adequate provision for
all such taxes, interest, penalties, assessments or deficiencies, if any,
through the date indicated thereon. MAGNUM has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any taxes. MAGNUM is not a party to any pending action or proceeding, nor, to
the best of its knowledge, is any such action or proceeding threatened by any
governmental authority for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies, and no claim for assessment or
collection of taxes, interest, penalties, assessments or deficiencies has been
asserted against it. No issue has been raised by any federal, state, local, or
foreign taxing authority in connection with an audit or examination of MAGNUM
tax returns, business or properties which has not been settled or resolved.
<PAGE>
4.10 Compensation. The MAGNUM Schedule contains a full and complete list
of all persons who served as directors, officers, employees or consultants of
MAGNUM at June 30, 1998, specifying their names and job designations, the annual
compensation paid or payable to such persons and the basis of such compensation,
whether fixed or commission or a combination thereof. Except as otherwise
disclosed in the MAGNUM Schedule, since June 30, 1998, there his been no
material change in compensation, by means of wages, salaries, bonuses,
gratuities or otherwise, to any such director, officer, employee or consultant
of MAGNUM.
4.11 Compliance with Law. Except for possible minor exceptions, the curing
or non-curing of which would not have a material effect on the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of MAGNUM taken as a whole, the business of MAGNUM has been conducted in
accordance with all applicable laws, regulations, orders and other requirements
of governmental authorities, including, without limiting the generality of the
foregoing, all laws, regulations and orders relating to employment practices and
procedures and the health and safety of employees. MAGNUM has not received any
notice of alleged violations of any of the foregoing.
4.12 Litigation. Except as set forth in the MAGNUM Schedule, there is no
claim, dispute, action, proceeding, suit, appeal or investigation, at law or in
equity, pending against MAGNUM or involving any of its business or properties,
before any court, agency, authority, arbitration panel or other tribunal, and,
to the best knowledge of MAGNUM and the Shareholder, none has been threatened.
To the best knowledge of MAGNUM and the Shareholder, there are no facts which,
if known to shareholders, customers, governmental authorities or other persons,
would result in any such claim, dispute, action, proceeding, suit, appeal or
investigation which would have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, properties or operations
of MAGNUM taken as a whole. Except as set forth in the MAGNUM Schedule, MAGNUM
is not subject to any order, writ, injunction or decree of any court, agency,
authority, arbitration panel or other tribunal, or in default with respect to
any notice, order, writ, injunction or decree.
4.13 Contracts. The MAGNUM Schedule contains a full and complete list
(subject in the case of clause (i) below to the dollar amount indicated therein)
of each partially or totally executory contract or agreement to which MAGNUM is
a party, or by which it is bound in any respect, including, without limitation,
any and all: (i) contracts or agreements for the purchase, sale, lease or other
disposition of equipment, goods, materials, research and development, supplies,
studies, or capital assets, or for the performance of services, in any case
involving more than $10,000, except that such limitation as to dollar amount
shall not apply as to any contracts or agreements covered by Section 4.22; (ii)
contracts or agreements for the joint performance of work or services, and all
other joint venture or teaming agreements, (iii) management or employment
contracts, consulting contracts, collective bargaining contracts or termination
and severance agreements; (iv) notes, mortgages, deeds of trues, loan
agreements, security agreements, guarantees, debentures, indentures, credit
agreements and other evidences of indebtedness; (v) pension, retirement, profit
sharing, deferred compensation, bonus, incentive, life insurance,
hospitalization, or other employee benefit plans or arrangements (including,
without limitation, any contracts or agreements with trustees, insurance
companies or others relating to any such employee benefit plan or arrangement);
(vi) stock option, stock purchase, warrant, repurchase or other contracts or
agreements relating to any shares of capital stock; (vii) contracts or
agreements with agents, brokers, consignees, sales representatives or
distributors; (viii) contracts or agreements with any director, officer,
employee, consultant or shareholder; (ix) powers of attorney or similar
authorizations granted to third parties; and (x) licenses, sublicenses, royalty
agreements, and other contracts or agreements to which MAGNUM is a party, or
otherwise subject, relating to technical assistance or to Proprietary Rights (as
defined in Section 4.15). MAGNUM is not a party to, nor bound by, any contract
or agreement which: (A) MAGNUM can reasonably foresee will result in any
material loss upon the performance thereof (including any material liability for
penalties or damages, whether liquidated, direct, indirect, incidental or
consequential, or down time charges); and (B) is not reflected or adequately
reserved against on the MAGNUM Balance Sheets. No party has raised any claim,
dispute or controversy or withheld payments from MAGNUM with respect to any of
its contracts nor has MAGNUM received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance
<PAGE>
with respect to the obligations of MAGNUM under any of its contracts, nor are
there any facts which exist indicating that any of such contracts may be totally
or partially terminated or suspended by the other party thereto. MAGNUM has not
entered into any contract or agreement containing covenants limiting its right
to compete in any business with any person. As used in this Agreement, the terms
"contract" and "agreement" mean and include every contract, agreement and
commitment whether written or oral.
4.14 Real Property. The MAGNUM Schedule contains a full and complete list
of all real property leased by MAGNUM. All such property is held under valid and
enforceable leases, copies of which have been delivered to ColorSmart and as to
which neither party to the lease is in material default. MAGNUM does not own any
real property in fee simple. To the best knowledge of MAGNUM, the operations of
MAGNUM on any of such real property, nor any improvement thereon, violate any
applicable building code, zoning requirement, or pollution control ordinance or
any other regulation or statute applicable to such real property.
4.15 Proprietary Rights. The MAGNUM Schedule contains a full and complete
list of all trademarks, trade names, service marks, and copyrights, or
applications therefor, owned or used by MAGNUM. MAGNUM owns, or possesses
adequate licenses or other rights to use, all trademarks, trademark
applications, service marks, trade names, copyrights, inventions, drawings,
computer software, designs, trade secrets, customer lists, proprietary know-how
or information, or other rights with respect thereto (collectively referred to
as "Proprietary Rights") required for or incident to the operation, sale and use
of all products and services sold or provided by MAGNUM, free and clear of any
right, lien, encumbrance or claim of others, including without limitation
present or former employees of MAGNUM or their former employers; provided,
however, that the possibility exists that other persons, completely independent
of MAGNUM or its employees or agents, could have developed trade secrets,
customer information or items of technical information similar or identical to
that of MAGNUM. MAGNUM is not aware of any such development by other persons of
similar or identical trade secrets or technical information. MAGNUM has taken
reasonable security measures to protect the secrecy and confidentiality of such
of its Proprietary Rights, the value of which depends upon such secrecy and
confidentiality.
4.16 Toxic Wastes; Employee Safety etc. To the best of its knowledge,
MAGNUM makes adequate provision for the control, removal, disposal and storage
of all toxic wastes, if any, generated by its business operations. MAGNUM is not
presently in violation of any federal or state law, regulation, ordinance, or
the like governing protection of the environment and human health and safety
regarding toxic wastes. MAGNUM is not presently in violation of any provision of
OSHA or any regulation promulgated thereunder. No action, proceeding, claim,
suit or the like is pending or has been threatened against by any government
agency or any person with respect to toxic wastes, occupational health and
safety or environmental damage, nor is MAGNUM aware of any potential claims
concerning any such matters.
4.17 Insurance. The MAGNUM Schedule contains a full and complete list of
all policies of insurance to which MAGNUM is a party or is a beneficiary or
named insured, and MAGNUM has in full force and effect, with all premiums due
thereon paid, the policies of insurance set forth therein. All the insurable
properties of MAGNUM are insured in amounts and coverages and against risks and
losses which are adequate and usual for similar properties and businesses.
4.18 Bank Accounts. The MAGNUM Schedule contains a full and complete list
of all the bank accounts of MAGNUM together with the names of the persons
authorized to draw thereon. All cash in such accounts is held in demand deposits
and is not subject to any restriction or limitation as to withdrawal.
4.19 No Conflict. The execution and delivery of this Agreement by MAGNUM
and the performance of its obligations hereunder: (i) are not in violation or
breach of, and will not conflict with or constitute a default under, any of the
terms of its Articles of Incorporation or Bylaws, or any note, debt instrument,
security agreement, lease, deed of trust or mortgage, or any other contract,
agreement or commitment binding upon MAGNUM or any of its assets or properties;
(ii) will not result in the creation or imposition of
<PAGE>
any lien, encumbrance, equity or restriction in favor of any third party upon
any of its assets or properties; and (iii) will not conflict with or violate any
applicable law, rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court having jurisdiction over MAGNUM or any of
its assets or properties. The MAGNUM Schedule contains a full and complete list
of all necessary consents, waivers and approvals of third parties required to be
obtained by MAGNUM in connection with the execution and delivery of this
Agreement by MAGNUM and the performance of its obligations hereunder.
4.20 No Default. MAGNUM has in all respects performed, or is now
performing, the obligations of, and is not in material default (and would not by
the lapse of time and/or the giving of notice be in material default) in respect
of, any note, debt instrument, "security agreement, option to purchase, lease,
deed of trust or mortgage, or any other material contract, agreement or
commitment binding upon it or its assets or properties. Each of the material
contracts, agreements or other instruments described on the MAGNUM Schedule is a
legal, binding, and enforceable obligation by or against it. To the best
knowledge of MAGNUM, no party with whom it has an agreement or contract, which
is of material importance to the condition (financial or otherwise), business,
net worth, assets, properties, or operations of MAGNUM taken as a whole, is in
default thereunder or has breached any terms of provisions thereof in a material
way.
4.21 Certain Advances. There are no receivables of MAGNUM owing by
directors, officers, employees, consultants or its shareholders, or owing by any
affiliate of any director or officer of MAGNUM, other than advances in the
ordinary and usual course of business to officers and employees for reimbursable
business expenses.
4.22 Related Parties. No officer or director of MAGNUM, or any affiliate
of any such person, has, either directly or indirectly: (i) an interest in any
corporation, partnership, firm or other person or entity which furnishes or
sells products or services which are similar to those furnished or sold by
MAGNUM; or (ii) a beneficial interest in any contract or agreement to which
MAGNUM is a party or by which MAGNUM may be bound. For purposes of this Section
4.22, there shall be disregarded any interest which arises solely from the
ownership of less than a one (1) percent equity interest in a corporation whose
stock is regularly traded on any national securities exchange or in the
over-the-counter market.
4.23 Copies of Certain Documents. The MAGNUM Schedule contains true and
complete copies of: (i) its currently effective Articles of Incorporation,
certified by the Secretary of State of Florida; (ii) its currently effective
Bylaws, certified by the Secretary of MAGNUM; and (iii) all federal and other
tax returns filed by MAGNUM since its inception [or for a shorter period agreed
to by the parties such as 5 years].
4.24 Underlying Documents. All underlying documents listed or described in
the MAGNUM Schedule have heretofore been furnished to ColorSmart. All such
documents furnished to ColorSmart are true and correct copies, and there are no
amendments or modifications thereto, except as expressly noted in the MAGNUM
Schedule. The minute books of MAGNUM contain full, complete and accurate records
of all meetings and other corporate actions taken by the directors and
shareholders of MAGNUM, and ColorSmart has heretofore been furnished true and
correct copies of all documents and records contained in said minute books.
4.25 Disclosure. Neither this Agreement, the MAGNUM Schedule, nor any
other written statement or certificate furnished by MAGNUM or the Shareholders
to ColorSmart in connection with the transactions contemplated hereby, when
taken together, contain any untrue statement of a material fact or omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
4.26 Effect of Agreement. The execution, delivery and performance by the
Shareholder and by MAGNUM of this Agreement, and the consummation of the
transactions herein contemplated, will not conflict with, or result in a breach
of the terms of, or constitute a default under or violation of, any law or
regulation of any governmental authority or any provision of the Articles of
Incorporation or Bylaws of either, or any
<PAGE>
agreement or instrument to which the Shareholder or MAGNUM is a party or by
which they are bound or to which they are subject. No consent of any person not
a party to this Agreement and no consent of any governmental authority is
required to be obtained on the part of the Shareholder or MAGNUM to permit the
consummation of the transactions contemplated by this Agreement, which consents
will not have been received before the Closing Date.
4.27 Indemnification of ColorSmart. MAGNUM and the Shareholder, agree,
jointly and severally, to indemnify, defend and hold ColorSmart, its officers,
directors, employees and attorneys (all such persons and entities being
collectively referred to as the "ColorSmart Group"), harmless from and against
any and all losses, damages, costs and expenses, including attorneys' fees (any
such loss, damage, cost or expense herein called a "Loss"), which they or any
member of the ColorSmart Group may at any time sustain or incur by reason of (i)
any inaccuracy or breach of any of the representations, warranties or covenants
of MAGNUM or the Shareholder contained herein or in any certificate delivered
pursuant hereto, or (ii) any claim or claims whether or not presently known to
the ColorSmart Group, which arise in connection with the operation of the
business of MAGNUM, where the event which gives rise to such claim occurred
prior to the date of this Agreement, or (iii) any claim or claims arising out of
the failure of MAGNUM or the Shareholder to discharge any of their obligations
pursuant to this Agreement. In any action in respect of which indemnity may be
sought hereunder by a party hereto shall be brought against such party, the
other party shall be entitled to participate in the defense thereof at its own
expense and to settle any such action on such terms as it shall see fit so long
as the party entitled to indemnification hereunder shall be released from any
liability by reason of such settlement. In such event, the party required to
provide indemnification shall receive full cooperation and access to all
relevant and nonprivileged records. The indemnification provisions of this
Section shall not be deemed exclusive and shall not prejudice any other rights
or remedies, at law or in equity, of any party under this Agreement with respect
to any matter relating to the terms, provisions, covenants or conditions of this
Agreement or any transaction contemplated hereby.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF COLORSMART
ColorSmart represents and warrants to MAGNUM and the Shareholder that:
5.01 Organization. ColorSmart is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada and has full
corporate power and authority to carry on its business as now being conducted.
5.02 Validity of Agreement. ColorSmart has full corporate power and
authority to execute and deliver this Agreement. This Agreement constitutes the
valid and binding obligation of ColorSmart, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
other similar laws affecting creditors' rights generally and by principles of
equity. The execution and delivery of this Agreement by ColorSmart, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action, and such execution and delivery do not
require the consent, approval or authorization of any person, public authority
or other entity.
5.03 Effect of Agreement. The execution, delivery and performance by
ColorSmart of this Agreement, and the consummation of the transactions herein
contemplated, will not conflict with, or result in a breach of the terms of, or
constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of ColorSmart, or any agreement or instrument to which ColorSmart is a
party or by which it is bound or to which it is subject. No consent of any
person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of ColorSmart to permit the
consummation of the transactions contemplated by this Agreement, which consent
will not have been received before the Closing Date.
<PAGE>
5.04 Indemnification of MAGNUM and the Shareholder. ColorSmart agrees to
indemnify, defend and hold MAGNUM, the Shareholder, their respective officers,
directors, employees and attorneys (all such persons and entities being
collectively referred to as the "MAGNUM Group"), harmless from and against any
and all losses, damages, costs and expenses, including attorneys' fees (any such
loss, damage, cost or expense herein called a "Loss"), which they or any member
of the MAGNUM Group may at any time sustain or incur by reason of: (i) any claim
or claims whether or not presently known to the ColorSmart Group, which arise in
connection with the operation of the business of ColorSmart, where the event
which gives rise to such claim occurred prior to the date of this Agreement, or
(ii) any claim or claims arising out of the failure of ColorSmart to discharge
any of its obligations pursuant to this Agreement. In any action in respect of
which indemnity may be sought hereunder by a party hereto shall be brought
against such party, the other party shall be entitled to participate in the
defense thereof at its own expense and to settle any such action on such terms
as it shall see fit so long as the party entitled to indemnification hereunder
shall be released from any liability by reason of such settlement. In such
event, the party required to provide indemnification shall receive full
cooperation and access to all relevant and nonprivileged records. The
indemnification provisions of this Section shall not be deemed exclusive and
shall not prejudice any other rights or remedies, at law or in equity, of any
party under this Agreement with respect to any matter relating to the terms,
provisions, covenants or conditions of this Agreement or any transaction
contemplated hereby.
ARTICLE VI.
ACCESS TO INFORMATION: CONFIDENTIALITY
6.01 Access.
(a) Prior to the Closing Date, MAGNUM shall afford representatives of
ColorSmart reasonable access to the officers and personnel of MAGNUM and to such
of its financial, contractual and other records as shall be reasonably necessary
for ColorSmart's investigation of MAGNUM and its business and operations.
(b) ColorSmart shall make available to the Shareholder the opportunity to
ask questions of and receive answers from appropriate officers or
representatives of ColorSmart concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which ColorSmart possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to the Shareholder hereunder.
6.02 Confidentiality.
(a) No information concerning MAGNUM not previously disclosed to the
public or in the public domain which is contained herein or in the MAGNUM
Schedule, or which shall have been furnished to or obtained by ColorSmart as
provided in Section 6.01(a), shall be disclosed to any person other than
ColorSmart's employees, legal counsel, financial advisers, or accountants in
confidence, or used for any purpose other than as contemplated herein. In the
event that the purchase and sale of the MAGNUM Stock shall not be consummated,
ColorSmart shall return to MAGNUM all such information in its possession which
is in written form.
(b) No information concerning ColorSmart not previously disclosed to the
public or in the public domain which is contained herein or which shall have
been furnished to or obtained by MAGNUM or any Shareholder as provided in
Section 6.01(b) or 6.01(c), shall be disclosed by them to any person other than
their respective employees, legal counsel, financial advisors, or accountants in
confidence, or used for any purpose other than as contemplated herein. In the
event that the purchase and sale of the MAGNUM Stock shall not be consummated,
each such person shall return to ColorSmart all such information in their
possession which is in written form.
<PAGE>
ARTICLE VII
COVENANTS OF MAGNUM AND THE SHAREHOLDER
MAGNUM and the Shareholder hereby jointly and severally covenant:
7.01 Conduct of Business. From and after the execution and delivery of
this Agreement and until the Closing Date or the termination of this Agreement,
whichever shall first occur: (i) MAGNUM shall not engage in any activities or
transactions which shall be outside the ordinary course of its business without
the prior written consent of ColorSmart, which consent shall not be unreasonably
withheld; (ii) such persons will use their best efforts to preserve the existing
licenses, franchises, rights and privileges pertinent to the business and
operations of MAGNUM; and (iii) such persons will use their best efforts to
preserve intact the business organization of MAGNUM and to preserve its goodwill
and relationships with its suppliers, customers, employees and others with whom
it deals.
7.02 Notice of Certain Adverse Changes, Defaults or Claims. MAGNUM shall
give prompt notice to ColorSmart of any material adverse change to the property
or business of MAGNUM, or any notice of default received by it, subsequent to
the date of this Agreement and prior to the Closing Date, under any instrument
or agreement to which MAGNUM is a party or by which any of its property is
bound, or of the assertion of any claim which, if upheld, would render
inaccurate any representation contained herein.
7.03 Actions Requiring Consent. Between the date hereof and the Closing
Date or, the termination of this Agreement, whichever shall first occur, MAGNUM
shall not, without the prior written consent of ColorSmart, which consent shall
not unreasonably be withheld, take any action of the type described in clauses
(c) through (n) of Section 4.06.
7.04 Implementation of Representations and Warranties. Such persons shall
use all reasonable efforts to render accurate as of the Closing Date their
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
7.05 Communications. Between the date hereof and the Closing Date, such
persons shall furnish no communication to the public with respect to the
transactions contemplated by this Agreement without the prior approval of
ColorSmart as to the content thereof, which approval shall not unreasonably be
withheld by ColorSmart.
7.06 Other Negotiations. Between the date hereof and the Closing Date or
the termination of this Agreement, whichever shall first occur, such persons
will disclose to ColorSmart all bona fide inquiries from other persons, firms or
corporations concerning the possible acquisition of MAGNUM (by consolidation,
merger, sale or exchange of assets, sale of stock or otherwise) or equity
securities of MAGNUM; and neither MAGNUM nor the Shareholder will solicit an
acquisition of MAGNUM by another person, firm or corporation, whether by
consolidation, merger or purchase or sale of business or assets or by the sale
or exchange of stock, nor will MAGNUM solicit the sale of any of its capital
stock or other equity securities to any other person, firm or corporation.
Nothing contained in this Section shall be construed as limiting the rights of
the Board of Directors of MAGNUM to discharge their fiduciary responsibilities
in response to unsolicited offers from third parties.
7.07 Cooperation. The Shareholder shall cooperate, and will use its best
efforts to have the other present officers, directors and employees of MAGNUM
cooperate, with ColorSmart, at its request, on and after the Closing Date and
without further consideration, in endeavoring to effect the collection of
accounts or notes receivable owing to MAGNUM at the Closing Date, and, at
ColorSmart's expense, in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
relating to adjustment of federal income or any other taxes of MAGNUM for all
<PAGE>
periods prior to the Closing Date and in connection with any other actions,
proceedings, arrangements or disputes whatsoever involving MAGNUM and based upon
contracts, arrangements or acts which were in effect or occurred on or prior to
the Closing Date.
7.08 Facilitation of the ColorSmart Public Offering. MAGNUM and the
Shareholder shall use their best efforts to cooperate, and will use their best
efforts to have the other present officers, directors, agents, employees,
attorneys, and accountants of MAGNUM to cooperate with ColorSmart in the process
of ColorSmart's initial public offering of its common stock, being undertaken by
ColorSmart pursuant to the Securities Act of 1933, as amended ("Public
Offering"). Such cooperation shall include, but not be limited to: (i) providing
for, at ColorSmart's expense, a certified audit of MAGNUM's financial statements
and statements of operation for the two year period ended December 31, 1997 and
for the preparation and review of any interim financial statements and
statements of operations of MAGNUM as required by Regulation S-B promulgated
under the Securities Act, if such certified audit shall be required in the
Public Offering; and (ii) providing such additional information or documents
which may be reasonably necessary for ColorSmart to conduct its Public Offering
and to permit the effectiveness of the registration statement to be filed by
ColorSmart with the United States Securities and Exchange Commission ("SEC").
ARTICLE VIII.
COVENANTS OF COLORSMART
ColorSmart hereby covenants:
8.01 Implementation of Representations and Warranties. ColorSmart shall
use all reasonable efforts to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
8.02 Communications. Between the date hereof and the Closing Date (except
to the extent required by state or federal securities laws), ColorSmart shall
furnish no communication to the public with respect to the transactions
contemplated by this Agreement without the prior approval of MAGNUM as to the
content thereof, which approval shall not unreasonably be withheld by MAGNUM.
8.03 Registration of ColorSmart Common. ColorSmart will use its best
efforts to file and maintain an effective registration statement with the SEC
and applicable state securities commissions covering the registration on Form
SB-2 and sale of its common stock in order to conduct the Public Offering as
soon as practicable after the execution of this Agreement.
8.04 Additional SEC Documents. ColorSmart shall furnish to MAGNUM and the
Shareholder copies of all documents, if any, (other than preliminary material
and documents which describe this Agreement and the transactions contemplated
hereby) that ColorSmart files with the SEC from the date hereof through the
Closing Date.
ARTICLE IX.
SECURITIES LAW MATTERS
9.01 Securities Act Exemptions. The MAGNUM Stock to be transferred by the
Shareholder to ColorSmart pursuant to this Agreement shall not be registered
under the Securities Act, in reliance upon exemptions from such registration
contained in Section (4)(l) and/or Section 4(2) of the Securities Act.
9.02 Stock Restrictions. The certificates representing the shares of
MAGNUM Stock transferred pursuant to this Agreement shall bear a restrictive
legend in substantially the following form (and appropriate stock transfer
orders shall be placed against the transfer thereof):
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE `ACT'). THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR, OTHERWISE DISPOSED OF EXCEPT UNDER THE CIRCUMSTANCES SPECIFIED
BY A SHAREHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY
OF THE CORPORATION."
9.03 Representations of ColorSmart. ColorSmart represents and warrants to
the Shareholder that it is acquiring the MAGNUM Stock for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof and without any present intention of selling the same;
provided, however, that any disposition thereof will at all times be within its
control.
9.05 Legend Restrictions. It is understood that the certificates
representing the MAGNUM Stock purchased hereunder shall be endorsed with a
legend restricting transfer as necessary to conform to the requirements of the
Securities Act.
ARTICLE X.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder under this Agreement are, at the option
of the Shareholder, subject to the satisfaction at or prior to the Closing of
the following conditions:
10.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by ColorSmart in this Agreement shall be
true in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and ColorSmart
shall have delivered to MAGNUM and the Shareholder a certificate to such effect
dated the Closing Date and signed by its President and Chief Executive Officer.
10.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by ColorSmart at or before
the Closing Date shall have been duly complied with and performed, and
ColorSmart shall have delivered to MAGNUM and the Shareholder a certificate to
such effect dated the Closing Date and signed by its President and Chief
Executive Officer.
10.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
10.04 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon MAGNUM the Shareholder because of such transaction.
ARTICLE XI.
CONDITIONS TO OBLIGATIONS OF COLORSMART
The obligations of ColorSmart under this Agreement are, at the option of
ColorSmart, subject to the satisfaction at or prior to the Closing of the
following conditions:
<PAGE>
11.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by MAGNUM and the Shareholder in this
Agreement shall be true in all material respects as of the Closing Date with the
same force and effect as though such representations and warranties had been
made as of the Closing Date, except for changes contemplated by this Agreement,
MAGNUM shall have delivered to ColorSmart a certificate to such effect dated the
Closing Date and signed by its President and Chief Executive Officer.
11.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by MAGNUM or the Shareholder
at or before the Closing Date shall have been duly complied with and performed,
and MAGNUM shall each have delivered to ColorSmart a certificate to such effect
dated the Closing Date and signed by its President and Chief Executive Officer.
11.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
11.04 Consents Obtained. MAGNUM and the Shareholder shall have delivered
to ColorSmart the written consent or approval of each person or organization
whose consent or approval shall be required in order to permit them to
consummate the transactions contemplated hereby or in order to avoid any breach
or termination of any agreement to which they are a party.
11.05 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon ColorSmart, or any of its officers or directors because of such
transaction.
11.06 Accountant's Review. ColorSmart shall have received from
_______________ a letter to the effect that on the basis of their "acquisition
review" of MAGNUM, not constituting a full audit, nothing has come to their
attention which has caused them to believe that the accounts or balances to
which they applied their procedures should be adjusted.
11.07 Accounting Treatment. ColorSmart shall have received from
__________, a written analysis stating that the business combination resulting
from the consummation of the transactions contemplated by this Agreement may be
accounted for on a pooling of interests basis in accordance with generally
accepted accounting principles and in accordance with all rules, regulations and
policies of the SEC.
11.08 ColorSmart Review. There shall not have come to the attention of
ColorSmart, as a result of any investigation performed pursuant to Section 6.01
hereof, any information, not previously disclosed to ColorSmart, which is likely
to materially and adversely affect the business, property or operations of
MAGNUM following the Closing Date.
11.09 Resignation of Directors. All persons serving as directors of MAGNUM
shall have tendered their resignations to be effective as of the Closing Date.
11.10 Sale of MAGNUM Stock. Not less than one hundred percent (100%) of the
shares of MAGNUM Stock outstanding as of the Closing Date shall have been
tendered by the Shareholder for purchase by ColorSmart hereunder.
ARTICLE XII.
SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS
<PAGE>
The representations, warranties and covenants of the parties contained in
this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive the Closing hereunder.
ARTICLE XIII.
PAYMENT OF EXPENSES
13.01 Expenses. Except as provided herein, the parties shall each pay
their own legal and accounting fees and other out-of-pocket expenses incurred
incident to the preparation and carrying out of this Agreement and the
transactions herein contemplated, whether or not such transactions are
consummated; provided however, in the event that the Shareholder, or MAGNUM, or
either of them, shall fail to consummate the transactions contemplated by this
Agreement, for reasons other than a material breach by ColorSmart of the terms
of this Agreement, MAGNUM shall pay to ColorSmart as a "break-up" fee all actual
accounting and legal expenses incurred by ColorSmart up to a maximum of $15,000.
In the event that such transactions are consummated, the reasonable legal and
accounting fees and ether expenses of MAGNUM shall be borne by ColorSmart
following the Closing. All other expenses shall be deemed to be expenses of the
Shareholder, and the Shareholder, jointly and severally, shall assume and be
responsible for the payment thereof.
13.02 Brokers. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement and, insofar as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any such transaction. Each party
agrees to indemnify and hold the other parties harmless against any loss,
liability, damage, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act, omission or
statement of the indemnifying party.
ARTICLE XIV.
GENERAL PROVISIONS
14.01 Notices. Any notice, request, instruction or other document to be
given hereunder by a party to any other party shall be in writing and effective
when delivered personally or sent by certified mail with return receipt
requested, postage prepaid, as follows:
To ColorSmart:
Attn: President
With a Copy to:
Attn:
To MAGNUM
Attn: President
With a Copy to:
Attn:
To Shareholder:
<PAGE>
or to such other addresses or other persons as may be designated in writing by
any of the parties, by notice given as aforesaid.
14.02 Headings. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
14.03 Counterparts. This Agreement may be executed in one or more
counterparts, and when so executed each counterpart shall be deemed to be an
original, and said counterparts together shall constitute one and the same
instrument.
14.04 Assignment. None of the parties may assign or transfer any rights or
obligations under this Agreement.
14.05 Waiver. Any party hereto may, by written notice to the others: (i) waive
any of the conditions to its obligations hereunder or extend the time for the
performance of any of the obligations or actions of the others; (ii) waive any
inaccuracies in the representations of the others contained in this Agreement or
in any documents delivered pursuant to this Agreement; (iii) waive compliance
with any of the covenants of the others contained in this Agreement; or (iv)
waive or modify performance of any of the obligations of the others. No action
taken pursuant to this Agreement, including without limitation any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representation, warranty,
condition or agreement contained herein. Waiver of the breach of any one or more
provisions of this Agreement shall not be deemed or construed to be a waiver of
other breaches or subsequent breaches of the same provisions.
14.06 Entire Agreement. This Agreement, including the schedules and exhibits
hereto, constitutes the entire agreement between the parties pertaining to the
subject matter contained herein and supersedes all prior and contemporaneous
agreements, representations, and understandings of the parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by the party sought to be bound.
14.07 Good Faith. Each of the parties hereto agree that it or they shall
act in good faith in an attempt to cause all the conditions precedent to their
respective obligations hereunder to be satisfied.
14.08 Applicable Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Nevada.
14.09 Severability. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
Witness the due execution of this Agreement by the parties hereto as of
the date first set forth above.
COLORSMART, INC.
By [ILLEGIBLE]
-----------
Title: Chairman/CEO
MAGNUM DIGITAL SERVICES CORP.
<PAGE>
By [ILLEGIBLE]
-----------
Title: President
SHAREHOLDER:
[ILLEGIBLE]
-----------
(Signature)
(Typed or printed name and title, if applicable) [ILLEGIBLE]
-----------
SCHEDULE OF ATTACHMENTS
Section
Exhibit/Schedule Title
<PAGE>
EXHIBIT 2.02
[Colorsmart Letterhead]
December 2, 1999
Mr. Robert McDowell
Magnum Digital Inc.
6601 Lyons Rd. C-2
Coconut Creek, Fl.
33073
Gentlemen:
By this letter, the parties acknowledge that the agreement between
Robert McDowell, the sole shareholder of Magnum Digital, Inc. ("Magnum") and
Colorsmart.com, Inc., dated September 3, 1998 is binding and in effect.
Furthermore, the parties agree that the closing date for the purchase of
Magnum's shares has been extended until Colorsmart.com Inc. competes its
initial public offering. Colorsmart acknowledges that it will file a
registration statement with the Securities and Exchange Commission within the
next 15 days. This will also confirm that since no closing has taken place,
no shares of Magnum have been issued or delivered to Colorsmart, Magnum has
not given a promissory note to Robert McDowell for the purchase price, and
there is no deed of pledge between Robert McDowell and Colorsmart extant.
Very truly yours,
Colorsmart.com, Inc.
By: /s/ Roger D. Finchum, Sr.
--------------------------
ACCEPTED, AGREED TO AND ACKNOWLEDGED:
/s/ Robert McDowell
- --------------------
Robert McDowell
<PAGE>
Exhibit 2.03
- --------------------------------------------------------------------------------
STOCK AND ASSET PURCHASE AGREEMENT
Dated September 23, 1998
By and Between
COLORSMART, INC.
and
ADVERTISING THAT WORKS, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
INTRODUCTION 7
RECITALS 7
ARTICLE I. 7
1.01 Sale and Transfer of ATW Stock 7
1.02 Consideration at Closing 7
ARTICLE II. CLOSING 8
2.01 Closing Date 8
2.02 Delivery 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDER 8
3.01 Title to Shares 8
3.02 Authorization 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ATW
AND SHAREHOLDER 9
4.01 Organization 9
4.02 Capitalization 9
4.03 ATW Subsidiaries 9
4.04 Validity of Agreement 9
4.05 ATW Financial Statements 10
4.06 Events Since Date of ATW Balance Sheet 10
4.07 Properties 12
4.08 Accounts Receivable 12
4.09 Taxes 12
4.10 Compensation 12
4.11 Compliance with Law 13
4.12 Litigation 13
4.13 Contracts 13
4.14 Real Property 14
4.15 Proprietary Rights 14
4.16 Toxic Wastes; Employee Safety, etc 15
4.17 Insurance 15
4.18 Bank Accounts 15
4.19 No Conflict 15
<PAGE>
4.20 No Default 16
4.21 Certain Advances 17
4.22 Related Parties 17
4.23 Copies of Certain Documents 17
4.24 Underlying Documents 17
4.25 Disclosure 17
4.26 Effect of Agreement 17
4.27 Indemnification of ColorSmart 17
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF COLORSMART 17
5.01 Organization 17
5.02 Validity of Agreement 17
5.03 Effect of Agreement 18
5.04 Indemnification of ATW and
the Shareholder 18
ARTICLE VI. ACCESS TO INFORMATION; CONFIDENTIALITY 19
6.01 Access 19
6.02 Confidentiality 19
ARTICLE VII. COVENANTS OF ATW AND THE SHAREHOLDER 20
7.01 Conduct of Business 20
7.02 Notice of Certain Adverse Changes, Defaults or Claims 20
7.03 Actions Requiring Consent 20
7.04 Implementation of Representations and Warranties 20
7.05 Communications 20
7.06 Other Negotiations 20
7.07 Cooperation 21
7.08 Facilitation of Public Offering 21
ARTICLE VIII. COVENANTS OF COLORSMART 21
8.01 Implementation of Representations and Warranties 21
8.02 Communications 22
8.03 Registration of ColorSmart Stock 22
8.04 Additional SEC Documents 22
ARTICLE IX. SECURITIES LAW MATTERS 22
9.01 Securities Act Exemptions 22
9.02 Stock Restrictions 22
9.03 Representations of ColorSmart 22
9.05 Legend Restrictions 23
<PAGE>
ARTICLE X. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER 23
10.01 Accuracy of Representations and Warranties 23
10.02 Fulfillment of Covenants 23
10.03 Approval of Sale 23
10.04 No Litigation 23
ARTICLE XI. CONDITIONS TO OBLIGATIONS OF COLORSMART 24
11.01 Accuracy of Representations and Warranties 24
11.02 Fulfillment of Covenants 24
11.03 Approval of Sale 24
11.04 Consents Obtained 24
11.05 No Litigation 24
11.06 Accountant's Review 24
11.07 Accounting Treatment 25
11.08 ColorSmart Review 25
11.09 Resignation of Directors 25
11.10 Sale of ATW Stock 25
ARTICLE XII. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS 25
ARTICLE XIII. PAYMENT OF EXPENSES 25
13.01 Expenses 25
13.02 Brokers 26
ARTICLE XIV. GENERAL PROVISIONS 26
14.01 Notices 27
14.02 Heading 27
14.03 Counterparts 27
14.04 Assignment 27
14.05 Waiver 27
14.06 Entire Agreement 27
14.07 Good Faith 27
14.08 Applicable Law 27
14.09 Severability 27
SCHEDULE OF EXHIBITS 29
<PAGE>
STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT ("Agreement") is made and entered
into as of the 23rd day of September, 1998, by and between ColorSmart, Inc., a
Tennessee corporation ("ColorSmart") and Advertising That Works, Inc., a Georgia
corporation ("ATW"); and the sole shareholder of ATW, Chris England (the
"Shareholder").
RECITALS:
A. The Shareholder is the holder of one-hundred percent (100%) of the
outstanding voting stock of ATW (the "ATW Stock") and the owner in fee simple
title of certain real property upon which the ATW business is currently
conducted ("ATW Real Estate");
B. ColorSmart desires to purchase from the Shareholder, and the
Shareholder desires to sell to ColorSmart, all of the outstanding ATW Stock
owned by Shareholder and the ATW Reel Estate, in exchange for the consideration
described herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
ARTICLE I.
1.01 Sale and Transfer of ATW Stock and ATW Real Estate. Subject to the
terms and conditions of this Agreement, on the Closing Date (as hereinafter
defined) the Shareholder agrees to sell, and ColorSmart agrees to purchase, all
of the shares of ATW Stock owned by the Shareholder, and Shareholder agrees to
convey by sufficient warranty deed to ColorSmart, all right, title, ownership,
and interest in and to the ATW Real Estate, free and clear of any liens or
encumbrances.
1.02 Consideration. As payment for the ATW Stock, ColorSmart shall deliver
at closing as hereinafter defined, to the Shareholder by certified bank check or
wire transfer, the sum of $1,500,000.00 ("Purchase Price"). The Purchase Price
shall be allocated such that $1,000,000 shall be allocated to the ATW Stock and
$500,000 shall be allocated to the ATW Real Estate.
<PAGE>
ARTICLE II.
CLOSING
2.01 Closing Date. The closing of the purchase and sale of the ATW Stock
and ATW Real Estate hereunder (the "Closing") shall be held at the offices of
ATW at 1:00 p.m. on November 30, 1998, or at such other time and place upon
which ColorSmart and ATW may agree in writing (the "Closing Date"); provided,
however, that any agreement postponing the Closing Date beyond November 30, 1998
shall also require the consent of all the parties hereto.
2.02 Delivery. At the Closing, the Shareholder shall deliver to ColorSmart
a stock certificate or certificates, duly endorsed with signatures guaranteed,
representing the shares of ATW Stock to be purchased from such Shareholder and
totaling an aggregate of five-hundred (500) shares, duly endorsed with
appropriate signature guarantees for transfer. In addition at Closing, the
Shareholder shall deliver to ColorSmart a warranty deed in form and substance
satisfactory to counsel for the parties hereto, sufficient to convey fee simple
title to the ATW Real Estate to ColorSmart, free and clear of any liens or
encumbrances. Upon receipt of the stock certificate or stock certificates
referenced in the preceding sentence, and all other conditions to Closing are
satisfied, ColorSmart shall cause to be delivered to the Shareholder the
Purchase Price.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to ColorSmart as set forth below
that:
3.01 Title to ATW Stock and ATW Real Estate. Shareholder is the owner,
beneficially and of record, of all of the outstanding shares of capital stock
issued by ATW and to be sold by such Shareholder hereunder, free and clear of
any liens, encumbrances, security agreements, options, claims, charges or
restrictions of any nature whatsoever. Further, that such Shareholder shall
cause his shares to be voted in favor of the consummation of the transactions
contemplated by this Agreement, at any meeting of such Shareholder which may be
required hereunder. Shareholder is also the record title holder to all right,
title, and interest to the ATW Real Estate to be sold by such Shareholder
hereunder, free and clear of any liens, encumbrances.
3.02 Authorization. Such Shareholder has the full power and authority to
execute and deliver this Agreement and to execute and deliver any and all other
collateral agreements hereto and which are referred to as a part hereof. This
Agreement constitutes the valid and binding obligation of such Shareholder,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally and by principles of equity.
<PAGE>
ARTICLE IV.
JOINT REPRESENTATIONS AND WARRANTIES OF
ATW AND THE SHAREHOLDER
Subject to and except for the information which is set forth in a list of
exceptions, identified by the Section in this Article to which they pertain, and
contained in a schedule delivered to ColorSmart prior to the execution of this
Agreement and signed for identification on behalf of ColorSmart and ATW (the
"ATW Schedule"), ATW and the Shareholder jointly and severally represent and
warrant to ColorSmart that:
4.01 Organization. ATW is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia, and has full
corporate power and authority to carry on its business as it is now being
conducted. ATW is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or properties make such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on ATW.
4.02 Capitalization. The authorized capital stock of ATW consists of
___________ shares of Common Stock all of which is issued and outstanding. All
such outstanding shares have been duly authorized, are validly issued, fully
paid and nonassessable and not subject to preemptive rights created by statute,
ATW's Articles of Incorporation or Bylaws or any agreement to which ATW is a
party or by which it is bound. All such outstanding shares have been issued in
accordance with all applicable state and federal securities laws. Except as set
forth herein, there are no options, warrants, calls, rights, commitments or
agreements of any character to which ATW is a party or by which it is bound
obligating ATW to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating ATW to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
4.03 ATW Subsidiaries. ATW owns no shares of capital stock directly or
indirectly, of any other corporation, partnership or joint venture interest.
4.04 Validity of Agreement. ATW has corporate power and authority to
execute and deliver this Agreement. This Agreement constitutes the valid and
binding obligation of ATW, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy laws or other similar laws
affecting creditors' rights generally and by principles of equity. The execution
and delivery of this Agreement by ATW, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action, and such execution and delivery do not require the consent, approval or
authorization of any person, public authority or other entity.
<PAGE>
4.05 ATW Financial Statements. ATW has furnished to ColorSmart true and
correct copies of its unaudited statements of operations, statements of
shareholders' equity and statements of changes in financial condition for its
fiscal year ended December 31, 1997, and for the interim period from January 1,
1998 to June 30, 1998, and ATW's unaudited balance sheets as of the end of such
fiscal period (the balance sheet as of December 31, 1997, and as of June 30,
1998, hereinafter referred to as the "ATW Balance Sheets", and all such
financial statements, together with the notes thereto, being hereinafter
referred to collectively as the "ATW Financials"). All of the ATW Financials:
(i) are in accordance with ATW's books and records; (ii) present fairly the
financial position of ATW and the results of its operations as of the respective
dates and for the periods indicated thereon (subject to normal adjustments); and
(iii) have been prepared in accordance with generally accepted accounting
principles, applied on a consistent basis. At the date of the ATW Balance
Sheets, ATW had no material liabilities or obligations, fixed, contingent or
otherwise, not set forth on or reserved against in the ATW Financials, or the
accompanying notes thereto, or in the ATW Schedule. For purposes of this
Agreement, "materiality" shall mean amounts in excess of $10,000 either
individually or in the aggregate.
4.06 Events Since Date of ATW Balance Sheets. Since the date of the ATW
Balance Sheet, except as otherwise contemplated by this Agreement, and except as
described in the ATW Schedule, ATW has conducted its business only in the
ordinary and usual course and, without: (i) limiting the generality of the
foregoing:
(a) ATW has not sustained any damage, destruction or loss by reason of
fire, explosion, earthquake, casualty, labor trouble, requisition or taking of
property by any government or agency thereof, windstorm, embargo, riot, act of
God or public enemy, flood, accident, revocation of license or right to do
business, total or partial termination, suspension, default or modification of
contracts, governmental restriction or regulation, other calamity, or other
similar or dissimilar event (whether or not covered by insurance) materially and
adversely affecting the condition (financial or otherwise), business, net worth,
assets, properties or operations of ATW taken as a whole.
(b) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, properties, operations, obligations or liabilities
(fixed or contingent) of ATW which, in the aggregate, have had or may be
reasonably expected to have (whether before or after the Closing Date) a
materially adverse effect on the condition (financial or otherwise), business,
net, worth, assets, properties or operations of ATW as a whole.
(c) ATW has not issued, or authorized for issuance, any equity security,
bond, note or other security or granted, or entered into, any commitment or
obligation to issue or sell any such equity security, bond, note or other
security, whether pursuant to offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation plans, warrants, calls,
conversion rights or otherwise.
<PAGE>
(d) ATW has not incurred additional debt for borrowed money, nor incurred
any obligation or liability (fixed, contingent or otherwise) except in the
ordinary and usual course of business.
(e) ATW has not declared or made any dividend, payment or other
distribution on or with respect to any share of its capital stock.
(f) ATW has not purchased, redeemed or otherwise acquired or committed
itself to acquire for a consideration, directly or indirectly, any share or
shares of its capital stock.
(g) ATW has not mortgaged, pledged, otherwise encumbered or subjected to
lien any of its assets or properties, tangible or intangible, nor committed
itself to do any of the foregoing, except for liens for current taxes which are
not yet due and payable and purchase money liens arising out of the purchase or
sale of products or services made in the ordinary and usual course of business.
(h) ATW has not disposed of, or agreed to dispose of, any asset or
property, tangible or intangible, except in the ordinary and usual course of
business, and in each case for a consideration at least equal to the fair value
of such asset or property, nor leased or licensed to others (including officers
and directors), or agreed to lease or license, any asset or property.
(i) ATW has not purchased or agreed to purchase or otherwise acquire any
debt or equity securities of any corporation, partnership, joint venture, firm
or other entity.
(j) ATW has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of business
and not involving an amount in any case in excess of $10,000 nor waived any
right of substantial value or cancelled any debt or claim or voluntarily
suffered any extraordinary loss.
(k) ATW has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Right (as defined in
Section 4.15).
(l) ATW has not effected or agreed to any amendment or supplement to any
employee profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement.
(m) ATW has not effected or agreed to effect any change in its directors
or executive management.
(n) ATW has not effected or committed itself to effect any amendment or
<PAGE>
modification to its Articles of Incorporation or Bylaws.
4.07 Properties. The ATW Balance Sheets reflects all of the assets and
properties, real and personal, used by ATW in its business or otherwise held by
it, except for: (i) property acquired or disposed of in the ordinary and usual
course of business since the date of such balance sheet; and (ii) property not
required under generally accepted accounting principles to be reflected thereon;
and (iii) the ATW Real Estate. Except as set forth in the ATW Schedule, ATW has
good and marketable title to all assets and properties listed on the ATW Balance
Sheet and thereafter acquired, free and clear of any imperfections of title,
lien, claim, encumbrance, restriction, charge or equity of any nature
whatsoever, except for the lien of current taxes not yet due and payable. All of
the fixed assets and properties listed on the ATW Balance Sheet and thereafter
acquired are in good operating condition and are free from any material defect.
Attached hereto and made a part hereof as Exhibit 4.07 is a full and complete
legal description of the ATW Real Estate.
4.08 Accounts Receivable. All of the accounts receivable of ATW shown on
the ATW Balance Sheet or thereafter acquired arose and are collectible in the
ordinary and usual course of ATW's business, except that the value of any
account receivable the collection of which is doubtful or which is subject to a
defense or set-off has been written down to an amount not in excess of
realizable market value or adequate reserves or allowances therefor have been
provided. The values at which accounts receivable are carried reflect the
accounts receivable valuation policy of ATW, which is consistent with its past
practice and in accordance with generally accepted accounting principles applied
on a consistent basis.
4.09 Taxes. ATW has duly filed with the appropriate United States, state,
local and foreign governmental agencies, all tax returns and reports required to
be filed and has paid or accrued in full all taxes, interest, penalties,
assessments or deficiencies, if any, due to, or claimed to be due by, any taxing
authority. The ATW Balance Sheet includes adequate provision for all such taxes,
interest, penalties, assessments or deficiencies, if any, through the date
indicated thereon. ATW has not executed or filed with any taxing authority any
agreement extending the period for assessment or collection of any taxes. ATW is
not a party to any pending action or proceeding, nor, to the best of its
knowledge, is any such action or proceeding threatened by any governmental
authority for the assessment or collection of taxes, interest, penalties,
assessments or deficiencies, and no claim for assessment or collection of taxes,
interest, penalties, assessments or deficiencies has been asserted against it.
No issue has been raised by any federal, state, local, or foreign taxing
authority in connection with an audit or examination of ATW's tax returns,
business or properties which has not been settled or resolved.
4.10 Compensation. The ATW Schedule contains a full and complete list of
all persons who served as directors, officers, employees or consultants of ATW
at June 30, 1998, specifying their names and job designations, the annual
compensation paid or
<PAGE>
payable to such persons and the basis of such compensation, whether fixed or
commission or a combination thereof Except as otherwise disclosed in the ATW
Schedule, since June 30, 1998, there his been no material change in
compensation, by means of wages, salaries, bonuses, gratuities or otherwise, to
any such director, officer, employee or consultant of ATW.
4.11 Compliance with Law. Except for possible minor exceptions, the curing
or non-curing of which would not have a material effect on the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of ATW taken as a whole, the business of ATW has been conducted in accordance
with all applicable laws, regulations, orders and other requirements of
governmental authorities, including, without limiting the generality of the
foregoing, all laws, regulations and orders relating to employment practices and
procedures and the health and safety of employees. ATW has not received any
notice of alleged violations of any of the foregoing.
4.12 Litigation. Except as set forth in the ATW Schedule, there is no
claim, dispute, action, proceeding, suit, appeal or investigation, at law or in
equity, pending against ATW or involving any of its business or properties,
before any court, agency, authority, arbitration panel or other tribunal, and,
to the best knowledge of ATW and the Shareholder, none has been threatened. To
the best knowledge of ATW and the Shareholder, there are no facts which, if
known to shareholders, customers, governmental authorities or other persons,
would result in any such claim, dispute, action, proceeding, suit, appeal or
investigation which would have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, properties or operations
of ATW taken as a whole. Except as set forth in the ATW Schedule, ATW is not
subject to any order, writ, injunction or decree of any court, agency,
authority, arbitration panel or other tribunal, or in default with respect to
any notice, order, writ, injunction or decree.
4.13 Contracts. The ATW Schedule contains a full and complete list
(subject in the case of clause (i) below to the dollar amount indicated therein)
of each partially or totally executory contract or agreement to which ATW is a
party, or by which it is bound in any respect, including, without limitation,
any and all: (i) contracts or agreements for the purchase, sale, lease or other
disposition of equipment, goods, materials, research and development, supplies,
studies, or capital assets, or for the performance of services, in any case
involving more than $10,000, except that such limitation as to dollar amount
shall not apply as to any contracts or agreements covered by Section 4.22; (ii)
contracts or agreements for the joint performance of work or services, and all
other joint venture or teaming agreements, (iii) management or employment
contracts, consulting contracts, collective bargaining contracts or termination
and severance agreements; (iv) notes, mortgages, deeds of trues, loan
agreements, security agreements, guarantees, debentures, indentures, credit
agreements and other evidences of indebtedness; (v) pension, retirement, profit
sharing, deferred compensation, bonus, incentive, life insurance,
hospitalization, or other employee benefit plans or arrangements (including,
without limitation, any contracts or agreements with trustees, insurance
companies or others relating to any such employee benefit plan or arrangement);
(vi) stock option, stock
<PAGE>
purchase, warrant, repurchase or other contracts or agreements relating to any
shares of capital stock; (vii) contracts or agreements with agents, brokers,
consignees, sales representatives or distributors; (viii) contracts or
agreements with any director, officer, employee, consultant or shareholder; (ix)
powers of attorney or similar authorizations granted to third parties; and (x)
licenses, sublicenses, royalty agreements, and other contracts or agreements to
which ATW is a party, or otherwise subject, relating to technical assistance or
to Proprietary Rights (as defined in Section 4.15). ATW is not a party to, nor
bound by, any contract or agreement which: (A) ATW can reasonably foresee will
result in any material loss upon the performance thereof (including any material
liability for penalties or damages, whether liquidated, direct, indirect,
incidental or consequential, or down time charges); and (B) is not reflected or
adequately reserved against on the ATW Balance Sheets. No party has raised any
claim, dispute or controversy or withheld payments from ATW with respect to any
of its contracts nor has ATW received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance with respect to the
obligations of ATW under any of its contracts, nor are there any facts which
exist indicating that any of such contracts may be totally or partially
terminated or suspended by the other party thereto. ATW has not entered into any
contract or agreement containing covenants limiting its right to compete in any
business with any person. As used in this Agreement, the terms "contract" and
"agreement" mean and include every contract, agreement and commitment whether
written or oral.
4.14 Real Property. The ATW Schedule contains a full and complete list of
all real property leased by ATW. All such property is held under valid and
enforceable leases, copies of which have been delivered to ColorSmart and as to
which neither party to the lease is in material default ATW does not own any
real property in fee simple. To the best knowledge of ATW, the operations of ATW
on any of such real property, nor any improvement thereon, violate any
applicable building code, zoning requirement, or pollution control ordinance or
any other regulation or statute applicable to such real property.
4.15 Proprietary Rights. The ATW Schedule contains a full and complete
list of all trademarks, trade names, service marks, and copyrights, or
applications therefor, owned or used by ATW. ATW owns, or possesses adequate
licenses or other rights to use, all trademarks, trademark applications, service
marks, trade names, copyrights, inventions, drawings, computer software,
designs, trade secrets, customer lists, proprietary know-how or information, or
other rights with respect thereto (collectively referred to as "Proprietary
Rights") required for or incident to the operation, sale and use of all products
and services sold or provided by ATW, free and clear of any right, lien,
encumbrance or claim of others, including without limitation present or former
employees of ATW or their former employers; provided, however, that the
possibility exists that other persons, completely independent of ATW or its
employees or agents, could have developed trade secrets, customer information or
items of technical information similar or identical to that of ATW. ATW is not
aware of any such development by other persons of similar or identical trade
secrets or technical
<PAGE>
information. ATW has taken reasonable security measures to protect the secrecy
and confidentiality of such of its Proprietary Rights, the value of which
depends upon such secrecy and confidentiality.
4.16 Toxic Wastes; Employee Safety etc. To the best of its knowledge, ATW
makes adequate provision for the control, removal, disposal and storage of all
toxic wastes, if any, generated by its business operations. ATW is not presently
in violation of any federal or state law, regulation, ordinance, or the like
governing protection of the environment and human health and safety regarding
toxic wastes. ATW is not presently in violation of any provision of OSHA or any
regulation promulgated thereunder. No action, proceeding, claim, suit or the
like is pending or has been threatened against by any government agency or any
person with respect to toxic wastes, occupational health and safety or
environmental damage, nor is ATW aware of any potential claims concerning any
such matters.
4.17 Insurance. The ATW Schedule contains a full and complete list of all
policies of insurance to which ATW is a party or is a beneficiary or named
insured, and ATW has in full force and effect, with all premiums due thereon
paid, the policies of insurance set forth therein. All the insurable properties
of ATW are insured in amounts and coverages and against risks and losses which
are adequate and usual for similar properties and businesses.
4.18 Bank Accounts. The ATW Schedule contains a full and complete list of
all the bank accounts of ATW together with the names of the persons authorized
to draw thereon. All cash in such accounts is held in demand deposits and is not
subject to any restriction or limitation as to withdrawal.
4.19 No Conflict. The execution and delivery of this Agreement by ATW and
the performance of its obligations hereunder: (i) are not in violation or breach
of, and will not conflict with or constitute a default under, any of the terms
of its Articles of Incorporation or Bylaws, or any note, debt instrument,
security agreement, lease, deed of trust or mortgage, or any other contract,
agreement or commitment binding upon ATW or any of its assets or properties;
(ii) will not result in the creation or imposition of any lien, encumbrance,
equity or restriction in favor of any third party upon any of its assets or
properties; and (iii) will not conflict with or violate any applicable law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over ATW or any of its assets or
properties. The ATW Schedule contains a full and complete list of all necessary
consents, waivers and approvals of third parties required to be obtained by ATW
in connection with the execution and delivery of this Agreement by ATW and the
performance of its obligations hereunder.
4.20 No Default. ATW has in all respects performed, or is now performing,
the obligations of, and is not in material default (and would not by the lapse
of time and/or the giving of notice be in material default) in respect of, any
note, debt instrument, "security agreement, option to purchase, lease, deed of
trust or mortgage, or any other
<PAGE>
material contract, agreement or commitment binding upon it or its assets or
properties. Each of the material contracts, agreements or other instruments
described on the ATW Schedule is a legal, binding, and enforceable obligation by
or against it. To the best knowledge of ATW, no party with whom it has an
agreement or contract, which is of material importance to the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of ATW taken as a whole, is in default thereunder or has breached any terms of
provisions thereof in a material way.
4.21 Certain Advances. There are no receivables of ATW owing by directors,
officers, employees, consultants or its shareholders, or owing by any affiliate
of any director or officer of ATW, other than advances in the ordinary and usual
course of business to officers and employees for reimbursable business expenses.
4.22 Related Parties. No officer or director of ATW, or any affiliate of
any such person, has, either directly or indirectly: (i) an interest in any
corporation, partnership, firm or other person or entity which furnishes or
sells products or services which are similar to those furnished or sold by ATW;
or (ii) a beneficial interest in any contract or agreement to which ATW is a
party or by which ATW may be bound. For purposes of this Section 4.22; there
shall be disregarded any interest which arises solely from the ownership of less
than a one (1) percent equity interest in a corporation whose stock is regularly
traded on any national securities exchange or in the over-the-counter market.
4.23 Copies of Certain Documents. The ATW Schedule contains true and
complete copies of: (i) its currently effective Articles of Incorporation,
certified by the Secretary of State of Georgia; (ii) its currently effective
Bylaws, certified by the Secretary of ATW; and (iii) all federal and other tax
returns filed by ATW since its inception [or for a shorter period agreed to by
the parties such as 5 years].
4.24 Underlying Documents. All underlying documents listed or described in
the ATW Schedule have heretofore been furnished to ColorSmart. All such
documents furnished to ColorSmart are true and correct copies, and there are no
amendments or modifications thereto, except as expressly noted in the ATW
Schedule. The minute books of ATW contain full, complete and accurate records of
all meetings and other corporate actions taken by the directors and shareholders
of ATW, and ColorSmart has heretofore been furnished true and correct copies of
all documents and records contained in said minute books.
4.25 Disclosure. Neither this Agreement, the ATW Schedule, nor any other
written statement or certificate furnished by ATW or the Shareholders to
ColorSmart in connection with the transactions contemplated hereby, when taken
together, contain any untrue statement of a material fact or omit to state any
material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
4.26 Effect of Agreement. The execution, delivery and performance by the
<PAGE>
Shareholder and by ATW of this Agreement, and the consummation of the
transactions herein contemplated, will not conflict with, or result in a breach
of the terms of, or constitute a default under or violation of, any law or
regulation of any governmental authority or any provision of the Articles of
Incorporation or Bylaws of either, or any agreement or instrument to which the
Shareholder or ATW is a party or by which they are bound or to which they are
subject. No consent of any person not a party to this Agreement and no consent
of any governmental authority is required to be obtained on the part of the
Shareholder or ATW to permit the consummation of the transactions contemplated
by this Agreement, which consents will not have been received before the Closing
Date.
4.27 Indemnification of ColorSmart. ATW and the Shareholder, agree,
jointly and severally, to indemnify, defend and hold ColorSmart, its officers,
directors, employees and attorneys (all such persons and entities being
collectively referred to as the "ColorSmart Group"), harmless from and against
any and all losses, damages, costs and expenses, including attorneys' fees (any
such loss, damage, cost or expense herein called a "Loss"), which they or any
member of the ColorSmart Group may at any time sustain or incur by reason of:
(i) any inaccuracy or breach of any of the representations, warranties or
covenants of ATW or the Shareholder contained herein or in any certificate
delivered pursuant hereto, or (ii) any claim or claims whether or not presently
known to the ColorSmart Group, which arise in connection with the operation of
the business of ATW, where the event which gives rise to such claim occurred
prior to the date of this Agreement, or (iii) any claim or claims arising out of
the failure of ATW or the Shareholder to discharge any of their obligations
pursuant to this Agreement. In any action in respect of which indemnity may be
sought hereunder by a party hereto shall be brought against such party, the
other party shall be entitled to participate in the defense thereof at its own
expense and to settle any such action on such terms as it shall see fit so long
as the party entitled to indemnification hereunder shall be released from any
liability by reason of such settlement. In such event, the party required to
provide indemnification shall receive full cooperation and access to all
relevant and nonprivileged records. The indemnification provisions of this
Section shall not be deemed exclusive and shall not prejudice any other rights
or remedies, at law or in equity, of any party under this Agreement with respect
to any matter relating to the terms, provisions, covenants or conditions of this
Agreement or any transaction contemplated hereby.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF COLORSMART
ColorSmart represents and warrants to ATW and the Shareholder that:
5.01 Organization. ColorSmart is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee and has
full corporate power and authority to carry on its business as now being
conducted.
<PAGE>
5.02 Validity of Agreement. ColorSmart has full corporate power and
authority to execute and deliver this Agreement. This Agreement constitutes the
valid and binding obligation of ColorSmart, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
other similar laws affecting creditors' rights generally and by principles of
equity. The execution and delivery of this Agreement by ColorSmart, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action, and such execution and delivery do not
require the consent, approval or authorization of any person, public authority
or other entity.
5.03 Effect of Agreement. The execution, delivery and performance by
ColorSmart of this Agreement, and the consummation of the transactions herein
contemplated, will not conflict with, or result in a breach of the terms of, or
constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of ColorSmart, or any agreement or instrument to which ColorSmart is a
party or by which it is bound or to which it is subject No consent of any person
not a party to this Agreement and no consent of any governmental authority is
required to be obtained on the part of ColorSmart to permit the consummation of
the transactions contemplated by this Agreement, which consent will not have
been received before the Closing Date.
5.04 Indemnification of ATW and the Shareholder. ColorSmart agrees to
indemnify, defend and hold ATW, the Shareholder, their respective officers,
directors, employees and attorneys (all such persons and entities being
collectively referred to as the "ATW Group"), harmless from and against any and
all losses, damages, costs and expenses, including attorneys' fees (any such
loss, damage, cost or expense herein called a "Loss"), which they or any member
of the ATW Group may at any time sustain or incur by reason of: (i) any claim or
claims whether or not presently known to the ColorSmart Group, which arise in
connection with the operation of the business of ColorSmart, where the event
which gives rise to such claim occurred prior to the date of this Agreement, or
(ii) any claim or claims arising out of the failure of ColorSmart to discharge
any of its obligations pursuant to this Agreement In any action in respect of
which indemnity may be sought hereunder by a party hereto shall be brought
against such party, the other party shall be entitled to participate in the
defense thereof at its own expense and to settle any such action on such terms
as it shall see fit so long as the party entitled to indemnification hereunder
shall be released from any liability by reason of such settlement. In such
event, the party required to provide indemnification shall receive full
cooperation and access to all relevant and nonprivileged records. The
indemnification provisions of this Section shall not be deemed exclusive and
shall not prejudice any other rights or remedies, at law or in equity, of any
party under this Agreement with respect to any matter relating to the terms,
provisions, covenants or conditions of this Agreement or any transaction
contemplated hereby.
<PAGE>
ARTICLE VI.
ACCESS TO INFORMATION: CONFIDENTIALITY
6.01 Access.
(a) Prior to the Closing Date, ATW shall afford representatives of
ColorSmart reasonable access to the officers and personnel of ATW and to such of
its financial, contractual and other records as shall be reasonably necessary
for ColorSmart's investigation of ATW and its business and operations.
(b) Prior to the Closing Date, ColorSmart shall afford representatives of
ATW reasonable access to the officers and personnel of ColorSmart and to such of
their financial, contractual and other records as shall be reasonably necessary
for ATW's investigation of ColorSmart and its business and operations.
(c) ColorSmart shall make available to the Shareholder the opportunity to
ask questions of and receive answers from appropriate officers or
representatives of ColorSmart concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which ColorSmart possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to the Shareholder hereunder.
6.02 Confidentiality.
(a) No information concerning ATW not previously disclosed to the public
or in the public domain which is contained herein or in the ATW Schedule, or
which shall have been furnished to or obtained by ColorSmart as provided in
Section 6.0 1(a), shall be disclosed to any person other than ColorSmart's
employees, legal counsel, financial advisers, or accountants in confidence, or
used for any purpose other than as contemplated herein. In the event that the
purchase and sale of the ATW Stock shall not be consummated, ColorSmart shall
return to ATW all such information in its possession which is in written form.
(b) No information concerning ColorSmart not previously disclosed to the
public or in the public domain which is contained herein or which shall have
been furnished to or obtained by ATW or any Shareholder as provided in Section
6.01(b) or 6.0 1(c), shall be disclosed by them to any person other than their
respective employees, legal counsel, financial advisors, or accountants in
confidence, or used for any purpose other than as contemplated herein. In the
event that the purchase and sale of the ATW Stock shall not be consummated, each
such person shall return to ColorSmart all such
<PAGE>
information in their possession which is in written form.
ARTICLE VII.
COVENANTS OF ATW AND THE SHAREHOLDER
ATW and the Shareholder hereby jointly and severally covenant:
7.01 Conduct of Business. From and after the execution and delivery of
this Agreement and until the Closing Date or the termination of this Agreement,
whichever shall first occur: (i) ATW shall not engage in any activities or
transactions which shall be outside the ordinary course of its business without
the prior written consent of ColorSmart, which consent shall not be unreasonably
withheld; (ii) such persons will use their best efforts to preserve the existing
licenses, franchises, rights and privileges pertinent to the business and
operations of ATW; and (iii) such persons will use their best efforts to
preserve intact the business organization of ATW and to preserve its goodwill
and relationships with its suppliers, customers, employees and others with whom
it deals.
7.02 Notice of Certain Adverse Changes, Defaults or Claims. ATW shall give
prompt notice to ColorSmart of any material adverse change to the properties or
business of ATW, or any notice of default received by it, subsequent to the date
of this Agreement and prior to the Closing Date, under any instrument or
agreement to which ATW is a party or by which any of its property is bound, or
of the assertion of any claim which, if upheld, would render inaccurate any
representation contained herein.
7.03 Actions Requiring Consent. Between the date hereof and the Closing
Date or, the termination of this Agreement, whichever shall first occur, ATW
shall not, without the prior written consent of ColorSmart, which consent shall
not unreasonably be withheld, take any action of the type described in clauses
(c) Through (n) of Section 4.06.
7.04 Implementation of Representations and Warranties. Such persons shall
use all reasonable efforts to render accurate as of the Closing Date their
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
7.05 Communications. Between the date hereof and the Closing Date, such
persons shall furnish no communication to the public with respect to the
transactions contemplated by this Agreement without the prior approval of
ColorSmart as to the content thereof, which approval shall not unreasonably be
withheld by ColorSmart.
7.06 Other Negotiations. Between the date hereof and the Closing Date or
the termination of this Agreement, whichever shall first occur, such persons
will disclose to ColorSmart all bona fide inquiries from other persons, firms or
corporations concerning
<PAGE>
the possible acquisition of ATW (by consolidation, merger, sale or exchange of
assets, sale of stock or otherwise) or equity securities of ATW; and neither ATW
nor the Shareholder will solicit an acquisition of ATW by another person, firm
or corporation, whether by consolidation, merger or purchase or sale of business
or assets or by the sale or exchange of stock, nor will ATW solicit the sale of
any of its capital stock or other equity securities to any other person, firm or
corporation. Nothing contained in this Section shall be construed as limiting
the rights of the Board of Directors of ATW to discharge their fiduciary
responsibilities in response to unsolicited offers from third parties.
7.07 Cooperation. The Shareholder shall cooperate, and will use its best
efforts to have the other present officers, directors and employees of ATW
cooperate, with ColorSmart, at its request, on and after the Closing Date and
without further consideration, in endeavoring to effect the collection of
accounts or notes receivable owing to ATW at the Closing Date, and, at
ColorSmart's expense, in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
relating to adjustment of federal income or any other taxes of ATW for all
periods prior to the Closing Date and in connection with any other actions,
proceedings, arrangements or disputes whatsoever involving ATW and based upon
contracts, arrangements or acts which were in effect or occurred on or prior to
the Closing Date.
7.08 Facilitation of the ColorSmart Public Offering. ATW and the
Shareholder shall use their best efforts to cooperate, and will use their best
efforts to have the other present officers, directors, agents, employees,
attorneys, and accountants of ATW to cooperate with ColorSmart in the process of
ColorSmart's initial public offering of its common stock, being undertaken by
ColorSmart pursuant to the Securities Act of 1933, as amended ("Public
Offering"). Such cooperation shall include, but not be limited to: (i) providing
for, at ColorSmart's expense, a certified audit of ATW's financial statements
and statements of operation for the two year period ended December 31, 1997 and
for the preparation and review of any interim financial statements and
statements of operations of ATW as required by Regulation S-B promulgated under
the Securities Act, if such certified audit shall be required in the Public
Offering; and (ii) providing such additional information or documents which may
be reasonably necessary for ColorSmart to conduct its Public Offering and to
permit the effectiveness of the registration statement to be filed by ColorSmart
with the United States Securities and Exchange Commission ("SEC").
ARTICLE VIII.
COVENANTS OF COLORSMART
ColorSmart hereby covenants:
8.01 Implementation of Representations and Warranties. ColorSmart shall
use all reasonable efforts to render accurate as of the Closing Date its
representations and
<PAGE>
warranties contained in this Agreement, and shall refrain from taking any action
which would render inaccurate as of the Closing Date any of such representations
or warranties.
8.02 Communications. Between the date hereof and the Closing Date (except
to the extent required by state or federal securities laws), ColorSmart shall
furnish no communication to the public with respect to the transactions
contemplated by this Agreement without the prior approval of ATW as to the
content thereof, which approval shall not unreasonably be withheld by ATW.
8.03 Registration of ColorSmart Common. ColorSmart will use its best
efforts to file and maintain an effective registration statement with the SEC
and applicable state securities commissions covering the registration on Form
SB-2 and sale of its common stock in order to conduct the Public Offering as
soon as practicable after the execution of this Agreement.
8.04 Additional SEC Documents. ColorSmart shall furnish to ATW and the
Shareholder copies of all documents, if any, (other than preliminary material
and documents which describe this Agreement and the transactions contemplated
hereby) that ColorSmart files-with the SEC from the date hereof through the
Closing Date.
ARTICLE IX.
SECURITIES LAW MATTERS
9.01 Securities Act Exemptions. The ATW Stock to be transferred by the
Shareholder to ColorSmart pursuant to this Agreement shall not be registered
under the Securities Act, in reliance upon exemptions from such registration
contained in Section (4)(1) and/or Section 4(2) of the Securities Act.
9.02 Stock Restrictions. The certificates representing the shares of ATW
Stock transferred pursuant to this Agreement shall bear a restrictive legend in
substantially the following form (and appropriate stock transfer orders shall be
placed against the transfer thereof):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'). THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
UNDER THE CIRCUMSTANCES SPECIFIED BY A SHAREHOLDER'S AGREEMENT, A
COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE
CORPORATION."
9.03 Representations of ColorSmart. ColorSmart represents and warrants to
the Shareholder that it is acquiring the ATW Stock for its own account for
investment and
<PAGE>
not with a view to, or for sale in connection with, any distribution thereof,
and without any present intention of selling the same; provided, however, that
any disposition thereof will at all times be within its control.
9.05 Legend Restrictions. It is understood that the certificates
representing the ATW Stock purchased hereunder shall be endorsed with a legend
restricting transfer as necessary to conform to the requirements of the
Securities Act.
ARTICLE X.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder under this Agreement are, at the option
of the Shareholder, subject to the satisfaction at or prior to the Closing of
the following conditions:
10.01 Accuracy of Representations and Warranties. All of the
representations and warranties made-by ColorSmart in this Agreement shall be
true in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and ColorSmart
shall have delivered to ATW and the Shareholder a certificate to such effect
dated the Closing Date and signed by its President and Chief Executive Officer.
10.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by ColorSmart at or before
the Closing Date shall have been duly complied with and performed, and
ColorSmart shall have delivered to ATW and the Shareholder a certificate to such
effect dated the Closing Date and signed by its President and Chief Executive
Officer.
10.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
10.04 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon ATW the Shareholder because of such transaction.
<PAGE>
ARTICLE XI.
CONDITIONS TO OBLIGATIONS OF COLORSMART
The obligations of ColorSmart under this Agreement are, at the option of
ColorSmart, subject to the satisfaction at or prior to the Closing of the
following conditions:
11.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by ATW and the Shareholder in this Agreement
shall be true in all material respects as of the Closing Date with the same
force and effect as though such representations and warranties had been made as
of the Closing Date, except for changes contemplated by this Agreement, and ATW
shall have delivered to ColorSmart a certificate to such effect dated the
Closing Date and signed by its President and Chief Executive Officer.
11.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by ATW or the Shareholder at
or before the Closing Date shall have been duly complied with and performed, and
ATW shall each have delivered to ColorSmart a certificate to such effect dated
the Closing Date and signed by its President and Chief Executive Officer.
11.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
11.04 Consents Obtained. ATW and the Shareholder shall have delivered to
ColorSmart the written consent or approval of each person or organization whose
consent or approval shall be required in order to permit them to consummate the
transactions contemplated hereby or in order to avoid any breach or termination
of any agreement to which they are a party.
11.05 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon ColorSmart, or any of its officers or directors because of such
transaction.
11.06 Accountant's Review. ColorSmart shall have received from ATW's
accountant, a letter to the effect that on the basis of their "acquisition
review" of ATW, not constituting a full audit, nothing has come to their
attention which has caused them to believe that the accounts or balances to
which they applied their procedures should be
<PAGE>
adjusted.
11.07 Accounting Treatment. ColorSmart shall have received from its
accountant, a written analysis stating that the business combination resulting
from the consummation of the transactions contemplated by this Agreement may be
accounted for on a pooling of interests basis in accordance with generally
accepted accounting principles and in accordance with all rules, regulations and
policies of the SEC.
11.08 ColorSmart Review. There shall not have come to the attention of
ColorSmart, as a result of any investigation performed pursuant to Section 6.01
hereof, any information, not previously disclosed to ColorSmart, which is likely
to materially and adversely affect the business, property or operations of ATW
following the Closing Date.
11.09 Resignation of Directors. All persons serving as directors of ATW
shall have tendered their resignations to be effective as of the Closing Date.
11.10 Sale of ATW Stock. Not less than one hundred percent (100%) of the
shares of ATW Stock outstanding as of the Closing Date shall have been tendered
by the Shareholder for purchase by ColorSmart hereunder.
ARTICLE XII.
SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS
The representations, warranties and covenants of the parties contained in
this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive the Closing hereunder.
ARTICLE XIII.
PAYMENT OF EXPENSES
13.01 Expenses. Except as provided herein, the parties shall each pay
their own legal and accounting fees and other out-of-pocket expenses incurred
incident to the preparation and carrying out of this Agreement and the
transactions herein contemplated, whether or not such transactions are
consummated; provided however, in the event that the Shareholder, or ATW, or
either of them, shall fail to consummate the transactions contemplated by this
Agreement, for reasons other than a material breach by ColorSmart of the terms
of this Agreement, ATW shall pay to ColorSmart as a "break-up" fee all actual
accounting and legal expenses incurred by ColorSmart up to a maximum of $15,000.
In the event that such transactions are consummated, the reasonable legal and
accounting fees and ether expenses of ATW shall be borne by ColorSmart following
the Closing. All other expenses shall be deemed to be expenses of the
Shareholder, and the
<PAGE>
Shareholder, jointly and severally, shall assume and be responsible for the
payment thereof.
13.02 Brokers. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement and, insofar as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any such transaction. Each party
agrees to indemnify and hold the other parties harmless against any loss,
liability, damage, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act, omission or
statement of the indemnifying party.
ARTICLE XIV.
GENERAL PROVISIONS
14.01 Notices. Any notice, request, instruction or other document to be
given hereunder by a party to any other party shall be in writing and effective
when delivered personally or sent by certified mail with return receipt
requested, postage prepaid, as follows:
To ColorSmart:
Attn: President
537 Myatt Drive
Madison, Tennessee 37115
With a Copy to: Gregory Bartko, Esq.
3475 Lenox Road, Suite 400
Atlanta, Georgia 30326
To ATW
Attn: President
P.O. Box 400
Tyrone, Georgia 30290
With a Copy to: Steve Kaiser, Esq.
Webb, Stuckey & Lindsey
400 Westpark Court, Suite 220
Peachtree City, Georgia 30269
To Shareholder: Christopher J. England
3067 Main Street
East Point, Georgia 30344
or to such other addresses or other persons as may be designated in writing by
any of the parties, by notice given as aforesaid.
<PAGE>
14.02 Headings. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
14.03 Counterparts. This Agreement may be executed in one or more
counterparts, and when so executed each counterpart shall be deemed to be an
original, and said counterparts together shall constitute one and the same
instrument.
14.04 Assignment None of the parties may assign or transfer any rights or
obligations under this Agreement.
14.05 Waiver. Any party hereto may, by written notice to the others: (i)
waive any of the conditions to its obligations hereunder or extend the time for
the performance of any of the obligations or actions of the others; (ii) waive
any inaccuracies in the representations of the others contained in this
Agreement or in any documents delivered pursuant to this Agreement; (iii) waive
compliance with any of the covenants of the others contained in this Agreement;
or (iv) waive or modify performance of any of the obligations of the others. No
action taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
14.06 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, constitutes the entire agreement between the parties pertaining
to the subject matter contained herein and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by the party sought to be bound.
14.07 Good Faith. Each of the parties hereto agree that it or they shall
act in good faith in an attempt to cause all the conditions precedent to their
respective obligations hereunder to be satisfied.
14.08 Applicable Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Georgia.
14.09 Severability. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
<PAGE>
Witness the due excecution of this Agreement by the parties hereto as of
the date first set forth above.
COLORSMART, INC.
By /s/ Roger D. Finchum, Sr.
-------------------------
Title: Chairman/CEO
ADVERTISING THAT WORKS, INC.
By: /s/ Chris England
-------------------------
Title: President/CEO
SHAREHOLDER:
/s/ Chris England
----------------------------
(Signature)
----------------------------
(Typed or printed name and
title, if applicable)
<PAGE>
EXHIBIT 2.04
December 2, 1999
Mr. Chris England
Advertising That Works, Inc.
3067 Main Street
East Point, GA 30344
Gentlemen:
By this letter, the parties acknowledge that the agreement between Chris
England, the sole shareholder of Advertising That Works, Inc. ("ATW") and
Colorsmart.com, Inc. dated September 23, 1998 is binding and in effect.
Furthermore, the parties agree that the contract for the purchase of ATW's
shares has been extended until 1/31/00. Colorsmart acknowledges that it will
file a registration statement with the Securities and Exchange Commission
within the next 15 days. This will also confirm that since no closing has
taken place, no shares of ATW have been issued or delivered to Colorsmart,
ATW has not given a promissory note to Chris England for the purchase price,
and there is no deed of pledge between Chris England and Colorsmart extant.
Very truly yours,
Colorsmart.com, Inc.
By: /s/ Roger D. Finchum, Sr./CEO
------------------------------
ACCEPTED, AGREED TO AND ACKNOWLEDGED:
/s/ Chris England
- ------------------
Chris England
<PAGE>
Exhibit 2.05
SALE OF SHARES AGREEMENT
THIS SALE OF SHARES (STOCK AND ASSET PURCHASE) AGREEMENT ("Agreement") is
made and entered into as of the 12th day of October, 1998, by and between
ColorSmart, Inc., a Nevada corporation ("ColorSmart"); and Stonehouse Graphics
(Proprietary) Limited (No 97/19446/07) a South African company registered
according to the Company Laws of the Republic of South Africa ("Stonehouse");
and NOLAN WEIGHT the sole shareholder of Stonehouse, (the "Shareholder").
RECITALS:
A. The Shareholder owns the total issued share capital of Stonehouse (the
"Stonehouse shares");
B. ColorSmart desires to purchase from the Shareholder, and the Shareholder
desires to sell to ColorSmart, the Stonehouse shares owned by him, in
exchange for the consideration described herein.
C. In as much as this agreement establishes the intentions of the parties, it
is recorded that the warranties given by the Shareholder and Stonehouse
will apply to Stonehouse as it will be on the Closing Date as herein set
out.
<PAGE>
2
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE I.
SALE OF SHARES (STOCK)
1.0 Sale and Transfer of STONEHOUSE Shares.
Subject to the terms and conditions of this Agreement, on the Effective Date (as
hereinafter defined) the Shareholder agrees to sell, and ColorSmart agrees to
purchase, all of the Stonehouse shares owned by the Shareholder together with
all loan claims enjoyed by the Shareholder against Stonehouse at such date, and
the Shareholder agrees to convey to ColorSmart, all right, title, ownership, and
interest in and to the Stonehouse shares and loan claims, free and clear of any
liens or encumbrances. The transaction shall however, close on the Closing Date
as hereinafter defined and shall be subject to the fulfillment and discharge of
the condition precedent referred to in paragraph 1.02.
1.01 Effective Date
The sale and purchase of the Stonehouse shares and loan claims shall take place
on the commencement of business on the 15th October 1998 (the Effective Date)
notwithstanding the date of execution hereof. All risk in and benefit to the
Stonehouse shares and the Shareholder's loan claims shall pass to ColorSmart on
the Effective Date.
1.02 Condition Precedent
The Closing and implementation of the sale and purchase recorded in this
Agreement is subject to the conclusion of a Public Offering (as referred to in
paragraph 6.08) on a recognized United States stock-exchange by the 30th
November 1998, or such extended date as may be agreed upon in writing by the
parties hereto, failing which this Agreement shall be deemed to have been
cancelled, null and void and of no force or effect unless otherwise agreed in
writing and none of the parties shall enjoy any rights or claims against the
others arising herefrom.
<PAGE>
3
1.03 Effective Balance Sheet
Stonehouse shall cause to be prepared signed and audited financial statements of
its business as at the close of business on the 14th October 1998 (the Effective
Balance Sheet) which financial statements shall reflect all its liabilities of
whatsoever nature including contingent liabilities, if any. The Effective
Balance Sheet shall be prepared as soon as possible, but in any event within 90
(ninety) days of the Effective Date.
1.04 Consideration.
The consideration for the Stonehouse shares and loan claims hereby acquired
shall be the sum of R15 000 000.00 (fifteen million rand) LESS an amount
equivalent to all the liabilities of Stonehouse as at the Effective Date which
liabilities shall include all amounts, owing by Stonehouse to the Shareholder on
loan account, its bankers and trade creditors. The consideration shall further
be adjusted by an amount equal to the aggregate of all deposits and prepayments
made or not made by Stonehouse in respect of insurances, water, electricity,
telephone, normal payments of company tax and any other matter in respect of any
period both prior to and subsequent to the Effective Date. Any adjustment so
made to the purchase consideration shall be settled by the relevant party within
7 (seven) days of the presentation of an Adjustment Account to be prepared by
the auditors in completing the Effective Balance Sheet. The consideration paid
for the loan claims shall accordingly be the face value thereof; and the
consideration for the issued shares shall be the difference between the sum of
R15 000 000 (fifteen million rand) as adjusted aforesaid less the aggregate of
the face value of the loan claims plus the total liabilities of Stonehouse as at
the Effective Date.
1.05 Payment of the Consideration
Payment of the consideration by ColorSmart and against delivery of the total
issued share capital and a cession of the loan claims acquired by it in terms of
this Agreement and as hereinafter recorded shall be effected on the Closing Date
hereinafter determined as follows
(a) the sum of R5 000 000 (five million rand) being an estimate of the amount
equivalent to all the liabilities of Stonehouse as at the Effective Date
and which will be reflected as such in the Effective Balance Sheet to be
paid in South African rand to a bank account located in the Republic of
South Africa nominated by Stonehouse;
(b) the balance of R10 000 000.00 (ten million rand) to be paid to a bank
account as instructed and nominated by the Shareholder.
<PAGE>
4
(c) The liabilities referred to in paragraph (a) above shall be certified as
being true and correct by Stonehouse's auditor. As soon as the liabilities
of Stonehouse as at the Effective Date have been established and
certified, they shall be paid by Stonehouse to the respective creditor due
to receive such payment (ex the banking account referred to in (a) above).
The difference between the sum referred to in (a) above and the
liabilities certified and paid, shall be paid to the Shareholder as the
balance of the consideration due to him for the shares in terms hereof.
Should the Effective Balance Sheet be completed subsequent to the Closing
Date payment any interest which may accrue in respect of the amount paid
in terms of paragraph (a) shall be for the benefit of the Shareholder.
ARTICLE II.
CLOSING
2.00 Closing Date.
The closing of the purchase and sale of the Stonehouse Shares hereunder (the
"Closing") shall be held at the offices of Stonehouse at 1:00 p.m. on Monday
30th November, 1998, or at such other time and place upon which ColorSmart and
Stonehouse may agree in writing (the "Closing Date"); provided, however, that
any agreement postponing the Closing Date beyond November 30, 1998 shall also
require the consent of all the parties hereto.
2.01 Delivery.
At the Closing and against payment of the purchase consideration the.
Shareholder shall deliver to ColorSmart a share certificate or certificates, in
proper form and duly completed, representing the Stonehouse shares to be
purchased from the Shareholder and totaling in aggregate 100 (one hundred)
shares of R1 (one rand) each. In as much as this Agreement contemplates the
Shareholder disposing of all the issued shares in Stonehouse together with his
loan claims against Stonehouse to ColorSmart and that all of Stonehouse's
liabilities as at the Effective Date will be extinguished, in addition to the
share certificates to be delivered in terms of this paragraph 2.02 the
Shareholder shall deliver to ColorSmart at the Closing the following additional
documents:
1. a written cession of his claim/s on loan account against Stonehouse;
2. the original Memorandum and Articles of Association, Certificate of
Incorporation and Certificate to Commence Business of Stonehouse (or
certified copies thereof);
3. a resolution passed by the directors of Stonehouse approving the transfer
of the shares acquired in terms of this Agreement into the name of
ColorSmart or its nominee/s;
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5
4. the written resignation of the directors, secretary and public officer of
Stonehouse;
5. a resolution passed by the directors of Stonehouse appointing the nominees
of ColorSmart as directors, secretary and public officer respectively of
Stonehouse;
6. a written understanding by the current auditors of Stonehouse to resign as
such upon completion of the Effective Balance Sheet (if in fact they had
not resigned previously);
7. all books of account, records and documents of Stonehouse other than those
immediately required by the auditors instructed to prepare the Effective
Balance Sheet;
8. upon completion of the Effective Balance Sheet the Shareholder shall
deliver to ColorSmart all books of account, records and documents utilised
by the auditors for the preparation of the Effective Balance Sheet and the
written resignation of the auditors if so required.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
3.0 The Shareholder represents and warrants to ColorSmart as set forth below
that:
3.01 Title to STONEHOUSE Shares.
They Shareholder is the owner, beneficially and of record, of all of the shares
issued by Stonehouse and to be sold by such Shareholder hereunder, free and
clear of any liens, encumbrances, security agreements, options, claims, charges
or restrictions of any nature whatsoever. Further, that the Shareholder shall
cause his shares to be voted in favour of the consummation of the transactions
contemplated by this Agreement, at any meeting of such Shareholder which may be
required hereunder.
3.02 Authorisation.
The Shareholder has the full power and authority to execute and deliver this
Agreement and to execute and deliver any and all other collateral agreements
hereto and which are referred to as a part hereof. This Agreement constitutes
the valid and binding obligation of the Shareholder, enforceable in accordance
with its terms and conditions.
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ARTICLE IV.
JOINT REPRESENTATIONS AND WARRANTIES OF STONEHOUSE AND THE SHAREHOLDER
4.00 Subject to and except for the information which is set forth in a list of
exceptions, identified by the paragraph in this Article to which they pertain,
and contained in a schedule delivered to ColorSmart prior to the execution of
this Agreement and signed for identification on behalf of ColorSmart and
Stonehouse (the "Stonehouse Schedule"), Stonehouse and the Shareholder jointly
and severally represent and warrant to ColorSmart that:
4.01 Organisation.
Stonehouse is a company incorporated, validly existing and in good standing
under the laws of the Republic of South Africa under Number 97/19446/07, and has
full corporate power and authority to carry on its business as it is now being
conducted. Stonehouse is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or properties make such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on Stonehouse.
4.02 Capitalization.
The authorised capital stock of Stonehouse consists of 1000 (one thousand)
shares of R1 (one rand) each of which 100 (one hundred) shares of R1 (one rand)
each have been issued. All the shares which have been issued, are fully paid and
are not subject to pre-emptive rights created by statute, Stonehouse's
Memorandum and Articles of Association or any agreement to which Stonehouse is a
party or by which it is bound. Except as set forth herein, there are no options,
warrants, calls, rights, commitments or agreements of any character to which
Stonehouse is a party or by which it is bound obligating Stonehouse to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or obligating Stonehouse to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement.
4.03 STONEHOUSE Subsidiaries.
Stonehouse owns no shares directly or indirectly, in any other company,
corporation, partnership or joint venture interest.
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4.04 Validity of Agreement.
Stonehouse has corporate power and authority to execute and deliver this
Agreement. This Agreement constitutes the valid and binding obligation of
Stonehouse, enforceable in accordance with its terms and conditions. The
execution and delivery of this Agreement by Stonehouse, and the consummation of
the transactions contemplated hereby, have been duly authorised by all necessary
corporate action, and such execution and delivery do not require the consent
approval or authorisation of any person, public authority or other entity.
4.05 STONEHOUSE Financial Statements.
Stonehouse has furnished to ColorSmart true and correct copies of its unaudited
statements of operations, statements of shareholders' equity and statements of
changes in financial condition for its fiscal year ended 28th February 1998, and
for the interim period from 1st March 1998 to the 30th September 1998, and
Stonehouse's unaudited balance sheets as of the end of such fiscal period (as of
28th February 1998 1998, hereinafter referred to as the "Stonehouse Balance
Sheets", and all such financial statements, together with the notes thereto,
being hereinafter referred to collectively as the Stonehouse Financials"). All
of the Stonehouse Financials:
(i) are in accordance with Stonehouse's books and records;
(ii) present fairly the financial position of Stonehouse and the results of its
operations as of the respective dates and for the periods indicated
thereon (subject to normal adjustments); and
(iii) have been prepared in accordance with generally accepted accounting
principles, applied on a consistent basis.
At the date of the Stonehouse Balance Sheets, Stonehouse had no material
liabilities or obligations, fixed, contingent or otherwise, not set forth on or
reserved against in the Stonehouse Financials, or the accompanying notes
thereto, or in the Stonehouse Schedule. For purposes of this Agreement,
"materiality" shall mean amounts in excess of R20 000 (twenty thousand rand)
either individually or in the aggregate.
The Stonehouse Financials hereinbefore referred to in this paragraph 4.05 are
the financial accounts and documents presented to ColorSmart and upon which it
based it its decision to acquire the issued shares in Stonehouse and do not
refer to the Effective Balance Sheet referred to in paragraph 1.02. In respect
of the Effective Balance Sheet Stonehouse and the Shareholder do hereby further
warrant and undertake that the Effective Balance Sheet shall:
1. comply with the requirements of the Companies Act No 61 Of 1973 as amended
(South Africa);
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2. be prepared in conformity with generally accepted accounting principles;
3. fairly present the affairs and the profits of Stonehouse as at the
Effective Date;
4. fairly reflect the assets and liabilities of Stonehouse as at the
Effective Date;
5. make full provision for all liabilities (accrued or contingent) as at the
Effective Date;
6. be prepared on the same basis as the financial statements for the
financial year ended 28th February 1998
4.06 Events since Date of STONEHOUSE Balance Sheets.
Since the date of the Stonehouse Balance Sheet, except as otherwise contemplated
by this Agreement, and except as described in the Stonehouse Schedule,
Stonehouse has conducted its business only in the ordinary and usual course and,
without limiting the generality of the foregoing:
(a) Stonehouse has not sustained any damage, destruction or loss by reason of
fire, explosion, earthquake, casualty, labour trouble, requisition or
taking of property by any government or agency thereof, windstorm,
embargo, riot, act of God or public enemy, flood, accident, revocation of
license or right to do business, total of partial termination, suspension,
default or modification of contracts, governmental restriction or
regulation, other calamity, or other similar or dissimilar event (whether
or not covered by insurance) materially and adversely affecting the
condition (financial or otherwise), business, net worth, assets,
properties or operations of Stonehouse taken as a whole.
(b) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, properties, operations, obligations or
liabilities (fixed or contingent) of Stonehouse which, in the aggregate,
have had or may be reasonably expected to have (whether before or after
the Closing Date) a materially adverse effect on the condition (financial
or otherwise), business, net, worth, assets, properties or operations of
Stonehouse as a whole.
(c) Stonehouse has not issued, or authorised for issuance, any equity
security, bond, note or other security or granted, or entered into, any
commitment or obligation to issue or sell any such equity security, bond,
note or other security, whether pursuant to offers, stock option
agreements, stock bonus agreements, stock purchase plans, incentive
compensation plans, warrants, calls, conversion rights or otherwise.
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9
(d) Stonehouse has not incurred additional debt for borrowed money, nor
incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of business.
(e) Stonehouse has not declared, paid or made any dividend, payment or other
distribution on or with respect to any share of its capital stock
(f) Stonehouse has not purchased, redeemed or otherwise acquired or committed
itself to acquire for a consideration, directly or indirectly, any share
or shares of its capital stock
(g) Stonehouse has not mortgaged, pledged, otherwise encumbered or subjected
to lien any of its assets or properties, tangible or intangible, nor
committed itself to do any of the foregoing.
(h) Stonehouse has not disposed of, or agreed to dispose of, any asset or
property, tangible or intangible, except in the ordinary and usual course
of business, and in each case for a consideration at least equal to the
fair value of such asset or property, nor leased or licensed to others
(including officers and directors), or agreed to lease or license, any
asset or property.
(i) Stonehouse has not purchased or agreed to purchase or otherwise acquire
any debt or equity securities of any corporation, partnership, joint
venture, firm or other entity.
(j) Stonehouse has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of
business and not involving an amount in any case in excess of R200 000
(two hundred thousand rand) nor waived any right of substantial value or
cancelled any debt or claim or voluntarily suffered any extraordinary
loss.
(k) Stonehouse has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Right (as
defined in Paragraph 4.16).
(l) Stonehouse has not effected or agreed to any amendment or supplement to
any, employee profit sharing, stock option, stock purchase, pension,
bonus, incentive,
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10
retirement, medical reimbursement, life insurance, deferred compensation
or any other employee benefit plan or arrangement.
(m) Stonehouse has not effected or agreed to effect any change in its
directors or executive management.
(n) Stonehouse has not effected or committed itself to effect any amendment or
modification to its Memorandum or Articles of Association.
4.07 Events between Effective Date and Closing Date
Stonehouse shall continue to conduct its business only and in the usual course
during the period between the Effective Date and the Closing date and the
provisions of paragraph 4.06 (a) to 4.06 (n) inclusive shall as far as they may
be applicable apply mutatis mutandis to the conduct of the business during this
period.
4.08 Properties.
The Stonehouse Balance Sheets and the Effective Balance Sheet and Financial
Statements shall reflect all of the assets and properties, real and personal,
used by Stonehouse in its business or otherwise held by it, except for:
(1) property acquired or disposed of in the ordinary and usual course of
business since the date of such balance sheet; and
(2) property not required under generally accepted accounting principles to be
reflected thereon. Except as set forth in the Stonehouse Schedule, Stonehouse
has good and marketable title to all assets and properties listed on the
Stonehouse Balance Sheet and the Effective Balance Sheet and thereafter
acquired, free and clear of any imperfections of title, lien, claim,
encumbrance, restriction, charge or equity of any nature whatsoever. All of the
fixed assets and properties listed on the Stonehouse Balance Sheet and the
Effective Balance Sheet and thereafter acquired are in good operating condition
and are free from any material defect.
4.09 Accounts Receivable.
All of the accounts receivable of Stonehouse shown on the Stonehouse Balance
Sheet and the Effective Balance Sheet or thereafter acquired arose and are
collectible in the ordinary and usual course of Stonehouse's business, except
that the value of any account receivable the collection of which is doubtful or
which is subject to a defence or set-off has been written down to an amount
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11
not in excess of realisable market value or adequate reserves or allowances
therefor have been provided. The values at which accounts receivable are carried
reflect the accounts receivable valuation policy of Stonehouse, which is
consistent with its past practice and in accordance with generally accepted
accounting principles applied on a consistent basis.
4.10 Taxes.
Stonehouse has duly filed with the appropriate South African Revenue Service all
tax returns and reports required to be filed and has paid or accrued in full all
taxes, interest, penalties, assessments or deficiencies, if any, due to, or
claimed to be due by, any taxing authority. The Stonehouse Balance Sheet and
Effective Balance Sheet will include adequate provision for all such taxes,
interest, penalties, assessments or deficiencies, if any, through the date
indicated thereon. Stonehouse has not executed or filed with any taxing
authority any agreement extending the period for assessment or collection of any
taxes. Stonehouse is not a party to any pending action or proceeding, nor, to
the best of its knowledge, is any such action or proceeding threatened by any
governmental authority for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies, and no claim for assessment or
collection of taxes, interest, penalties, assessments or deficiencies has been
asserted against it. No issue has been raised by any tax authority in connection
with an audit or examination of Stonehouse's tax returns, business or properties
which has not been settled or resolved.
4.11 Compensation.
The Stonehouse Schedule will contain a full and complete list of all persons who
served as directors, officers, employees or consultants of Stonehouse as at the
date of signature hereto, specifying their names and job designations, the
annual compensation paid or payable to such persons and the basis of such
compensation, whether fixed or commission or a combination thereof.
4.12 Compliance with Law.
Except for possible minor exceptions, the curing or non-curing of which would
not have a material effect on the condition (financial or otherwise), business,
net worth, assets, properties, or operations of Stonehouse taken as a whole, the
business of Stonehouse has been conducted in accordance with all applicable
laws, regulations, orders and other requirements or governmental authorities,
including, without limiting the generality of the foregoing, all laws,
regulations and
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12
orders relating to employment practices and procedures and the health and safety
of employees. Stonehouse has not received any notice of alleged violations of
any of the foregoing.
4.13 Litigation.
Except as set forth in the Stonehouse Schedule, there is no claim, dispute,
action, proceeding, suit, appeal or investigation, at law or in equity, pending
against Stonehouse or involving any of its business or properties, before any
court, agency, authority, arbitration panel or other tribunal, and, to the best
knowledge of Stonehouse and the Shareholder, none has been threatened. To the
best knowledge of Stonehouse and the Shareholder, there are no facts which, if
known to shareholders, customers, governmental authorities or other persons,
would result in any such claim, dispute, action, proceeding, suit, appeal or
investigation which would have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, properties or operations
of Stonehouse taken as a whole. Except as set forth in the Stonehouse Schedule,
Stonehouse is not subject to any order, writ, injunction or decree of any court,
agency, authority, arbitration panel or other tribunal, or in default with
respect to any notice, order, writ, injunction or decree.
4.14 Contracts.
The Stonehouse Schedule contains a full and complete list (subject in the case
of clause (i) below to the rand amount indicated therein) of each partially or
totally executory contract or agreement to which Stonehouse is a party, or by
which it is bound in any respect, including, without limitation, any and all:
(i) contracts or agreements for the purchase, sale, lease or other disposition
of equipment, goods, materials, research and development, supplies,
studies, or capital assets, or for the performance of services, in any
case involving more than R200 000 (two hundred thousand rand), except that
such limitation as to the rand amount shall not apply as to any contracts
or agreements covered by Paragraph 4.23;
(ii) contracts or agreements for the joint performance of work or services, and
all other joint venture or teaming agreements,
(iii) management or employment termination and severance agreements contracts,
consulting contracts, collective bargaining contracts or,
(iv) notes, mortgages, loan agreements, security agreements, guarantees,
debentures, indentures, credit agreements and other evidences of
indebtedness;
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13
(v) pension, retirement, profit sharing, deferred compensation, bonus,
incentive, life insurance, hospitalisation, or other employee benefit
plans or arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating to any
such employee benefit plan or arrangement);
(vi) stock option, stock purchase, warrant, repurchase or other contracts or
agreements relating to any shares of capital stock;
(vii) contracts or agreements with agents, brokers, consignees, sales
representatives or distributors;
(viii) contracts or agreements with any director, officer, employee, consultant
or shareholder,
(ix) powers of attorney or similar authorisations granted to third parties;
and
(x) licenses, sublicenses, royalty agreements, and other contracts or
agreements to which Stonehouse is a party, or otherwise subject, relating
to technical assistance or to Proprietary Rights (as defined in Paragraph
4.16).
Stonehouse is not a party to, nor bound by, any contract or agreement which:
(A) Stonehouse can reasonably foresee will result in any material loss upon
the performance thereof (including any material liability for penalties
or damages, whether liquidated, direct, indirect, incidental or
consequential, or down time charges); and
(B) is not reflected or adequately reserved against on the Stonehouse Balance
Sheets and Effective Balance Sheet.
No party has raised any claim, dispute or controversy or withheld payments from
Stonehouse with respect to any of its contracts nor has Stonehouse received
notice or warning of alleged non-performance, delay in delivery or other
non-compliance with respect to the obligations of Stonehouse under any of its
contracts, nor are there any facts which exist indicating that any of such
contracts may be totally or partially terminated or suspended by the other party
thereto. Stonehouse has not entered into any contract or agreement containing
covenants limiting its right to compete in any business with any person. As used
in this Agreement, the terms "contract" and "agreement" mean and include every
contract, agreement and commitment whether written or oral.
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14
4.15 Immovable Property.
The Stonehouse Schedule contains a full and complete list of all immovable
property leased by Stonehouse. All such property is held under valid and
enforceable leases, copies of which have been delivered to ColorSmart and as to
which neither party to the lease is in material default. Stonehouse does not own
any immovable property. To the best knowledge of Stonehouse, the operations of
Stonehouse on any of such immovable property, nor any improvement thereon,
violate any applicable building code, zoning requirement, or pollution control
ordinance or any other regulation or statute applicable to such immovable
property.
4.16 Proprietary Rights.
The Stonehouse Schedule contains a full and complete list of all trademarks,
trade names, service marks, and copyrights, or applications therefor, owned or
used by Stonehouse. Stonehouse owns, or possesses adequate licenses or other
rights to use, all trademarks, trademark applications, service marks, trade
names, copyrights, inventions, drawings, computer software, designs, trade
secrets, customer lists, proprietary know-how or information, or other rights
with respect thereto (collectively referred to as "Proprietary Rights") required
for or incident to the operation, sale and use of all products and services sold
or provided by Stonehouse free and clear of any right, lien, encumbrance or
claim of others, including without limitation present or former employees of
Stonehouse or their former employers; provided, however, that the possibility
exists that other persons, completely independent of Stonehouse or its employees
or agents, could have developed trade secrets, customer information or items of
technical information similar or identical to that of Stonehouse. Stonehouse is
not aware of any such development by other persons of similar or identical trade
secrets or technical information. Stonehouse has taken reasonable security
measures to protect the secrecy and confidentiality of such of its Proprietary
Rights, the value of which depends upon such secrecy and confidentiality.
4.17 Toxic Wastes; Employee Safety etc.
To the best of its knowledge, Stonehouse makes adequate provision for the
control, removal, disposal and storage of all toxic wastes, if any, generated by
its business operations. Stonehouse is not presently in violation of any law,
regulation, ordinance, or the like governing protection of the environment and
human health and safety regarding toxic wastes. No action, proceeding, claim,
suit or the like is pending or has been threatened against by any government
agency or any person with respect to toxic wastes, occupational health and
safety or environmental damage, nor is Stonehouse aware of any potential claims
concerning any such matters.
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15
4.18 Insurance.
The Stonehouse Schedule contains a full and complete list of all policies of
insurance to which Stonehouse is a party or is a beneficiary or named insured,
and Stonehouse has in full force and effect, with all premiums due thereon paid,
the policies of insurance set forth therein. All the insurable properties of
Stonehouse are insured in amounts and coverages and against risks and losses
that are adequate and usual for similar properties and businesses.
4.19 Bank Accounts.
The Stonehouse Schedule contains a full and complete list of all the bank
accounts of Stonehouse together with the names of the persons authorised to draw
thereon. All cash in such accounts is held in demand deposits and is not subject
to any restriction or limitation as to withdrawal.
4.20 No conflict
The execution and delivery of this Agreement by Stonehouse and the performance
of its obligations hereunder:
(i) are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of its Memorandum and
Articles of Association, or any note, debt instrument, security agreement,
lease, deed of trust or mortgage, or any other contract, agreement or
commitment binding upon Stonehouse or any of its assets or properties;
(ii) will not result in the creation or imposition of any lien, encumbrance,
equity or restriction in favour of any third party upon any of its assets
or properties; and
(iii) and will not conflict with or violate any applicable law, rule,
regulation, judgement, order or decree of any government, governmental
instrumentality or court having jurisdiction over Stonehouse or any of its
assets or properties.
The Stonehouse Schedule contains a full and complete list of all necessary
consents, waivers and approvals of third parties required to be obtained by
Stonehouse in connection with the execution and delivery of this Agreement by
Stonehouse and the performance of its obligations
hereunder.
4.21 No Default.
Stonehouse has in all respects performed, or is now performing, the obligations
of, and is not in material default (and would not by the lapse of time and/or
the giving of notice be in material default) in respect of, any note, debt
instrument, "security agreement, option to purchase, lease,
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16
deed of trust or mortgage, or any other material contract, agreement or
commitment binding upon it or its assets or properties. Each of the material
contracts, agreements or other instruments described on the Stonehouse Schedule
is a legal, binding, and enforceable obligation by or against it to the best
knowledge of Stonehouse, no party with whom it has an agreement or contract,
which is of material importance to the condition (financial or otherwise),
business, net worth, assets, properties, or operations of Stonehouse taken as a
while, is in default thereunder or has breached any terms of provisions thereof
in a material way,
4.22 Certain Advances.
There are no receivables of Stonehouse owing by directors, officers, employees,
consultants or its shareholders, or owing by any affiliate of any director or
officer of Stonehouse, other than advances in the ordinary and usual course of
business to officers and employees for reimbursable business expenses.
4.23 Related Parties.
No officer or director of Stonehouse, or any affiliate of any such person has,
either directly or indirectly:
(i) an interest in any corporation, partnership, firm or other person or
entity which furnishes or sells products or services which are similar to
those furnished or sold by Stonehouse; or
(ii) a beneficial interest in any contract or agreement to which Stonehouse is
a party or by which Stonehouse may be bound.
For purposes of this Paragraph 4.23, there shall be disregarded any interest
which arises solely from the ownership of less than a one (1) percent equity
interest in a corporation whose stock is regularly traded on any national
stock-exchange.
4.24 Copies of Certain Documents.
The Stonehouse Schedule contains true and complete copies of:
(i) its currently effective Memorandum and Articles of Association, certified
by the Registrar of Companies, Pretoria;
(ii) all tax returns filed by Stonehouse since its inception
4.25 Underlying Documents.
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All underlying documents listed or described in the Stonehouse Schedule have
heretofore been furnished to ColorSmart. All such documents furnished to
ColorSmart are true and correct copies, and there are no amendments or
modifications thereto, except as expressly noted in the Stonehouse Schedule. The
minute books of Stonehouse contain full, complete and accurate records of all
meetings and other corporate actions taken by the directors and shareholders of
Stonehouse, and ColorSmart has heretofore been furnished true and correct copies
of all documents and records contained in said minute books.
4.26 Disclosure.
Neither this Agreement, the Stonehouse Schedule, nor any other written statement
or certificate furnished by Stonehouse or the Shareholders to ColorSmart in
connection with the transactions contemplated hereby, when taken together,
contain any untrue statement of a material fact or omit to state any material
fact necessary to make any statement, in light of the circumstances under which
such statement is made, not misleading.
4.27 Effect of Agreement.
The execution, delivery and performance by the Shareholder and by Stonehouse of
this Agreement, and the consummation of the transactions herein contemplated,
will not conflict with, or result in a breach of the terms of, or constitute a
default under or violation of, any law or regulation of any governmental
authority or any provision of the Memorandum and Articles of Association of
either, or any agreement or instrument to which the Shareholder or Stonehouse is
a party or by which they are bound of to which they are subject. No consent of
any person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of the Shareholder or
Stonehouse to permit the consummation of the transactions contemplated by this
Agreement, which consents will not have been received before the Closing Date.
4.28 Indemnification of ColorSmart.
Stonehouse and the Shareholder, agree, jointly and severally, to indemnify,
defend and hold ColorSmart, its officers, directors, employees and attorneys
(all such persons and entities being collectively referred to as the "ColorSmart
Group"), harmless from and against any and all losses, damages, costs and
expenses, including attorneys' fees (any such loss, damage, cost or expense
herein called a "Loss"), which they or any member of the ColorSmart Group may at
any time sustain or incur by reason of:
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(i) any inaccuracy or breach of any of the representations, warranties or
covenants of Stonehouse or the Shareholder contained herein or in any
certificate delivered pursuant hereto, or
(ii) any claim or claims whether or not presently known to the ColorSmart
Group, which arise in connection with the operation of the business of
Stonehouse, where the event which gives rise to such claim occurred prior
to the date of this Agreement, or
(iii) any claim or claims arising out of the failure of Stonehouse or the
Shareholder to discharge any of their obligations pursuant to this
Agreement.
Stonehouse and the Shareholder do hereby, jointly and severally, furthermore
indemnify and hold harmless ColorSmart against all liabilities, actual or
contingent, and in particular against taxation liabilities, damages, criminal
fines and legal costs of Stonehouse accrued or the cause of action of which
arose on or before the Effective Date, which have not been provided for in the
Effective Balance Sheet or in this Agreement. Without in any way derogating the
generality of the above, the Shareholder hereby indemnifies ColorSmart against:
1. all taxation of every kind which may be levied upon Stonehouse as a result
of:
(a) the re-opening by the Tax Authorities of any taxation assessment of
any nature whatsoever in respect of any period prior to the
Effective Date;
(b) any new or additional assessment of any nature whatsoever by the Tax
Authorities in respect of any period prior to the Effective Date.
2. all interest and any penalties of any nature whatever payable under the
Income Tax Act and the relevant statutes and under any other circumstances
whatsoever by Stonehouse for all periods up to and including the Effective date.
In any action in respect of which indemnity may be sought hereunder by a party
hereto shall be brought against such party, the other party shall be entitled to
participate in the defence thereof at its own expense and to settle any such
action on such terms as it shall see fit so long as the party entitled to
indemnification hereunder shall be released from any liability by reason of such
settlement. In such event, the party required to provide indemnification shall
receive full cooperation and access to all relevant and non-privileged records
and ColorSmart shall, if required, furnish the Shareholder with necessary Powers
or Attorney and Resolutions in order to give effect to the aforegoing. The
indemnification provisions of this Paragraph shall not be deemed exclusive and
shall not prejudice any other rights or remedies, at law or in equity, of any
party under this Agreement with respect to any matter relating to the terms,
provisions, covenants or conditions of this Agreement or any transaction
contemplated hereby.
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ARTICLE V
ACCESS TO INFORMATION: CONFIDENTIALITY
5.00 Access.
Prior to the Closing Date, Stonehouse shall afford BDO Spencer Steward,
Chartered Accountants, the representatives of ColorSmart, reasonable access to
the officers and personnel of Stonehouse and to such of its financial,
contractual and other records as shall be reasonably necessary for ColorSmart's
"due diligence" investigation of Stonehouse and its business and operations.
5.01 Confidentiality.
(a) No information concerning Stonehouse not previously disclosed to the
public or in the public domain which is contained herein or in the
Stonehouse Schedule, or which shall have been furnished to or obtained by
ColorSmart as provided in Section 6.02, shall be disclosed to any person
other than ColorSmart's employees, legal counsel, financial advisers, or
accountants in confidence, or used for any purpose other than as
contemplated herein. In the event that the purchase and sale of the
Stonehouse Stock shall not be consummated, ColorSmart shall return to
Stonehouse all such information in its possession that is in written form.
(b) No information concerning ColorSmart not previously disclosed to the
public or in the public domain which is contained herein or which shall
have been furnished to or obtained by Stonehouse or any Shareholder shall
be disclosed by them to any person other than their respective employees,
legal counsel, financial advisors, or accountants in confidence, or used
for any purpose ether than as contemplated herein. In the event that the
purchase and sale of the Stonehouse Stock shall not be consummated, each
such person shall return to ColorSmart all such information in their
possession that is in written form.
<PAGE>
20
ARTICLE VI.
COVENANTS OF STONEHOUSE AND THE SHAREHOLDER
6.00 Stonehouse and the Shareholder hereby jointly and severally covenant:
6.01 Conduct of Business.
From and after the execution and delivery of this Agreement and until the
Closing Date or the termination of this Agreement, whichever shall first occur:
(i) Stonehouse shall not engage in any activities or transactions which shall
be outside the ordinary course of its business without the prior written
consent of ColorSmart, which consent shall not be unreasonably withheld;
(ii) such persons will use their best efforts to preserve the existing
licenses, franchises, rights and privileges pertinent to the business and
operations of Stonehouse; and
(iii) such persons will use their best efforts to preserve intact the
business organisation of Stonehouse and to preserve its goodwill and
relationships with its suppliers, customers, employees and others with
whom it deals.
6.02 Notice of Certain Adverse Changes, Defaults or Claims.
Stonehouse shall give prompt notice to ColorSmart of any material adverse change
to the properties or business of Stonehouse, or any notice of default received
by it, subsequent to the date of this Agreement and prior to the Closing Date,
under any instrument or agreement to which Stonehouse is a party or by which any
of its property is bound, or of the assertion of any claim which, if upheld,
would render inaccurate any representation contained herein.
6.03 Actions Requiring Consent.
Between the date hereof and the Closing Date or, the termination of this
Agreement, whichever shall first occur, Stonehouse shall not, without the prior
written consent of ColorSmart, which consent shall not unreasonably be withheld,
take any action of the type described in clauses (c) through (n) of Paragraph
4.06.
6.04 Implementation of Representations and Warranties.
Such persons shall use all reasonable efforts to render accurate as of the
Closing Date their representations and warranties contained in this Agreement,
and shall refrain from taking any
<PAGE>
21
action which would render inaccurate as of the Closing Date any of such
representations or warranties.
6.05 Communications.
Between the date hereof and the Closing Date, such persons shall furnish no
communication to the public with respect to the transactions contemplated by
this Agreement without the prior approval of ColorSmart as to the content
thereof, which approval shall not unreasonably be withheld by ColorSmart.
6.08 Other Negotiations.
Between the date hereof and the Closing Date or the termination of this
Agreement, whichever shall first occur, such persons will disclose to ColorSmart
all bona fide inquiries from other persons, firms or corporations concerning the
possible acquisition of Stonehouse (by consolidation, merger, sale or exchange
of assets, sale of stock or otherwise) or equity securities of Stonehouse; and
neither Stonehouse nor the Shareholder will solicit an acquisition of Stonehouse
by another person, firm or corporation, whether by consolidation, merger or
purchase or sale of business or assets or by the sale or exchange of stock, nor
will Stonehouse solicit the sale of any of its capital stock or other equity
securities to any other person, firm or corporation. Nothing contained in this
Section shall be construed as limiting the rights of the Board of Directors of
Stonehouse to discharge their fiduciary responsibilities in response to
unsolicited offers from third parties.
6.07 Co-operation.
The Shareholder shall co-operate, and will use its best efforts to have the
other present officers, directors and employees of Stonehouse cooperate, with
ColorSmart, at its request, on and after the Closing Date and without further
consideration, in endeavouring to effect the collection of accounts or notes
receivable owing to Stonehouse at the Closing Date, and, at ColorSmart's
expense, in furnishing information, evidence, testimony and other assistance in
connection with any actions, proceedings, arrangements or disputes relating to
adjustment of income or any other taxes of Stonehouse for all periods prior to
the Closing Date and in connection with any other actions, proceedings,
arrangements or disputes whatsoever involving Stonehouse and based upon
contracts, arrangements or acts which were in effect or occurred on or prior to
the Closing Date.
<PAGE>
22
6.08 Facilitation of the ColorSmart Public Offering.
Stonehouse and the Shareholder shall use their best efforts to co-operate, and
will use their best efforts to have the other present officers, directors,
agents, employees, attorneys, and accountants of Stonehouse to cooperate with
ColorSmart in the process of ColorSmart's initial public offering of its common
stock, being undertaken by ColorSmart pursuant to the Securities Act of 1933
(United States), as amended ("Public Offering"). Such co-operation shall
include, but not be limited to: (i) providing for, at ColorSmart's expense, a
certified audit of Stonehouse's financial statements and statements of operation
for the period ended 28th February 1998 and for the preparation and review of
any interim financial statements and statements of operations of Stonehouse as
required by Regulation S-8 promulgated under the Securities Act, if such
certified audit shall be required in the Public Offering; and (ii) providing
such additional information or documents which may be reasonably necessary for
ColorSmart to conduct its Public Offering and to permit the effectiveness of the
registration statement to be filed by ColorSmart with the United States
Securities and Exchange Commission ("SEC").
ARTICLE VII.
COVENANTS OF COLORSMART
7.00 ColorSmart hereby covenants:
7.01 Communications.
Between the date hereof and the Closing Date (except to the extent required by
state or federal securities laws), ColorSmart shall furnish no communication to
the public with respect to the transactions contemplated by this Agreement
without the prior approval of Stonehouse as to the content thereof, which
approval shall not unreasonably be withheld by Stonehouse.
7.02 Registration of ColorSmart Common.
ColorSmart will use its best efforts to file and maintain an effective
registration statement with the SEC and applicable state securities commissions
covering the registration on Form SB-2 and sale of its common stork in order to
conduct the Public Offering as soon as practicable after the execution of this
Agreement.
<PAGE>
23
7.03 ColorSmart to notify Authorities
Forthwith after Closing, ColorSmart shall at its cost cause the necessary
returns and information to be forwarded to the Receiver of Revenue, the
Registrar of Companies and any other competent authority having jurisdiction
recording the change of control of Stonehouse as provided for in this Agreement.
7.04 Suretyships and Guarantees
ColorSmart shall forthwith after closing secure the release of the Shareholder
and/or any other person from any suretyships and/or guarantees which may have
been given in respect of any obligations of Stonehouse and does hereby further
Indemnify the Shareholder and/or any other person in respect of any liability
which he or they may have under such suretyships and/or guarantees until
ColorSmart has procured the said release.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER
8.00 The obligations of the Shareholder under this Agreement are, subject to the
satisfaction of ColorSmart at or prior to the Closing of the following
conditions:
8.01 Accuracy of Representations and Warranties.
All of the representations and warranties made by Stonehouse in this Agreement
shall be true in all material respects as of the Closing Date with the same
force and effect as though such representations and warranties had been made as
of the Closing Date, except for changes contemplated by this Agreement
8.02 Fulfillment of Covenants.
All of the terms, covenants and conditions of this Agreement to be complied with
and performed by Stonehouse at or before the Closing Date shall have been duly
complied with and performed.
8.03 Approval of Sale.
All authorisations, consents and approvals of all state and local governmental
agencies and authorities required to be obtained in order to permit consummation
of the transactions contemplated by this Agreement shall have been obtained.
8.04 No Litigation.
<PAGE>
24
There shall be no litigation pending which has been brought for the purpose of
enjoining any transaction contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon Stonehouse the
Shareholder because of such transaction.
8.05 Consents Obtained.
Stonehouse and the Shareholder shall have delivered to ColorSmart the written
consent or approval of each person or organisation whose consent or approval
shall be required in order to permit them to consummate the transactions
contemplated hereby or in order to avoid any breach or termination of any
agreement to which they are a party.
8.06 Accountant's Review.
ColorSmart shall have received from BDO Spencer Steward, Chartered Accountants,
a letter to the effect that on the basis of their "acquisition review" of
Stonehouse, not constituting a full audit, nothing has come to their attention
which has caused them to believe that the accounts or balances to which they
applied their procedures should be adjusted.
8.07 Accounting Treatment.
ColorSmart shall have received from the said BDO Spencer Steward, a written
analysis stating that the business combination resulting from the consummation
of the transactions contemplated by this Agreement may be accounted for on a
pooling of interests basis in accordance with generally accepted accounting
principles and in accordance with all rules, regulations and policies of the
SEC.
8.08 ColorSmart Review.
There shall not have come to the attention of ColorSmart, as a result of any
investigation performed pursuant to Paragraph 5.00 hereof, any information, not
previously disclosed to ColorSmart which is likely to materially and adversely
affect the business, property or operations of Stonehouse following the Closing
Date.
8.09 Resignation of Directors.
All persons serving as directors of Stonehouse shall have tendered their
resignations to be effective as of the Closing Date.
<PAGE>
25
8.10 Sale of STONEHOUSE Shares.
Not less than one hundred percent (100%) of the issued shares of Stonehouse as
of the Closing Date shall have been tendered by the Shareholder for purchase by
ColorSmart hereunder.
8.11 Public Offering
The Public Offering referred to in paragraph 6.08 to be undertaken by ColorSmart
in terms of the Securities Act of 1933 (United States) shall have been
successfully concluded by the 30th November 1998 or such extended date as may
have been agreed to by the parties in writing.
8.12 Parties to use their best endeavours
Each of the parties shall use its best endeavours to procure the fulfilment of
the conditions herein contained and in particular the conditions listed in
paragraphs 8.03 to 8.11.
8.13 Failure of Conditions.
If any of the conditions fails this agreement shall cease to be of any further
force and effect and the parties shall be restored as near as may be to the
positions in which they would have been had this agreement not been entered
into. No party shall have any claim against the other as a result of the failure
of the condition, except for such claims, if any, as may result from a breach
of paragraphs 8.12 and 8.13.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS
9.00 The representations, warranties and covenants of the parties contained in
this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive the Closing hereunder.
ARTICLE X
PAYMENT OF EXPENSES
10.00 Expenses.
Except as provided herein, the parties shall each pay their own legal and
accounting fees and other out-of-pocket expenses incurred incident to the
preparation and carrying out of this Agreement and the transactions herein
contemplated, whether or not such transactions are consummated; provided
however, in the event that the Shareholder, or Stonehouse, or either of them,
shall fail to consummate the transactions contemplated by this Agreement, for
reasons
<PAGE>
28
11.07 Good Faith
Each of the parties hereto agree that it or they shall act in good faith in an
attempt to cause all the conditions precedent to their respective obligations
hereunder to be satisfied.
11.08 Applicable Law.
This Agreement shall be governed by and construed and interpreted in accordance
with the laws of the State of Tennessee.
11.09 Severability.
Should any provision of this Agreement be determined to be invalid, it shall be
severed from this Agreement and the remaining provisions of the Agreement shall
remain in full force and effect.
Witness the due execution of this Agreement by the parties hereto as of the date
set forth above.
COLORSMART, INC.
By /s/ Roger D. Finchum, Sr /CEO
---------------------------------------
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED.
By /s/ Nolan Weight
---------------------------------------
SHAREHOLDER:
By /s/ Nolan Weight
---------------------------------------
NOLAN WEIGHT
- ----------
Prepared by Lams (Pty) Ltd 1 September 1998
Revised 7th October 1998
Revised 10th October 1998
<PAGE>
Exhibit 2.06
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 23rd day of June, 1999, by and between Colorsmart.com, Inc., a Nevada
corporation ("Colorsmart.com") and Donovan J. McNamee, Jr. and Pamela M. McNamee
who are residents of Nashville, Tennessee (together, the "Shareholders").
RECITALS:
A. The Shareholders together own sixty (60) and forty (40) shares,
respectively, which shares together comprise all of the issued and outstanding
shares of capital stock of Display Arts, Inc., a Tennessee corporation ("Display
Arts"), (collectively, the "Display Arts Stock");
B. The Shareholders are directors and officers of Display Arts; and
C. Colorsmart.com desires to purchase from the Shareholders, and the
Shareholders desire to sell to Colorsmart.com, the Display Arts Stock under
terms herein recited.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
ARTICLE I
Sale of Display Arts Stock
1.01 Sale and Transfer of Display Arts Stock. Subject to the terms and
conditions of this Agreement, on the date of the Closing (as defined under
Section 2.01 hereof) the Shareholders shall sell, and Colorsmart.com shall
purchase, the Display Arts Stock free and clear of any liens or encumbrances.
1.02 Consideration; Payment of Display Arts Closing Debts. At the Closing,
Colorsmart.com shall pay to the Shareholders the sum of one million three
hundred thousand dollars ($1,300,000), the "Tentative Purchase Price."
Immediately following the Closing, the Shareholders shall deposit such sum into
a bank account in the Shareholders' names over which the Shareholders alone have
signature authority (the "Shareholders' Closing Account"), which account shall
be utilized by the Shareholders for the sole purpose of paying off Display Arts'
debts and obligations related to certain of Display Art's equipment leases and
its bank loans (collectively, the "Display Arts Closing Debts") identified on
the Display Arts Schedule attached hereto (the "Display Arts Schedule"), such
payments to be accomplished in the manner provided under Section 2.02 hereof.
The amount remaining in the Shareholders' Closing Account following payment of
the Display Arts Closing Debts shall constitute the Shareholders' consideration
for the Display Arts Stock (the "Final Purchase Price") and shall be the
Shareholders' sole and exclusive property.
<PAGE>
ARTICLE II
Closing
2.01 Closing Date. The closing of the purchase and sale of the Display
Arts Stock hereunder (the "Closing") shall be held at the offices of Display
Arts' attorney, D. Jefferson Herring, at 12:00 noon on October 1, 1999, or at
such other time and place upon which Colorsmart.com and the Shareholders may
agree in writing (the "Closing Date"). The parties may by written agreement
extend the Closing to a subsequent date and time.
2.02 Delivery of Consideration and Payment of Display Arts Closing Debts.
A. Payment of Tentative Purchase Price. At the Closing, provided all
obligations hereunder imposed on each party have been fulfilled in all respects
and provided all other conditions hereof have been met, the Shareholders shall
deliver to Colorsmart.com the stock certificates representing the Display Arts
Stock, duly endorsed for transfer with signatures guaranteed. Upon receipt of
same, Colorsmart.com shall pay to the Shareholders the Tentative Purchase Price
via wire transfer to a bank account in Nashville, Tennessee, designated by the
Shareholders. The Closing shall not be considered to have been completed until
such wire transfer has been received in such bank account.
B. Shareholders' Closing Account and Payment of the Display Arts
Closing Debts and Finalized Purchase Price. Immediately following the Closing,
the Shareholders shall promptly make disbursements from the Shareholders'
Closing Account to pay off all of the Display Arts Closing Debts. For the sole
purpose of paying off the Display Arts Closing Debts and disbursing to
themselves the Finalized Purchase Price, the Shareholders shall be agents of
Colorsmart.com. The parties understand and agree that only the Display Arts
Closing Debts shall be paid from the Shareholders' Closing Account and the
Shareholders shall have no obligation whatsoever to pay any other debt, expense
or obligation of Display Arts, except as may be otherwise herein provided.
Promptly following payment of the Display Arts Closing Debts, the Shareholders
shall disburse from the Shareholders' Closing Account the Finalized Purchase
Price to the Shareholders and thereupon such account shall be closed and the
bank statements and other records relating to such account shall be delivered to
Colorsmart.com. Following the Closing, Colorsmart.com shall cause Display Arts
to allow the Shareholders full access to the books and records of Display Arts
in the event a disagreement arises between Display Arts or the Shareholders and
a creditor of Display Arts with respect to payment of any of the Display Arts
Closing Debts. Upon request by the Shareholders, Colorsmart.com shall further
cause Display Arts to provide the Shareholders with photocopies of any of such
books and records at Display Arts' sole expense. In the event of any such
disagreement, the Shareholders shall be permitted to communicate directly with
creditors and employ an attorney (at the Shareholders sole expense) to represent
Display Arts in connection with such disagreement until the same has been
resolved. The Shareholders shall hold Colorsmart.com and Display Arts harmless
and indemnify such companies for any damages, costs and expenses, including
reasonable attorneys' fees, with respect to the Shareholders' failure to pay in
full any of the Display Arts Closing Debts.
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<PAGE>
2.03 Public Offering; Colorsmart.com's Option to Terminate; Audit of
Display Art's Books.
A. Public Offering; Colorsmart.com's Option to Termination
Agreement. A condition precedent to the parties consummating the Closing shall
be the satisfactory completion by Colorsmart.com of an initial public offering
of its common stock (the "IPO"). If, prior to or on the date set for the
Closing, Colorsmart.com, in its sole judgment, determines that the IPO will not
be accomplished, it shall promptly provide notice thereof to the Shareholders.
This Agreement shall be rescinded as of the effective date of such notice from
Colorsmart.com to the Shareholders and thereafter neither of the parties shall
have any further obligation to the other party with the exception of the
provisions hereunder concerning the return of confidential information and the
ongoing obligations recited hereunder not to disclose such confidential
information.
B. Audit of Display Arts Books. In preparation for the IPO,
Colorsmart.com has retained, at Colorsmart.com's sole expense, a certified
public accounting firm (the "CPA Firm") to perform a certified audit of Display
Art's books, records and financial statements for the periods required by rule 5
promulgated by the Securities and Exchange Commission (the "SEC"). The
Shareholders shall have no liability to the CPA Firm for any of the costs
associated with such audit.
C. Termination of Agreement. Notwithstanding anything herein to the
contrary, it is a material condition of this Agreement that unless the Closing
occurs on or before 12:00 o'clock noon, October 1, 1999 (the "Termination
Date"), this Agreement shall be rescinded in its entirety and thereafter each of
the parties shall have no further obligation to the other party, including
reimbursement of any expenses incurred by such other party in connection with
this Agreement, with the exception of the provisions hereunder concerning the
return of confidential information and the ongoing obligations recited hereunder
imposed upon the parties not to disclose such confidential information. The
parties may by written agreement extend the Termination Date. TIME IS OF THE
ESSENCE WITH RESPECT TO THE PROVISIONS OF THIS SUBSECTION 2.03C.
D. Property to be Distributed to the Shareholders: Shareholders'
Personal Property. Listed on the Display Arts Schedule are items of personal
property that shall be distributed to the Shareholders prior to the closing.
Additionally, the Display Arts Schedule lists items of the Shareholders'
personal property that will be removed from the Display Arts' business premises
promptly following the Closing.
ARTICLE III
Representations and Warranties of The Shareholders
Subject to and except for the information which is set forth in a list of
exceptions, explanations and disclosures identified by the section in this
Article to which they pertain, and contained in the schedule attached hereto
(the "Display Arts Schedule"), the Shareholders, jointly and severally,
represent and warrant to Colorsmart.com that:
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<PAGE>
3.01 Title to the Display Arts Stock. The Shareholders are the owners,
beneficially and of record, of all of the outstanding shares of capital stock
issued by Display Arts to be sold by the Shareholders hereunder, free and clear
of any liens, encumbrances, security agreements, options, claims, charges or
restrictions of any nature whatsoever. The Shareholders shall not vote to
approve or take any actions to cause Display Arts to issue any additional shares
of Display Arts stock or rights to acquire Display Arts stock from and after the
date hereof.
3.02 Authorization. The Shareholders have the full power and authority to
execute and deliver this Agreement and to execute and deliver any and all other
collateral agreements hereto and which are referred to as a part hereof. This
Agreement constitutes the valid and binding obligation of the Shareholders,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally and by principles of equity.
3.03 Organization. Display Arts is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee, and has
full corporate power and authority to carry on its business as it is now being
conducted. Display Arts is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or properties make such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on Display Arts.
3.04 Capitalization. The authorized capital stock of Display Arts consists
of one hundred (100) shares of Common Stock, all of which are issued and
outstanding. All such outstanding shares have been duly authorized, are validly
issued, fully paid and nonassessable, and do not violate Display Arts' Articles
of Incorporation or Bylaws or any agreement to which Display Arts is a party or
by which it is bound. All such outstanding shares have been issued in accordance
with all applicable state and federal securities laws. Except as set forth
herein, there are no options, warrants, calls, rights, commitments or agreements
of any character to which Display Arts is a party or by which it is bound
obligating Display Arts to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating Display
Arts to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
3.05 Display Arts Subsidiaries. Display Arts owns no shares of capital
stock directly or indirectly, of any other corporation, partnership or joint
venture interest.
3.06 Validity of Agreement. The Shareholders have the power and authority
to execute and deliver this Agreement. This Agreement constitutes the valid and
binding obligation of the Shareholders, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
other similar laws affecting creditors' rights generally and by principles of
equity. The execution and delivery of this Agreement by the Shareholders, and
the consummation of the transactions contemplated hereby, do not require the
consent, approval or authorization of any person, public authority or other
entity.
3.07 Display Arts' Financial Statements. Attached hereto as a part of the
Display Arts Schedule are true and correct copies of Display Arts' income
statement
-4-
<PAGE>
and its balance sheet for its year ended December 31, 1997 and its income
statement and balance sheet for its year ended December 31, 1998. Such
statements are referred to collectively as the "Display Arts Financials" and the
said balance sheets are together referred to as the "Display Arts Balance
Sheets." To the Shareholders' knowledge, the Display Arts Financials:
(i) in all material respects are in accordance with Display Arts'
books and records; and
(ii) in all material respects are prepared in accordance with
generally accepted accounting principles and present fairly the financial
position of Display Arts and the results of its operations as of the respective
dates and for the periods indicated thereon except as otherwise stated in such
financial statements
The above representations concerning the Display Arts Financials are
subject to the additional information provided in the attached Display Arts
Schedule. At the date of the Display Arts Balance Sheets, to the Shareholder's
knowledge Display Arts had no material liabilities or obligations, fixed,
contingent or otherwise, not set forth on the Display Arts Financials or in the
Display Arts Schedule. For purposes of this Agreement, "materiality" shall mean
amounts in excess of fifteen thousand dollars ($15,000) either individually or
in the aggregate.
3.08 Events Since Date of Display Arts Balance Sheet. Since the date of
the Display Arts Balance Sheet dated December 31, 1998, except as otherwise
contemplated by this Agreement, or except as described in the Display Arts
Schedule, Display Arts has conducted and its business only in the ordinary and
usual course and, without limiting the generality of the foregoing:
(a) Display Arts has not sustained any damage, destruction or loss
by reason of fire, explosion, earthquake, casualty, labor trouble, requisition
or taking of property by any government or agency thereof, windstorm, embargo,
riot, act of God or public enemy, flood, accident, revocation of license or
right to do business, total or partial termination, suspension, default or
modification of any Material Contracts (defined under Section 3.15 hereof),
governmental restriction or regulation, other calamity, or other similar or
dissimilar event (whether or not covered by insurance) materially and adversely
affecting the condition (financial or otherwise), business, net worth, assets,
properties or operations of Display Arts taken as a whole.
(b) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, operations, obligations or
liabilities (fixed or contingent) of Display Arts which, in the aggregate, have
had or may be reasonably expected to have (whether before or after the Closing
Date) a materially adverse effect on the condition (financial or otherwise),
business, net, worth, assets, properties or operations of Display Arts as a
whole.
(c) Display Arts has not issued, or authorized for issuance, any
equity security, bond, note or other security or granted, or entered into, any
commitment or obligation to issue or sell any such equity security, bond, note
or other security, whether pursuant to offers, stock option agreements, stock
bonus agreements, stock purchase plans, incentive compensation plans, warrants,
calls, conversion rights or otherwise.
-5-
<PAGE>
(d) Display Arts has not incurred additional debt for borrowed
money, nor incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of business.
(e) Display Arts has not declared or made any dividend, payment or
other distribution on or with respect to any share of its capital stock.
(f) Display Arts has not purchased, redeemed or otherwise acquired
or committed itself to acquire for a consideration, directly or indirectly, any
share or shares of its capital stock.
(g) Display Arts has not mortgaged, pledged, otherwise encumbered or
subjected to lien any of its assets or properties, tangible or intangible, nor
committed itself to do any of the foregoing, except for liens for current taxes
which are not yet due and payable and purchase money liens arising out of the
purchase or sale of products or services made in the ordinary and usual course
of business.
(h) Display Arts has not disposed of, or agreed to dispose of, any
asset or property, tangible or intangible, except in the ordinary and usual
course of business, and in each case for a consideration at least equal to the
fair value of such asset or property, nor leased or licensed to others
(including officers and directors), or agreed to lease or license, any asset or
property.
(i) Display Arts has not purchased or agreed to purchase or
otherwise acquire any debt or equity securities of any corporation, partnership,
joint venture, firm or other entity.
(j) Display Arts has not entered into any transaction or contract,
or made any commitment to do the same, except in the ordinary and usual course
of business and not involving an amount in any case in excess of $10,000 nor
waived any right of substantial value or canceled any debt or claim or
voluntarily suffered any extraordinary loss.
(k) Display Arts has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any Proprietary Right (as
defined in Section 3.17 hereof).
(l) Display Arts has not effected or agreed to any amendment or
supplement to any employee profit sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, medical reimbursement, life insurance,
deferred compensation or any other employee benefit plan or arrangement.
(m) Display Arts has not effected or agreed to effect any change in
its directors or executive management.
(n) Display Arts has not effected or committed itself to effect any
amendment or modification to its Articles of Incorporation or Bylaws.
3.09 Properties. To the Shareholder's knowledge, in all material respects,
the Display Arts Balance Sheets reflects all of the assets and properties, real
and personal, used by Display Arts in its business or otherwise held by it,
except for:
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<PAGE>
(i) property acquired or disposed of in the ordinary and usual
course of business since the date of such balance sheet.
Except as set forth in the Display Arts Balance Sheets and the Display
Arts Schedule, Display Arts has good and marketable title to all assets and
properties listed on the Display Arts Balance Sheets and thereafter acquired,
free and clear of any imperfections of title, lien, claim, encumbrance,
restriction, charge or equity of any nature whatsoever, except for the lien of
current taxes not yet due and payable. All of the fixed assets and properties
listed on the Display Arts Balance Sheets and thereafter acquired are in good
operating condition and are free from any material defect.
3.10 Accounts Receivable. All of the accounts receivable of Display Arts
shown on the Display Arts Balance Sheets or thereafter acquired arose and are
collectible in the ordinary and usual course of Display Arts business, subject
to normal business risks of the non-collection of such accounts.
3.11 Taxes. With the exception of its 1998 federal and State of Tennessee
income tax returns which have been extended, Display Arts has duly filed with
the appropriate United States, state, local and foreign governmental agencies,
all tax returns and reports required to be filed and has paid in full all taxes,
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any taxing authority at this time or has made adequate provision
therefor on its books. Display Arts has not executed or filed with any taxing
authority any agreement extending the period for assessment or collection of any
taxes. Display Arts is not a party to any pending action or proceeding, nor, to
the best of its knowledge, is any such action or proceeding threatened by any
governmental authority for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies, and no claim for assessment or
collection of taxes, interest, penalties, assessments or deficiencies has been
asserted against it. No issue has been raised by any federal, state, local, or
foreign taxing authority in connection with an audit or examination of Display
Arts's tax returns, business or properties which has not been settled or
resolved.
3.12 Compensation. The Display Arts Schedule contains a full and complete
list of all persons who served as directors, officers, employees or consultants
of Display Arts at December 31, 1998, specifying their names and job
designations, the annual compensation paid or payable to such persons and the
basis of such compensation, whether fixed or commission or a combination
thereof. Except as otherwise disclosed in the Display Arts Schedule, since
December 31, 1998, there his been no material change in compensation or any
commitment to materially change the compensation, by means of wages, salaries,
bonuses, gratuities or otherwise, to any such director, officer, employee or
consultant of Display Arts.
3.13 Compliance with Law. Except for possible minor exceptions, the curing
or non-curing of which would not have a material effect on the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of Display Arts taken as a whole, the business of Display Arts has been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities, including, without limiting the
generality of the foregoing, all laws, regulations and orders relating to
employment practices and procedures and the health
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and safety of employees. Display Arts has not received any notice of alleged
violations of any of the foregoing.
3.14 Litigation. Except as set forth in the Display Arts Schedule, there
is no claim, dispute, action, proceeding, suit, appeal or investigation, at law
or in equity, pending against Display Arts or involving any of its business or
properties, before any court, agency, authority, arbitration panel or other
tribunal, and, to the best knowledge of the Shareholders, none has been
threatened. To the best knowledge of the Shareholders, there are no facts which,
if known to shareholders, customers, governmental authorities or other persons,
would result in any such claim, dispute, action, proceeding, suit, appeal or
investigation which would have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, properties or operations
of Display Arts taken as a whole. Except as set forth in the Display Arts
Schedule, Display Arts is not subject to any order, writ, injunction or decree
of any court, agency, authority, arbitration panel or other tribunal, or in
default with respect to any notice, order, writ, injunction or decree.
3.15 Material Contracts. The Display Arts Schedule contains a full and
complete list (subject in the case of clause (i) below to the dollar amount
indicated therein) of each partially or totally executory contract or agreement
to which Display Arts is a party, or by which it is bound in any respect (the
"Material Contracts"), including, without limitation, any and all:
(i) contracts or agreements for the purchase, sale, lease or other
disposition of equipment, goods, materials, research and development, supplies,
studies, or capital assets, or for the performance of services, in any case
involving more than $10,000, except that such limitation as to dollar amount
shall not apply as to any contracts or agreements covered by Section 3.24;
(ii) contracts or agreements for the joint performance of work or
services, and all other joint venture or teaming agreements;
(iii) management or employment contracts, consulting contracts,
collective bargaining contracts or termination and severance agreements;
(iv) notes, mortgages, deeds of trues, loan agreements, security
agreements, guarantees, debentures, indentures, credit agreements and other
evidences of indebtedness;
(v) pension, retirement, profit sharing, deferred compensation,
bonus, incentive, life insurance, hospitalization, or other employee benefit
plans or arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating to any such
employee benefit plan or arrangement);
(vi) stock option, stock purchase, warrant, repurchase or other
contracts or agreements relating to any shares of capital stock;
(vii) contracts or agreements with agents, brokers, consignees,
sales representatives or distributors;
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(viii) contracts or agreements with any director, officer, employee,
consultant or shareholder;
(ix) powers of attorney or singular authorizations granted to third
parties; and
(x) licenses, sublicenses, royalty agreements, and other contracts
or agreements to which Display Arts is a party, or otherwise subject, relating
to technical assistance or to Proprietary Rights (as defined in Section 3.17
hereof).
Except as stated in the Display Arts Schedule, Display Arts is not a party
to, nor bound by, any contract or agreement which:
(A) The Shareholders believe will result in any material loss upon
the performance thereof (including any material liability for penalties or
damages, whether liquidated, direct, indirect, incidental or consequential, or
down time charges), and
(B) No party has raised any claim, dispute or controversy or
withheld payments from Display Arts with respect to any of its contracts nor has
Display Arts received notice or warning of alleged nonperformance, delay in
delivery or other noncompliance with respect to the obligations of Display Arts
under any of its contracts, nor are there any facts which exist indicating that
any of such contracts may be totally or partially terminated or suspended by the
other party thereto. Display Arts has not entered into any contract or agreement
containing covenants limiting its right to compete in any business with any
person. As used in this Agreement, the terms "contract" and "agreement" mean and
include every contract, agreement and commitment whether written or oral.
3.16 Leased Real Property. The Display Arts Schedule contains a full and
complete list of all real property leased by Display Arts. Except as herein
stated to the contrary, all such property is held under valid and enforceable
leases, copies of which have been delivered to Colorsmart.com and as to which
neither party to the lease is in material default. Display Arts does not own any
real property in fee simple. To the best knowledge of the Shareholders, none of
the operations of Display Arts on any of such real property, nor any improvement
thereon, violate any applicable building code, zoning requirement, or pollution
control ordinance or any other regulation or statute applicable to such real
property. Display Arts is not the lessee under the lease for the premises at
1207 Faydur Court, Nashville, Tennessee identified on the Display Arts Schedule.
Display Arts has assumed the obligations of the tenant under such lease, Donovan
J. McNamee, Jr. Subject to the landlord's consent, prior to the closing, Donovan
J. McNamee, Jr. shall assign his interest in such lease to Display Arts. If for
any reason such assignment cannot be completed prior to the Closing, after the
Closing Colorsmart.com shall cause Display Arts to fulfill all of the
obligations of the tenant under such lease and Colorsmart.com shall hold Donovan
J. McNamee, Jr. harmless from and against any damages, costs and expenses,
including reasonable attorney's fees, with respect thereto.
3.17 Proprietary Rights. The Display Arts Schedule contains a full and
complete list of all trademarks, trade names, service marks, and copyrights, or
applications therefor, owned or used by Display Arts. Display Arts owns, or
possesses adequate licenses or other rights to use, all trademarks, trademark
applications, service
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marks, trade names, copyrights, inventions, drawings, computer software,
designs, trade secrets, customer fists, proprietary know-how or information, or
other rights with respect thereto (collectively referred to as "Proprietary
Rights") required for or incident to the operation, sale and use of all products
and services sold or provided by Display Arts, free and clear of any right,
lien, encumbrance or claim of others, including without limitation present or
former employees of Display Arts or their former employers; provided, however,
that the possibility exists that other persons, completely independent of
Display Arts or its employees or agents, could have developed trade secrets,
customer information or items of technical information similar or identical to
that of Display Arts. The Shareholders are not aware of any such development by
other persons of similar or identical trade secrets or technical information.
3.18 Toxic Wastes; Employee Safety; Etc. To the Shareholders' best
knowledge, Display Arts makes adequate provision for the control, removal,
disposal and storage of all toxic wastes, if any, generated by its business
operations. Display Arts is not presently in violation of any federal or state
law, regulation, ordinance, or the like governing protection of the environment
and human health and safety regarding toxic wastes. Display Arts is not
presently in violation of any provision of OSHA or any regulation promulgated
thereunder. No action, proceeding, claim, suit or the like is pending or has
been threatened against by any government agency or any person with respect to
toxic wastes, occupational health and safety or environmental damage, nor are
the Shareholders aware of any potential claims concerning any such matters.
3.19 Insurance. The Display Arts Schedule contains a full and complete
list of all policies of insurance to which Display Arts is a party or is a
beneficiary or named insured, and Display Arts has in full force and effect,
with all premiums due thereon paid, the policies of insurance set forth therein.
To the Shareholder's knowledge, all the insurable properties of Display Arts are
insured in amounts and coverages and against risks and losses which are adequate
and usual for similar properties and businesses.
3.20 Bank Accounts. The Display Arts Schedule contains a full and complete
list of all the bank accounts of Display Arts together with the names of the
persons authorized to draw thereon. All cash in such accounts is held in demand
deposits and is not subject to any restriction or limitation as to withdrawal.
3.21 No Conflict. The execution and delivery of this Agreement by the
Shareholders and the performance of their obligations hereunder:
(i) are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of its Articles of Incorporation or
Bylaws, or any note, debt instrument, security agreement, lease, deed of trust
or mortgage, or any other contract, agreement or commitment binding upon Display
Arts or any of its assets or properties;
(ii) will not result in the creation or imposition of any lien,
encumbrance, equity or restriction in favor of any third party upon any of its
assets or properties; and
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(iii) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Display Arts or any of its
assets or properties.
The Display Arts Schedule contains a full and complete list of all
necessary consents, waivers and approvals of third parties required to be
obtained by the Shareholders in connection with the execution and delivery of
this Agreement by the Shareholders and the performance of their obligations
hereunder.
3.22 No Default. Display Arts has in all respects performed, or is now
performing, the obligations of, and is not in material default (and would not by
the lapse of time and/or the giving of notice be in material default) in respect
of, any note, debt instrument, security agreement, option to purchase, lease,
deed of trust or mortgage, or any other material contract, agreement or
commitment binding upon it or its assets or properties. Each of the Material
Contracts, agreements or other instruments described on the Display Arts
Schedule is a legal, binding, and enforceable obligation by or against it. To
the best knowledge of the Shareholders, no party with whom Display Arts has an
agreement or contract, which is of material importance to the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of Display Arts taken as a whole, is in default thereunder or has breached any
terms of provisions thereof in a material way.
3.23 Certain Advances. There are no receivables of Display Arts owing by
directors, officers, employees, consultants or its shareholders, or owing by any
affiliate of any director or officer of Display Arts, other than advances in the
ordinary and usual course of business to officers and employees for reimbursable
business expenses.
3.24 Related Parties. No officer or director of Display Arts, or any
affiliate of any such person, has, either directly or indirectly:
(i) an interest in any corporation, partnership, firm or other
person or entity which furnishes or sells products or services which are similar
to those furnished or sold by Display Arts; or
(ii) a beneficial interest in any contract or agreement to which
Display Arts is a party or by which Display Arts may be bound.
For purposes of this Section 3.24, there shall be disregarded any interest
which arises solely from the ownership of less than a one (1) percent equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.
3.25 Copies of Certain Documents. The Display Arts Schedule contains true
and complete copies of:
(i) its currently effective Articles of Incorporation, certified by
the Secretary of State of Tennessee;
(ii) its currently effective Bylaws, certified by the Secretary of
Display Arts; and
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(iii) all federal and other tax returns filed by Display Arts since
its inception or for five (5) years, whichever period is shorter.
3.26 Underlying Documents. All underlying documents listed or described in
the Display Arts Schedule have heretofore been furnished to Colorsmart.com or
shall be furnished to Colorsmart.com upon Colorsmart.com's request or within
twenty days from the execution of this Agreement. All such documents furnished
to Colorsmart.com are true and correct copies, and there are no amendments or
modifications thereto, except as expressly noted in the Display Arts Schedule.
3.27 Disclosure. Neither this Agreement, the Display Arts Schedule, nor
any other written statement or certificate furnished by Display Arts or the
Shareholders to Colorsmart.com in connection with the transactions contemplated
hereby, when taken together, contain any untrue statement of a material fact or
omit to state any material fact necessary to make any statement, in light of the
circumstances under which such statement is made, not misleading.
3.28 Effect of Agreement. The execution, delivery and performance by the
Shareholders of this Agreement, and the consummation of the transactions herein
contemplated, will not conflict with, or result in a breach of the terms of, or
constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of either, or any agreement or instrument to which the Shareholders are a
party or by which they are bound or to which they are subject. No consent of any
person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of the Shareholders to permit
the consummation of the transactions contemplated by this Agreement, which
consents will not have been received before the Closing Date.
3.29 Indemnification of Colorsmart.com. The Shareholders, agree, jointly
and severally, to indemnify, defend and hold Colorsmart.com harmless from and
against any and all losses, damages, costs and expenses, including attorneys'
fees (any such loss, damage, cost or expense herein called a "Loss"), which
Colorsmart.com or any member of the Colorsmart.com Group may at any time sustain
or incur by reason of:
(i) any inaccuracy or breach of any of the representations,
warranties or covenants of the Shareholders contained herein or in any
certificate delivered pursuant hereto; or
(ii) any claim or claims arising out of the failure of the
Shareholders to discharge any of their obligations pursuant to this Agreement.
In any action in respect of which indemnity may be sought hereunder by a
party hereto shall be brought against such party, the other party shall be
entitled to participate in the defense thereof at its own expense and to settle
any such action on such terms as it shall see fit so long as the party entitled
to indemnification hereunder shall be released from any liability by reason of
such settlement. In such event, the party required to provide indemnification
shall receive full cooperation and access to all relevant and nonprivileged
records. The indemnification provisions of this section shall not be deemed
exclusive and shall not prejudice any other rights or remedies, at law or in
equity, of any party under this Agreement with respect to any matter relating to
the terms, provisions, covenants or conditions of this Agreement or any
transaction
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contemplated hereby. The obligation of the Shareholders under this section or
any other provision of this Agreement under any covenant, warranty,
representation or indemnity (the "Indemnity Obligations") are limited to the
following extent: (a) With the exception of the following item (b), the
Indemnity Obligations shall terminate and expire two (2) years after Closing;
(b) All obligations arising from the Shareholders' representations and
warranties hereunder shall continue until the expiration of the statute of
limitations applicable to any underlying liability or claim by a third party
against Colorsmart.com; (c) the Shareholders shall have no liability to
Colorsmart.com under this Agreement unless Colorsmart.com's damages in the
aggregate exceed twenty five thousand dollars ($25,000) and then the
Shareholders shall be liable only for the excess thereof and (d) the
Shareholders' liability under this Indemnity shall in no event exceed the
Purchase Price.
3.30 Short Period Financial Statements. Attached to the Display Arts
Schedule are true and correct copies of Display Arts' income statement and its
balance sheet for its three months ended March 31, 1997 and its income statement
and balance sheet for its three months ended March 31, 1998. Such statements are
referred to collectively as the "Display Arts Short Period Statements." Such
statements are unaudited and Shareholders make no representations or warranties
with respect thereto other than to represent and warrant that such statements
were prepared based on Display Arts books and records.
ARTICLE IV
Shareholders' Guaranties
The parties acknowledge that the Shareholders of Display Arts are
personally liable for certain obligations of Display Arts as disclosed on the
Display Arts Schedule. Colorsmart.com covenants that, with the exception of the
Display Arts Closing Debts which shall be paid by the Shareholders immediately
after the Closing from the Shareholders' Closing Account (as provided under
Article II hereof), after the Closing Colorsmart.com shall cause Display Arts to
pay all of such debts and obligations in a timely manner, and Colorsmart.com
shall hold the Shareholders and directors of Display Arts harmless and indemnify
them from and against any damages, costs and expenses, including reasonable
attorneys' fees, with respect to such debts and obligations.
ARTICLE V
Representations And Warranties of Colorsmart.com
Colorsmart.com represents and warrants to the Shareholders that:
5.01 Organization. Colorsmart.com is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee and has
full corporate power and authority to carry on its business as now being
conducted.
5.02 Validity of Agreement. Colorsmart.com has full corporate power and
authority to execute and deliver this Agreement. This Agreement constitutes the
valid and binding obligation of Colorsmart.com, enforceable in accordance with
its terms,
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except as enforcement may be limited by applicable bankruptcy laws or other
similar laws affecting creditors' rights generally and by principles of equity.
The execution and delivery of this Agreement by Colorsmart.com, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action, and such execution and delivery do not
require the consent, approval or authorization of any person, public authority
or other entity.
5.03 Effect of Agreement. The execution, delivery and performance by
Colorsmart.com of this Agreement, and the consummation of the transactions
herein contemplated, will not conflict with, or result in a breach of the terms
of, or constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of Colorsmart.com, or any agreement or instrument to which Colorsmart.com
is a party or by which it is bound or to which it is subject. No consent of any
person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of Colorsmart.com to permit the
consummation of the transactions contemplated by this Agreement, which consent
will not have been received before the Closing Date.
5.04 Indemnification of the Shareholders. Colorsmart.com agrees to
indemnify, defend and hold the Shareholders harmless from and against any and
all losses, damages, costs and expenses, including attorneys' fees (any such
loss, damage, cost or expense herein called a "Loss"), which they may at any
time sustain or incur by reason of (i) any claim or claims whether or not
presently known to the Colorsmart.com Group, which arise in connection with the
operation of the business of Colorsmart.com, where the event which gives rise to
such claim occurred prior to the date of this Agreement, or (ii) any claim or
claims arising out of the failure of Colorsmart.com to discharge any of its
obligations pursuant to this Agreement. In any action in respect of which
indemnity may be sought hereunder by a party hereto shall be brought against
such party, the other party shall be entitled to participate in the defense
thereof at its own expense and to settle any such action on such terms as it
shall see fit so long as the party entitled to indemnification hereunder shall
be released from any liability by reason of such settlement. In such event, the
party required to provide indemnification shall receive full cooperation and
access to all relevant and nonprivileged records. The indemnification provisions
of this Section shall not be deemed exclusive and shall not prejudice any other
rights or remedies, at law or in equity, of any party under this Agreement with
respect to any matter relating to the terms, provisions, covenants or conditions
of this Agreement or any transaction contemplated hereby. The obligation of
Colorsmart.com under this section or any other provision of this Agreement under
any covenant, warranty, representation or indemnity (the "Indemnity
Obligations") are limited to the following extent: (a) With the exception of the
following item (b), the Indemnity Obligations shall terminate and expire two (2)
years after Closing; (b) All obligations arising from Colorsmart.com's
representations and warranties hereunder in addition to its commitments to cause
Display Arts to pay all of the Display Arts debts and obligations for which the
Shareholders and directors of Display Arts are personally liable and the hold
such persons harmless with respect thereto shall continue until the expiration
of the statute of limitations applicable to any underlying liability or claim by
a third party against the Shareholders and directors of Display Arts; and (c)
Colorsmart.com shall have no liability to the Shareholders under this Agreement
unless damages in the aggregate exceed twenty five thousand dollars ($25,000)
and then Colorsmart.com shall be liable only for the excess thereof.
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ARTICLE VI
Access to Information; Confidentiality
6.01 Access.
(a) Prior to the Closing Date, the Shareholders shall cause Display
Arts to afford representatives of Colorsmart.com, including auditors from the
CPA Firm, reasonable access to the officers and personnel of Display Arts and to
such of its financial, contractual and other records as shall be reasonably
necessary for Colorsmart.com's investigation of Display Arts and its business
and operations including the audit of Display Arts books and records by the CPA
Firm.
(b) Prior to the Closing Date, Colorsmart.com shall afford
representatives of Display Arts reasonable access to the officers and personnel
of Colorsmart.com and to such of their financial, contractual and other records
as shall be reasonably necessary for Display Arts's investigation of
Colorsmart.com and its business and operations.
(c) Colorsmart.com shall make available to the Shareholders the
opportunity to ask questions of and receive answers from appropriate officers or
representatives of Colorsmart.com concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which Colorsmart.com possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to the Shareholders hereunder.
(d) The Shareholders shall cooperate with all reasonable requests by
Colorsmart.com in providing Colorsmart.com information pertaining to Display
Arts necessary to assist Colorsmart.com with the IPO.
6.02 Confidentiality.
(a) Prior to the Closing and except as may be required by the IPO,
Colorsmart.com shall not disclose to any person any information concerning
Display Arts not previously disclosed to the public or in the public domain
including, without limitation, financial data, customer data, operational data
and tax information (collectively, the "Confidential Information") which is
contained herein or in the Display Arts Schedule, or which shall have been
furnished to or obtained by Colorsmart.com as provided in Section 6.01(a) or to
the CPA Firm or otherwise furnished to Colorsmart.com. in connection with the
negotiation of this Agreement, other than Colorsmart.com's employees, legal
counsel, financial advisers, or accountants in confidence, or used for any
purpose other than as contemplated herein. In the event that the purchase and
sale of the Display Arts Stock shall not be consummated, Colorsmart.com shall
promptly return to Display Arts all such information in its possession or in the
possession of the CPA Firm which is in written form or on computer disk, and
Colorsmart.com shall delete all of the Confidential Information from its
computer hard drives and request that the CPA Firm do likewise, and from and
after the Termination Date Colorsmart.com shall refrain from disclosing any such
confidential information to any party verbally or by any other means.
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(b) No information concerning Colorsmart.com not previously
disclosed to the public or in the public domain which is contained herein or
which shall have been furnished to or obtained by Display Arts or any
shareholder as provided in Section 6.01(b) or 6.01(c), shall be disclosed by
them to any person other than their respective employees, legal counsel,
financial advisors, or accountants in confidence, or used for any purpose other
than as contemplated herein. In the event that the purchase and sale of the
Display Arts Stock shall not be consummated, each such person shall return to
Colorsmart.com all such information in their possession which is in written
form.
ARTICLE VII
Covenants of The Shareholders
The Shareholders hereby jointly and severally covenant:
7.01 Conduct of Business. From and after the execution and delivery of
this Agreement and until the Closing Date or the termination of this Agreement,
whichever shall first occur, the Shareholders shall cause the following:
(i) Display Arts shall not engage in any activities or transactions
which shall be outside the ordinary course of its business without the prior
written consent of Colorsmart.com which consent shall not be unreasonably
withheld;
(ii) such persons will use their best efforts to preserve the
existing licenses, franchises, rights and privileges pertinent to the business
and operations of Display Arts; and
(iii) such persons will use their best efforts to preserve intact
the business organization of Display Arts and to preserve its goodwill and
relationships with its suppliers, customers, employees and others with whom it
deals.
7.02 Notice of Certain Adverse Changes, Defaults or Claims. The
Shareholders shall give prompt notice to Colorsmart.com of any material adverse
change to the properties or business of Display Arts, or any notice of default
received by it, subsequent to the date of this Agreement and prior to the
Closing Date, under any instrument or agreement to which Display Arts is a party
or by which any of its property is bound, or of the assertion of any claim
which, if upheld, would render inaccurate any representation contained herein.
7.03 Actions Requiring Consent. Between the date hereof and the Closing
Date or, the Termination Date, whichever shall first occur, the Shareholders
shall not cause or permit Display Arts, without the prior written consent of
Colorsmart.com, which consent shall not unreasonably be withheld, to take any
action of the type described in clauses (e) through (n) of Section 3.08 hereof.
7.04 Implementation of Representations and Warranties. Such persons shall
use all reasonable efforts to render accurate as of the Closing Date their
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
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7.05 Communications. Between the date hereof and the Closing Date, such
persons shall furnish no communication to the public with respect to the
transactions contemplated by this Agreement without the prior approval of
Colorsmart.com as to the content thereof, which approval shall not unreasonably
be withheld by Colorsmart.com.
7.06 Other Negotiations. Between the date hereof and the Closing Date or
the Termination Date, whichever shall first occur, such persons will disclose to
Colorsmart.com all bona fide inquiries from other persons, firms or corporations
concerning the possible acquisition of Display Arts (by consolidation, merger,
sale or exchange of assets, sale of stock or otherwise) or equity securities of
Display Arts; and the Shareholders shall not solicit nor permit an acquisition
of Display Arts by another person, firm or corporation, whether by
consolidation, merger or purchase or sale of business or assets or by the sale
or exchange of stock, nor will the Shareholders solicit the sale of any of
Display Arts' capital stock or other equity securities to any other person, firm
or corporation. Nothing contained in this Section shall be construed as limiting
the rights of the Board of Directors of Display Arts to discharge their
fiduciary responsibilities in response to unsolicited offers from third parties.
7.07 Cooperation. The Shareholders shall cooperate, and will use their
best efforts to have the other present officers, directors and employees of
Display Arts cooperate, with Colorsmart.com, at its request, on and after the
Closing Date and without further consideration, in endeavoring to effect the
collection of accounts or notes receivable owing to Display Arts at the Closing
Date, and, at Colorsmart.com's expense, in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes relating to adjustment of federal income or any other
taxes of Display Arts for all periods prior to the Closing Date and in
connection with any other actions, proceedings, arrangements or disputes
whatsoever involving Display Arts and based upon contracts, arrangements or acts
which were in effect or occurred on or prior to the Closing Date,
7.08 Facilitation of the Colorsmart.com Public Offering. The Shareholders
shall use their best efforts to cooperate, and will use their best efforts to
have the other present officers, directors, agents, employees, attorneys, and
accountants of Display Arts to cooperate with Colorsmart.com, in providing in a
timely manner any and all information concerning Display Arts to Colorsmart.com
and the CPA Firm in the process of Colorsmart.com's initial public offering of
its common stock, being undertaken by Colorsmart.com pursuant to the Securities
Act of 1933, as amended ("Public Offering"). Such cooperation shall include, but
not be limited to:
(i) permitting the CPA Firm to perform a certified audit of Display
Arts's financial statements and statements of operation for the two year period
ended December 31, 1998 and for the preparation and review of any interim
financial statements and statements of operations of Display Arts as required by
Regulation S-132 promulgated under the Securities Act, if such certified audit
shall be required in the Public Offering, and
(ii) providing such additional information or documents which may be
reasonably necessary for Colorsmart.com to conduct its Public Offering and to
permit the effectiveness of the registration statement to be filed by
Colorsmart.com with the United States Securities and Exchange Commission
("SEC").
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The parties understand and agree that with the exception of providing
information, the Shareholders shall have no obligation whatsoever in connection
with the IPO including, without limitation, participating in the IPO or
providing legal, accounting or other advice or assistance.
ARTICLE VIII
Covenants of Colorsmart.com
Colorsmart.com hereby covenants:
8.01 Implementation of Representations and Warranties. Colorsmart.com
shall use all reasonable efforts to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
8.02 Communications. Between the date hereof and the Closing Date (except
to the extent required by state or federal securities laws), Colorsmart.com
shall furnish no communication to the public with respect to the transactions
contemplated by this Agreement without the prior approval of Display Arts as to
the content thereof, which approval shall not unreasonably be withheld by
Display Arts.
8.03 Registration of Colorsmart.com Common. Colorsmart.com will use its
best efforts to file and maintain an effective registration statement with the
SEC and applicable state securities commissions covering the registration on
Form SB-2 and sale of its common stock in order to conduct the Public Offering
as soon as practicable after the execution of this Agreement.
8.04 SEC Documents. Colorsmart.com covenants that all documents prepared
and filed with the SEC in connection with the IPO at the time such are filed or
become effective, will not include an untrue statement of a material fact
pertaining to Display Arts or omit to state a material fact pertaining to
Display Arts required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by Colorsmart.com in reliance upon and in conformity with
written information concerning Display Arts furnished to Colorsmart.com by the
Shareholders in connection with this Agreement. Colorsmart.com covenants that it
will deliver to the Shareholders' attorney, not later than fifteen (15) days
after the same has been filed with the SEC, true and exact copies of all
documents prepared by Colorsmart.com or its advisors and agents in connection
with the IPO that name, refer to or discuss in any manner Display Arts or this
Agreement.
-18-
<PAGE>
ARTICLE IX
Securities Law Matters
The Display Arts Stock to be transferred by the Shareholders to
Colorsmart.com pursuant to this Agreement shall not be registered under the
Securities Act, in reliance upon exemptions from such registration contained in
the Securities Act including Section (4)(1) and/or Section 4(2) of the Act.
ARTICLE X
Conditions to Obligations of the Shareholders
The obligations of the Shareholders under this Agreement are, at the
option of the Shareholders, subject to the satisfaction at or prior to the
Closing of the following conditions in addition to other applicable provisions
hereof:
10.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by Colorsmart.com in this Agreement shall be
true in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and
Colorsmart.com shall have delivered to the Shareholders a certificate to such
effect dated the Closing Date and signed by its President and Chief Executive
Officer.
10.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by Colorsmart.com at or
before the Closing Date shall have been duly complied with and performed, and
Colorsmart.com shall have delivered to the Shareholders a certificate to such
effect dated as of the Closing Date and signed by its President and Chief
Executive Officer.
10.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and governmental agencies and authorities required to be obtained
in order to permit consummation of the transactions contemplated by this
Agreement shall have been obtained.
10.04 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon Display Arts or the Shareholders because of such transaction.
ARTICLE XI
Conditions to Obligations of Colorsmart.com
The obligations of Colorsmart.com under this Agreement are, at the option
of Colorsmart.com, subject to the satisfaction at or prior to the Closing of the
following conditions:
11.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by the Shareholders in this Agreement shall
be true in all material respects as of the Closing Date with the same force and
effect as though such
-19-
<PAGE>
representations and warranties had been made as of the Closing Date, except for
changes contemplated by this Agreement, and the Shareholders shall have
delivered to Colorsmart.com a certificate to such effect dated the Closing date.
11.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by the Shareholders at or
before the Closing Date shall have been duly complied with and performed, and
the Shareholders shall each have delivered to Colorsmart.com a certificate to
such effect dated the Closing Date.
11.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
11.04 Consents Obtained. The Shareholders shall have delivered to
Colorsmart.com the written consent or approval of each person or organization
whose consent or approval shall be required in order to permit them to
consummate the transactions contemplated hereby or in order to avoid any breach
or termination of any agreement to which they are a party.
11.05 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon Colorsmart.com or any of its officers or directors because of
such transaction.
11.06 Accountant's Review. Colorsmart.com shall have received a letter
from the CPA Firm to the effect that on the basis of their "acquisition review"
of Display Arts, nothing has come to their attention which has caused them to
believe that the accounts or balances to which they applied their procedures
should be adjusted.
11.07 Accounting Treatment. Colorsmart.com shall have received from its
legal counsel a written analysis stating that the business combination resulting
from the consummation of the transactions contemplated by this Agreement may be
accounted for on a pooling of interests basis in accordance with generally
accepted accounting principles and in accordance with all rules, regulations and
policies of the SEC.
11.08 Colorsmart.com Review. There shall not have come to the attention of
Colorsmart.com, as a result of any investigation performed pursuant to Section
6.01 hereof, any information, not previously disclosed to Colorsmart.com, which
is likely to materially and adversely affect the business, property or
operations of Display Arts following the Closing Date.
11.09 Resignation of Directors. All persons serving as directors of
Display Arts shall have tendered their resignations to be effective as of the
Closing Date.
11.10 Sale of Display Arts Stock. Not less than one hundred percent (100%)
of the shares of Display Arts Stock outstanding as of the Closing Date shall
have been tendered by the Shareholders for purchase by Colorsmart.com hereunder.
-20-
<PAGE>
11.11 Conversion of Shareholders' Loans to Capital. Prior to the Closing,
the Shareholders' Loans on the books of Display Arts shall be converted to
capital and at the time of the Closing, there shall be no loans owed by Display
Arts to any of the Shareholders.
11.12 Employment Agreements/Covenants Not to Compete. Prior to the
Closing, employment agreement satisfactory to the parties shall be entered into
by and among Colorsmart.com, Donovan J. McNamee, Sr. and Donovan J. McNamee,
Jr., which agreements shall include satisfactory covenants not to compete with
the business of Colorsmart.com after the date of the Closing.
ARTICLE XII
Survival of Representations Warranties and Covenants
The representations, warranties and covenants of the parties contained in
this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive the Closing hereunder.
ARTICLE XIII
Payment of Expenses
13.01 Expenses. Expenses of Negotiation and Consummation of Agreement.
Except as otherwise herein provided to the contrary, the parties shall each pay
their respective legal and accounting fees and other out-of-pocket expenses
incurred incident to the preparation and carrying out of this Agreement and the
transactions herein contemplated, whether or not such transactions are
consummated. As provided under Section 2.30B, Colorsmart.com shall pay the fee
of the CPA Firm which it will retain to audit the books and records of Display
Arts. Prior to the Closing, Display Arts may pay the legal, accounting and other
profession fees incurred by the Shareholders in the negotiation and consummation
of this Agreement but not to exceed twenty thousand dollars ($20,000).
13.02 Brokers. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement and, insofar as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any such transaction. Each party
agrees to indemnify and hold the other parties harmless against any loss,
liability, damage, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act, omission or
statement of the indemnifying party.
ARTICLE XIV
General Provisions
14.01 Notices. Any notice, request, instruction or other document to be
given hereunder by a party to any other party shall be in writing and effective
when delivered personally or sent by certified mail with return receipt
requested, postage prepaid, as follows:
-21-
<PAGE>
To Colorsmart.com:
Colorsmart.com, Inc.
537 Myatt Drive
Madison, TN 37115
Attn: Mr. Roger D. Finchum, Sr.
President
With a Copy to:
Gregory Bartko, Esq.
Law Office of Gregory Bartko
3475 Lenox Road, Suite 400
Atlanta, GA 30326
To the Shareholders:
Mrs. Pamela M. McNamee
Mr. Donovan J. McNamee, Jr.
3405 Anderson Road, No. 14
Antioch, TN 37013
With a Copy to:
D. Jefferson Herring, Esq.
144 Second Avenue North, Suite 200
Nashville, TN 37201
or to such other addresses or other persons as may be designated in writing by
any of the parties, by notice given as aforesaid. Any such notice shall be
effective when received by the party to whom notice is given.
14.02 Headings. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
14.03 Counterparts. This Agreement may be executed in one or more
counterparts, and when so executed each counterpart shall be deemed to be an
original, and said counterparts together shall constitute one and the same
instrument.
14.04 Assignment. None of the parties may assign or transfer any rights or
obligations under this Agreement.
14.05 Waiver. Any party hereto may, by written notice to the others:
(i) waive any of the conditions to its obligations hereunder or
extend the time for the performance of any of the obligations or actions of the
others,
(ii) waive any inaccuracies in the representations of the others
contained in this Agreement or in any documents delivered pursuant to this
Agreement;
-22-
<PAGE>
(iii) waive compliance with any of the covenants of the others
contained in this Agreement; or
(iv) waive or modify performance of any of the obligations of the
others.
No action taken pursuant to this Agreement, including without limitation
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
14.06 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, constitutes the entire agreement between the parties pertaining
to the subject matter contained herein and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by the party sought to be bound.
14.07 Good Faith. Each of the parties hereto agree that it or they shall
act in good faith in an attempt to cause all the conditions precedent to their
respective obligations hereunder to be satisfied.
14.08 Applicable Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Tennessee.
14.09 Severability. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
14. 10 Expenses and Attorneys' fees. If either party to this Agreement
breaches any of its duties or obligations hereunder (the "party at fault") in
addition to any damages that the other party hereto may recover from the party
at fault, the party at fault shall pay all of the other party's costs and
expenses of enforcing the provisions of this Agreement including its reasonable
attorneys' fees.
14.11 Mediation of Disputes. In the event a dispute between the parties
shall arise after the Closing in connection with this Agreement, the parties
agree to submit the matter to mediation under the auspices of the American
Arbitration Association, such mediation to be conducted in Nashville, Tennessee,
with the parties sharing the mediation costs equally but paying their respective
legal, accounting and other advisor fees in connection therewith. In the event
such mediation fails to resolve the dispute, the parties shall be free to
pursuant all available remedies under this law and this Agreement.
-23-
<PAGE>
WITNESS the due execution of date first set forth above. this Agreement by
the parties hereto as of the
Colorsmart.com, Inc.
/s/ [ILLEGIBLE] By: /s/ Roger D. Finchum, Sr.
- ------------------------ ------------------------
Roger D. Finchum, Sr.
Chairman of the Board and
Chief Executive Officer
Shareholders:
/s/ [ILLEGIBLE] /s/ Donovan J. McNamee, Jr.
- ------------------------ ----------------------------
Donovan J. McNamee, Jr.
/s/ [ILLEGIBLE] /s/ Pamela M. McNamee
- ------------------------ ----------------------------
Pamela M. McNamee
-24-
<PAGE>
STOCK PURCHASE AGREEMENT
DISPLAY ARTS SCHEDULE
This schedule is intended to disclose all information required to be disclosed
by the Shareholders under the Stock Purchase Agreement between Colorsmart.com,
Inc. and the shareholders of Display Arts Inc., Donovan J. McNamee, Jr. and
Pamela M. McNamee (the "Agreement"). The parties acknowledge that disclosure of
identical information is called for under various sections of the Agreement. The
parties agree that full disclosure by Display Arts of any necessary or required
information in this schedule shall be deemed to be full disclosure
notwithstanding the fact that such disclosure herein may not be referenced to
each and every section of the Agreement that requires the disclosure of such
information.
Section 2.02(B) - Listing of Display Arts Closing Debts (see Section 3.08B and
3.15 below for additional information).
- --------------------------------------------------------------------------------
Financial Institution/Lessor Identity of Lease or Bank Loan
- ---------------------------- ------------------------------
- --------------------------------------------------------------------------------
First American National Bank Original loan in amount of
$200,000
- --------------------------------------------------------------------------------
First American National Bank Original loan in amount of
$32,150
- --------------------------------------------------------------------------------
Capital Innovations Xerox 8954-3T #132956001
- --------------------------------------------------------------------------------
Capital Innovations Nova Jet Pro 50 #132956002
- --------------------------------------------------------------------------------
Aloha Leasing (Lessor now in Computer/ Plotter
bankruptcy and current payments
are made to trustee)
- --------------------------------------------------------------------------------
BankOne Toyota 4Runner
- --------------------------------------------------------------------------------
Dolphin Computers
- --------------------------------------------------------------------------------
Dolphin Computers
- --------------------------------------------------------------------------------
Section 2.03D -
A. Property to be Distributed from Corporation: The following is a list of
Display Arts' property that the shareholders will cause to be distributed to
them prior to the Closing subject to securing a waiver from the secured party:
(1) 1991 Dodge Dynasty Automobile
(2) Kitchen Equipment (teacake kitchen)
<PAGE>
B. Shareholders' Personal Property: The below listed items are personal property
belonging to the Shareholders and, therefore, do not constitute assets of the
Corporation. Such items shall be removed from the Display Arts premises promptly
following the closing.
(1) Refrigerator
(2) Freezer
(3) Two red chairs and table
(4) Personal items in top storage
(5) Tools and small workbench
(6) Shop-vac (Sears)
(7) Large brown wooden desk in front office
(8) Glass patio table in kitchen
(9) Four chairs
(10) Two wooden file cabinets in middle room
(11) Roaster
Section 3.07 - Financial Statements: See Attached Display Arts Financial
Statements.
Section 3.08 - Events Since Date of Display Arts Balance Sheet:
A. Termination of William G. Watters. On April 29, 1999, William G. Watters, who
was the manager of the Memphis, Tennessee, operation for Display Arts, was
terminated as an employee of Display Arts. This termination may have an impact
on Display Arts' business operations in Memphis due to Mr. Watters' relationship
with customers of Display Arts. Mr. Watters is working for another firm in
Memphis that competes with Display Arts. Since his departure from Display Arts,
Mr. Watters has contacted a number of Display Arts' customers for the apparent
purpose of persuading them to do business with Mr. Watters' new employer. Mr.
Watters is co-lessee with Display Arts under the lease for the Toyota 4Runner
vehicle referenced hereinafter under Section 3.05, Leased Equipment. Display
Arts is presently the only party using such vehicle and is paying the total
monthly rental payment. Mr. Watters has indicated that he has no desire to share
the vehicle with Display Arts and therefore, will not pay any of the future
monthly rental payments. Mr. Watters has made some nonspecific monetary claims
against Display Arts with respect to such vehicle lease. When the vehicle was
leased, Mr. Watters paid the initial deposit of $3,520.77. Mr. Watters has also
alleged that Display Arts has not turned over to him all of his personal
property that he left on the premises in Memphis when his employment was
terminated.
-2-
<PAGE>
B. Loans, Lines of Credit and Liens:
- --------------------------------------------------------------------------------
Original Corporate
Financial Amount of Periodic Balance at Assets as
Institution Loan Payments When Paid 06/01/99 Security?
- ----------- ---- -------- --------- -------- ---------
- --------------------------------------------------------------------------------
First $32,150 $1,032.27 monthly $32,150 Yes, a lien
American on assets
National secures this
Bank debt
- --------------------------------------------------------------------------------
First $200,000 $3,498.00 monthly $147,250 Yes, a lien
American on assets
National secures this
Bank debt
- --------------------------------------------------------------------------------
Other Liens:
(1) Alleged Lien on personal property under Lease for Knoxville location
for rent and Display Arts' other obligations.
Section 3.12 - Employee Information as of 6/1/99:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Baker, Gregory T. Employee/ $30,347.00 Nashville see footnote 4,267.00
Purchasing,
Costing,
Production
Scheduling, &
Administration
- ------------------------------------------------------------------------------------------------------------------------
Broadus, James W. Part-time $20,384.00 Nashville see footnote none
Employee/
Customer
Service Rep.
- ------------------------------------------------------------------------------------------------------------------------
Crafton, John W. Employee/ $25,480.00 Knoxville +commission & none
Responsible for quarterly bonus
Knoxville's sales of $600 in
activity including 1999: see
outside sales footnote below
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Curtsinger, Steven Employee/ $26,000.00 Nashville +600 quarterly none
Shipping and logistic bonus : eligible
coordinator for commission
see footnote
- ------------------------------------------------------------------------------------------------------------------------
Hanley, Travis Employee/ $32,000.00 Nashville +1,000 bonus none
Head quarterly:
Designer see footnote
below
- ------------------------------------------------------------------------------------------------------------------------
Litwin, David W. Employee/ $41,600.00 Nashville eligible for none
Art Director commission
- ------------------------------------------------------------------------------------------------------------------------
McNamee, Pamela M. Director/ $18,200.00 Nashville see footnote none
President/
Employee/
Involved with
overall company
activities and
miscellaneous
duties
- ------------------------------------------------------------------------------------------------------------------------
McNamee, Donovan J. Jr. Director/ Vice $32,760.00 Nashville +Nimlok bonus 2,600.00
President/ see footnote
Employee/ below
In charge of
overall company
sales and
marketing
- ------------------------------------------------------------------------------------------------------------------------
McNamee, Kelly M. Director/ part time Nashville see footnote none
Secretary- $12.50 per
Treasurer hour
Employee/
Performs company
accounting
including
accounts payable
- ------------------------------------------------------------------------------------------------------------------------
McNamee, Donovan J., Sr. CEO/ none none none none
Consultant
(see section 2
under general
disclosure below)
- ------------------------------------------------------------------------------------------------------------------------
Mikus, David A. Employee/ $26,000.00 Nashville see footnote 1,040.00
Graphic below
Production
Department
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New, Heather J. Part-time Employee/ $10 per hour Memphis none none
General office work
and shipping
programs
- ------------------------------------------------------------------------------------------------------------------------
Pospichal, Timothy Employee/ $28,080.00 Nashville +500 bonus 3,120.00
Customer Service 1/1/99 see
Manager footnote below
- ------------------------------------------------------------------------------------------------------------------------
Schmelhaus, Donald P. Employee/ $28,002.00 Knoxville +1,000 bonus 1,014.00
Knoxville 4/99, $250
Office moving allowance
Manager 4/99: see
footnote below
- ------------------------------------------------------------------------------------------------------------------------
Stephens, Joel Employee/ $22,880.00 Knoxville +500 bonus none
Salesman 7/99 &
including commission:
outside sales, see footnote
model making and below
large exhibit design
- ------------------------------------------------------------------------------------------------------------------------
Witt, Yvonne Employee/ $22,360.00 Nashville see footnote below none
Graphic Production
Department
including
Graphic
Production
Finishing
- ------------------------------------------------------------------------------------------------------------------------
Woodward, C. Ryan Employee/ $26,000.00 Memphis $500 moving allowance 1,040.00
Graphic 5/99, see footnote
Coordinator & below
Responsible
for Sofamore
Fulfillment
Program
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
footnote
- ----------
The above noted employees are eligible for company bonus and profit sharing
based on their performance, the company's performance, and at the discretion of
the board of directors.
-5-
<PAGE>
Section 3.14 and other applicable sections: Lawsuits, Claims, Disputes, etc.
with Vendors, Customers and others:
1. Nashville - Ace International, Inc.: Dispute over Scanner
Maintenance Agreement. Ace contends that Display Arts is liable to
pay fee for another year of maintenance. Amount at issue is $2,200.
2. Memphis - Beverly Taylor D/B/A Grand Central Shuttle Service vs.
Display Arts, Inc. She has sued for $25,000 alleging breach of
contract and other grounds related to Display Arts alleged failure
to complete a small job for her firm. On June 8, 1999, this lawsuit
was dismissed by the General Sessions Court of Shelby County,
Tennessee.
3. Nashville - Workman's Compensation Lawsuit filed by employee, Danny
Bowerman, for $1 million resulting from employment-related accident.
This lawsuit is being defended by workman's compensation insurance
defense attorneys.
4. Nashville - Dispute with EarthLink and American Express for $3,500.
Display Arts contests billing and is presently attempting to resolve
this dispute.
5. Nashville - Account receivable collection dispute with Shaw Company
and Cutting Edge Corporation in the amounts of $16,000 and $12,557,
respectively. Lawsuits have been filed for each account with
Franklin Collection Agency managing the collection activity. The
amount sought in each lawsuit is the delinquent account receivable
plus all costs of collection including attorney's fees.
6. Memphis - Potential workman's compensation case with new employee
who was allegedly injured trying to unload a truck.
Section 3.15 and other applicable sections - Material Contracts:
A. LEASED EQUIPMENT
- --------------------------------------------------------------------------------
Identity of Lessor Amount of When such Balance Owed on
Equipment Company Lease Payment Payment made Lease at 6/1/99
- --------- ------- ------------- ------------ ---------------
- --------------------------------------------------------------------------------
Xerox 8954- Capital 2,548.50 monthly $22,498.99
3T Innovations
#132956001
- --------------------------------------------------------------------------------
Nova Jet Capital 1,564.06 monthly 13,808.54
Pro 50 Innovations
#132956002
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
Identity of Lessor Amount of When such Balance Owed on
Equipment Company Lease Payment Payment made Lease at 6/1/99
- --------- ------- ------------- ------------ ---------------
- --------------------------------------------------------------------------------
Computer/ Aloha 808.01 monthly 8,888.11
Plotter Leasing
(Lessor
now in
bankruptcy
and current
payments are
made to
trustee)
- --------------------------------------------------------------------------------
Toyota BankOne 351.87 monthly 6,332.02
4Runner + payoff amount
on termination
of lease based
on mileage
- --------------------------------------------------------------------------------
Computers Dolphin 165.26 monthly 5,618.84
- --------------------------------------------------------------------------------
Computers Dolphin 290.42 monthly 9,103.02
- --------------------------------------------------------------------------------
B. LEASED PREMISES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Location of Lessor Amount of When Such Duration
Property Company Lease Payment Payment is Made of Lease
- -------- ------- ------------- --------------- --------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1207 Faydur Ct. Enos Reed 7,371.29 1st of month 5 years
Nashville, TN (this is total monthly beginning
(See Footnote payment, 1/2 of which 11/1/98
below) is paid by co-lessee -
see footnote below)
- -----------------------------------------------------------------------------------------------
30 South Main Hertz 2,625.00 by 10th of month 5 1/2 years
Memphis, TN beginning
10/1/96
- -----------------------------------------------------------------------------------------------
16 Emory Place R. G. Guay 1,850.00 1st of month 5 years
Knoxville, TN Revocable beginning
Trust 1/1/99
- -----------------------------------------------------------------------------------------------
1425 Elm Hill RDR Ltd. 3,740.67 1st of month 5 years
Pike Pt. beginning
Nashville, TN 4/1/98
- -----------------------------------------------------------------------------------------------
</TABLE>
Footnote
- ----------
The Faydur Court Lease resulted from a failed merger and the premises contains
excess space that Display Arts is presently trying to sublease. The owner of the
company that Display Arts planned to merge with, Steve Kress, is equally liable
on this lease and to date has been paying one-half of the monthly lease
payments. The tenants under this lease are Donovan J. McNamee, Jr. and Steve
Kress. Display Arts has assumed all of Donovan J. McNamee, Jr.'s obligations
under such lease. Subject to landlord's approval, prior to the Closing Donovan
J. McNamee, Jr. will have his interest in the lease assigned to Display Arts.
-7-
<PAGE>
C. Group Health Insurance:
Health and dental coverage for all employees under Employers Health Insurance
Company of Madison Wisconsin.
D. Miscellaneous Agreements:
- --------------------------------------------------------------------------------
Vendor Equipment/Service Fee
- ------ ----------------- ---
- --------------------------------------------------------------------------------
Cox Corporation Furnace and Air $2,940.00/annual
Conditioning Maintenance
- --------------------------------------------------------------------------------
Pitney Bowes Postage machine rental $1,247.04/annual
- --------------------------------------------------------------------------------
Danka Photocopy machine varies based on usage
maintenance
- --------------------------------------------------------------------------------
Xerox Colorgrafx Electrostatic machine $1,180.00/monthly
Systems, Inc.
- --------------------------------------------------------------------------------
Forklift Company (this Forklift purchase $500/monthly balance
also represents a loan) at 6/1/99 = $2,500
- --------------------------------------------------------------------------------
ADT (Knoxville) Security $31.00/monthly
- --------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,236.00/monthly
Nashville
- --------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,548.00/monthly
Memphis
- --------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,054.00/monthly
Knoxville
- --------------------------------------------------------------------------------
C4 Imaging Maintenance Contract $300/monthly
- --------------------------------------------------------------------------------
Sunshine Pages Advertisement for $4,400/annual - 1998
Advertisement 1998 and 1999 $2,500/annual - 1999
- --------------------------------------------------------------------------------
Nimlok Company Exclusive Distributor per agreement
Agreement
- --------------------------------------------------------------------------------
BFI Waste Systems Trash Removal as per agreement
- --------------------------------------------------------------------------------
Nextel Nexlink Telephone System Cell as per agreement
Contracts Telephone Systems
- --------------------------------------------------------------------------------
Section 3.16 - Leased Real Property: See 3.15 Above
-8-
<PAGE>
Section 3.19 - Insurance:
- --------------------------------------------------------------------------------
Name of Company Policy Number Type of Coverage
- --------------- ------------- ----------------
- --------------------------------------------------------------------------------
Southern Guaranty CCPP33028 Commercial General
Insurance Companies Liability
- --------------------------------------------------------------------------------
Southern Guaranty 0CCPP33028 Automobile
Insurance Companies
- --------------------------------------------------------------------------------
Southern Guaranty 00WCA33028 Workers Compensation
Insurance Companies
- --------------------------------------------------------------------------------
Section 3.20 - Bank Accounts:
- --------------------------------------------------------------------------------
Balance at Persons with
Name of Bank Type of Account 12/31/98 Signature Authority
- ------------ --------------- -------- -------------------
- --------------------------------------------------------------------------------
First Tennessee checking $17,860.29 Pamela M. McNamee
National Bank Donovan J. McNamee, Jr.
- --------------------------------------------------------------------------------
First American Checking 7,164.58 William G. Watters and
National Bank (Memphis) Donovan J. McNamee, Sr.
(Closed 4/23/99)
- --------------------------------------------------------------------------------
Section 3.25 - Copies of Certain Documents: See attached information as follows:
Certified Charter, Bylaws and Income Tax Returns.
GENERAL DISCLOSURE:
The following items constitute supplemental information Statements to the
Display Arts Financial and the Stock Purchase Agreement:
1. RECURRING MONTHLY EXPENSES AS OF 6/1/99:
First American National Bank Loan $3,498.00
First American National Bank Loan 1,032.27
Cox Corporation - HVAC Maintenance 245.00
RDR Rent (Nashville) 3,740.67
Faydur Court Lease (Nashville) - 1/4 monthly
rental w/utilities (est.) 4,000.00
Win. Len (Rent - Memphis) 2,625.00
-9-
<PAGE>
Ray Guay (Rent - Knoxville) 1,850.00
U.S. Pest Control 30.00
ADT Security Service (Knoxville) - contract 31.00
Creative Alarm (Nashville) 29.00
Aloha Leasing 808.01
Capital Innovations - lease 1,564.06
Capital Innovations - lease 2,548.50
Pitney Bowes - postage meter 103.67
Dolphin Leasing (I-Macs) 314.38
Dolphin Leasing (G3) 165.23
Forklift Systems Payment 500.00
Bell South Advertising (Nashville) 1,236.00
Bell South Advertising (Memphis) 1,548.00
Bell South Advertising (Knoxville) 1,054.00
Utilities - Nashville and Memphis (est.) 2,000.00
Danka - Memphis (est.) 75.00
BFI (Waste Removal) 85.07
C4 Imaging 300.00
Xerox Maintenance Contract 1,180.00
Office/Cell Phone Service - Nashville, Knoxville & Memphis (est.) 1,200.00
Medical/Dental Insurance (est.) 1,250.00
Payroll - (est.) 43,000.00
Workers Comp. (annual - Nashville, Memphis & Knoxville) 1,485.00
Commercial Insurance Policies (Nashville, Memphis & Knoxville) 5,637.00
-10-
<PAGE>
2. STATUS OF DONOVAN J. MCNAMEE, SR.
Donovan J. McNamee, Sr., is not a salaried employee of Display Arts but he
occupies the position of Chief Executive Officer and since Display Arts'
inception he has performed significant services for Display Arts.
3. Corporate Directors and Officers:
Donovan J. McNamee, Sr.
Director and Chief Executive Officer
3405 Anderson Road, No. 14
Antioch, TN 37013
Pamela M. McNamee
Director and President
3405 Anderson Road, No. 14
Antioch, TN 37013
Donovan J. McNamee, Jr.
Director and Vice-President
431 Claircrest Drive
Antioch, TN 37013
Kelly M. McNamee
Director and Secretary-Treasurer
3453 Parkwood Court
Hermitage, TN 37076
Kimberly A. Delsignore
Director
115 Wyeth Way
Hockessin, DE 19707
4. Display Arts Obligation for which Shareholders and Directors are liable:
(a) Nashville lease for Faydur Court
(b) Loans from First American National Bank to Display Arts
5. Loans From Shareholders and Related Parties to Display Arts (does not include
accrued interest) - see financial statements
-11-
<PAGE>
Exhibit 2.07
EXTENSION AGREEMENT
THIS EXTENSION AGREEMENT (this "Extension") is executed effective October
1, 1999, by and between Colorsmart.com, Inc., a Nevada corporation
("Colorsmart.com") and Donovan J. McNamee, Jr. and Pamela M. McNamee who are
residents of Nashville, Tennessee (together, the "Shareholders').
R E C I T A L S
WHEREAS, on June 23, 1999, the Shareholders and Colorsmart.com entered
into that certain agreement (the "Stock Purchase Agreement") under the terms of
which the Shareholders agreed to sell and convey, and Colorsmart.com agreed to
purchase and receive, all of the Shareholders' shares of capital stock in
Display Arts Inc., a Tennessee Corporation, under terms therein provided (the
"Stock Sale");
WHEREAS, pursuant to Section 2.01 of the Stock Purchase Agreement, the
Closing of the Stock Sale shall occur on October 1, 1999; and
WHEREAS, the parties desire to delay the Closing of the Stock Sale as
herein provided.
NOW, THEREFORE, in consideration of the premises and their mutual
agreement, the parties agree as follows:
1. Closing Date. Section 2.01 of the Stock Purchase Agreement as
originally constituted is rescinded in its entirety and from and after the
effective date hereof Section 2.01 shall be as follows:
2.01 Closing Date. The closing of the purchase and sale of the
Display Arts Stock hereunder (the "Closing") shall be held at the offices
of Display Arts' attorney, D. Jefferson Herring, at 12:00 noon on December
15, 1999, or at such other time and place upon which Colorsmart.com and
the Shareholders may agree in writing (the "Closing Date"). The parties
may by written agreement extend the Closing to a subsequent date and time.
2. Termination of Agreement. Section 2.03C of the Stock Purchase
Agreement as originally constituted is rescinded in its entirety and from and
after the effective date hereof Section 2.03C shall be as follows:
C. Termination of Agreement. Notwithstanding anything herein to the
contrary, it is a material condition of this Agreement that unless the
Closing occurs on or before 12:00 o'clock noon, December 15, 1999 (the
"Termination Date"), this Agreement shall be rescinded in its entirety and
thereafter each of the parties shall have no further obligation to the
other party, including reimbursement of any expenses incurred by such
other party in connection with this Agreement, with the exception of the
provisions hereunder concerning the return of confidential information and
the ongoing obligations recited hereunder imposed upon the parties not
<PAGE>
to disclose such confidential information. The parties may by written
agreement extend the Termination Date. TIME IS OF THE ESSENCE WITH RESPECT
TO THE PROVISIONS OF THIS SUBSECTION 2.03C.
WITNESS the due execution of this Extension by the parties hereto as of
the date first set forth above.
Colorsmart.com, Inc.
/s/ [ILLEGIBLE] By: /s/ Roger D. Finchum, Sr.
- ------------------------- ---------------------------------
Witness Roger D. Finchum, Sr.
Chairman of the Board and
Chief Executive Officer
Shareholders:
/s/ [ILLEGIBLE] /s/ Donovan J. McNamee, Jr.
- ------------------------- -------------------------------------
Witness Donovan J. McNamee, Jr.
/s/ [ILLEGIBLE] /s/ Pamela M. McNamee
- ------------------------- -------------------------------------
Witness Pamela M. McNamee
-2-
<PAGE>
EXHIBIT 2.08
SECOND EXTENSION AGREEMENT
THIS SECOND EXTENSION AGREEMENT (this "Extension") is executed effective
December 15, 1999, by and between Colorsmart.com, Inc., a Nevada corporation
("Colorsmart.com") and Donovan J. McNamee, Jr. and Pamela M. McNamee who are
residents of Nashville, Tennessee (together, the "Shareholders").
R E C I T A L S
WHEREAS, on June 23, 1999, the Shareholders and Colorsmart.com entered
into that certain agreement (the "Stock Purchase Agreement") under the terms
of which the Shareholders agreed to sell and convey, and Colorsmart.com
agreed to purchase and receive, all of the Shareholders' shares of capital
stock in Display Arts Inc., a Tennessee Corporation, under terms therein
provided (the "Stock Sale");
WHEREAS, pursuant to Section 2.01 of the Stock Purchase Agreement, the
Closing of the Stock Sale was to occur on October 1, 1999;
WHEREAS, pursuant to an Extension Agreement executed by the parties
effective October 1, 1999, the Closing of the Stock Sale was extended to
December 15, 1999; and
WHEREAS, the parties desire to extend further the Closing of the Stock
Sale as herein provided.
NOW, THEREFORE, in consideration of the premises and their mutual
agreement, the parties agree as follows:
1. CLOSING DATE. Section 2.01 of the Stock Purchase Agreement, as
amended, is rescinded in its entirety and from and after the effective date
hereof Section 2.01 shall be as follows:
2.01 CLOSING DATE. The closing of the purchase and sale of the
Display Arts Stock hereunder (the "Closing") shall be held at the
offices of Display Arts' attorney, D. Jefferson Herring, at 12:00 noon
on January 31, 2000, or at such other time and place upon which
Colorsmart.com and the Shareholders may agree in writing (the "Closing
Date"). The parties may by written agreement extend the Closing to a
subsequent date and time.
2. TERMINATION OF AGREEMENT. Section 2.03C of the Stock Purchase
Agreement, as amended, is rescinded in its entirety and from and after the
effective date hereof Section 2.03C shall be as follows:
C. TERMINATION OF AGREEMENT. Notwithstanding anything herein to
the contrary, it is a material condition of this Agreement that unless
the Closing occurs on or before 12:00 o'clock noon, January 31, 2000
(the "Termination Date"), this Agreement shall be rescinded in its
entirety and thereafter each of the parties shall have no further
obligation to the
<PAGE>
other party, including reimbursement of any expenses incurred by such
other party in connection with this Agreement, with the exception of the
provisions hereunder concerning the return of confidential information
and the ongoing obligations recited hereunder imposed upon the parties
not to disclose such confidential information. The parties may by
written agreement extend the Termination Date. TIME IS OF THE ESSENCE
WITH RESPECT TO THE PROVISIONS OF THIS SUBSECTION 2.03C.
WITNESS the due execution of this Extension by the parties hereto as of
the date first set forth above.
Colorsmart.com, Inc.
/s/ S. R. Finchum By: /s/ Roger D. Finchum, Sr.
- --------------------- ---------------------------
Witness Roger D. Finchum, Sr.
Chairman of the Board and
Chief Executive Officer
Shareholders:
/s/ illegible /s/ Donovan J. McNamee, Jr.
- --------------------- --------------------------------
Witness Donovan J. McNamee, Jr.
/s/ illegible /s/ Pamela M. McNamee
- --------------------- --------------------------------
Witness Pamela M. McNamee
-2-
<PAGE>
Exhibit 2.09
AGREEMENT
between
TOP COPY CC
("Seller")
and
COLORSMART.COM INC.
("Purchaser")
WHEREAS the agreement entered into for the sale of the business of the Seller to
the Purchaser and concluded on 20 May 1999 (the "Sale of Business Agreement")
has lapsed due to the non-fulfilment of the condition precedent contained in
clause 2.3 thereof, the Parties wish to reinstate the Sale of Business Agreement
and effect certain amendments so as to accommodate the Purchaser's delays.
NOW THEREFORE THE PARTIES AGREE:
1. REINSTATEMENT OF SALE OF BUSINESS AGREEMENT
The parties agree that the Sale of Business Agreement is hereby reinstated
with full force and effect from date of signature hereof save that, and
subject to, the terms of this agreement which hereby amend, where
applicable, the Sale of Business Agreement.
2. INTEREST ON PURCHASE PRICE
The parties hereby agree that interest shall be payable on the full amount
of the purchase price at a rate of 6.5% (six and a half per centum) per
annum, calculated daily, from 25 August 1999 to the date of payment of the
full amount of the purchase price, and such interest shall be paid together
with the purchase price.
3. CHANGE OF EFFECTIVE DATE AND IMPLEMENTATION DATE
The parties hereby amend the Sale of Business Agreement as follows:
3.1 The definition of "effective date" in clause 1.2.5 is amended to read
"means the close of business on 31 January 2000".
3.2 The definition of "implementation date" in clause 1.2.6 is amended to
read "means close of business on 31 January 2000".
<PAGE>
Page 1
4. COUNTERPARTS
This agreement may be entered into any number of counterparts and by the
parties to it on separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument.
5. GENERAL
No waiver, indulgence, leniency or extension of time which a party (the
"Grantor") may grant or show to the other, will in any way prejudice the
Grantor or preclude the Grantor from exercising any of his rights in the
future and no variation of, or addition or agreed cancellation to this
agreement shall be of any force or effect unless it is reduced to writing
and signed by or on behalf of the parties.
SIGNED on behalf of Top Copy CC at CAPE TOWN on the 14th of October 1999 in the
presence of the undersigned witnesses:
AS WITNESSES:
1. /s/ ILLEGIBLE for: Top Copy CC
--------------------------------
2. /s/ ILLEGIBLE /s/ ILLEGIBLE
-------------------------------- ---------------------------------------
Member, who warrants that he is duly
authorised
SIGNED on behalf of Colorsmart.Com Inc. at Madison, TN on the 14th of October
1999 in the presence of the undersigned witnesses:
AS WITNESSES:
1. /s/ ILLEGIBLE for: Colorsmart.Com Inc.
--------------------------------
2. /s/ ILLEGIBLE /s/ ILLEGIBLE/Chairman
-------------------------------- ---------------------------------------
Director, who warrants that he is duly
authorised
<PAGE>
[Stonehouse Graphics letterhead]
13 October 1999
Colorsmart.com, Inc
Fax 021 461 2287
Attention Reg Burrows.
We are prepared to extend the date of our agreement to January 2000.
All financials will then run to that date and be subject to an audit.
Kind regards,
/s/ Nolan Weight
Nolan Weight.
<PAGE>
Exhibit 2.10
AGREEMENT
between
TOP COPY CC
and
COLORSMART.COM
INCORPORATED
[letterhead of Fairbridge Ardene & Lawton Inc.]
<PAGE>
Page 1
INDEX
Clause Number and Description Page No.
- --------------------------------------------------------------------------------
1. INTERPRETATIONS AND DEFINITIONS.......................................2
2. RECORDAL..............................................................4
3. REINSTATEMENT OF SALE OF BUSINESS AGREEMENT...........................4
4. INTEREST ON PURCHASE PRICE............................................5
5. CHANGE OF EFFECTIVE DATE AND IMPLEMENTATION DATE......................5
6. AMENDMENT OF CLAUSE 2.1 OF SALE OF BUSINESS AGREEMENT.................5
7. BREACH................................................................5
8. RIGHT OF NOMINATION...................................................6
9. COUNTERPARTS..........................................................7
10. GENERAL...............................................................7
11. COSTS.................................................................8
- --------------------------------------------------------------------------------
<PAGE>
Page 2
AGREEMENT
between
TOP COPY CC
and
COLORSMART.COM INC.
THE PARTIES HEREBY AGREE:
1. INTERPRETATIONS AND DEFINITIONS
1.1 The headnotes to the clauses of this agreement are inserted for
reference purposes only and shall in no way govern or affect the
interpretation hereof.
1.2 Unless inconsistent with the context, any expression herein contained,
including any expression and any definition thereof in clause 1.3,
which denotes:
1.2.1 any gender, includes the other genders;
1.2.2 a natural person, includes an artificial person and vice
versa;
1.2.3 the singular, includes the plural and vice versa.
1.3 Unless inconsistent with the context, the expressions set forth below
shall bear the following meanings:
"Agreement" the agreement concluded
between the Parties as
recorded in this document;
"Business" the subject matter of the Sale
of Business Agreement;
"Effective Date" the effective date as
defined in the Sale of
Business Agreement;
<PAGE>
Page 3
"Implementation Date" the implementation date as
defined in the Sale of
Business Agreement;
"Parties" the Seller and the Purchaser
collectively;
"Purchase Price" the purchase price of the
Business as set out in clause
4 of the Sale of Business
Agreement;
"Purchaser" Colorsmart.Com Inc., a
corporation with limited
liability incorporated in
terms of the laws of the State
of Tennessee, United States of
America with registered office
at 537 Myatt Drive, Madison,
Tennessee;
"Sale of Business Agreement" the agreement entered into by
and between the Parties for
the sale of the business
conducted under the name of
"Top Copy", by the Seller to
the Purchaser signed by the
Seller on 18 May 1999 in Cape
Town and signed by Purchaser
on 20 May 1999 in Madison,
Tennessee, as amended by the
First Amendment to the
Agreement concluded on 29 June
1999 and the Second Amendment
to the Agreement concluded on
25 September 1999, as annexed
hereto marked "A";
"Seller" Topy Copy CC, a close
corporation duly incorporated
in terms of the Close
Corporation Act of South
Africa with registration
number CK 88/04604/23;
"Signature Date" the date on which this
Agreement is signed by the
last signing of the Parties
hereto.
<PAGE>
Page 4
1.4 If any provision in a definition is a substantive provision conferring
rights or imposing obligations on either Party then, notwithstanding
that such provision appears only in a definition clause, effect shall
be given thereto as if it were a substantive provision in the body of
this Agreement.
1.5 All provisions contained in the Annexures hereto shall be deemed to be
incorporated in, and to form part of, this Agreement as fully and
effectually as if specifically incorporated herein and each expression
defined In this Agreement shall have the same meaning where used in
any of the Annexures.
2. RECORDAL
2.1 The Purchaser and the Seller agreed to enter into the First Amendment
to the Agreement which was concluded on 29 June 1999 to extend the
deadline for the fulfillment of the condition precedent contained in
clause 2.1 of the Sale of Business Agreement from 30 June 1999 to 9
July 1999. Subsequently, the Seller and the Purchasers entered into
the Second Amendment to the Agreement to change the Implementation
Date and Effective Date from 25 August 1999 to 25 September 1999.
2.2 Notwithstanding the above, the Sale of Business Agreement has lapsed
due to the non-fulfillment of the condition precedent contained in
clause 2.3 of the Sale of Business Agreement. The Parties are,
however, desirous of reinstating the Sale of Business Agreement
subject to the terms of this Agreement which serve to amend the Sale
of Business Agreement.
2.3 The Purchaser has requested that the Effective Date and Implementation
Date be amended to reflect 19 November as the new Effective Date and
Implementation Date.
3. REINSTATEMENT OF SALE OF BUSINESS AGREEMENT
The Parties agree that the Sale of Business Agreement is hereby
reinstated with full force and effect from the Signature Date save
that, and subject to, the terms of this
<PAGE>
Page 5
Agreement which hereby amend, where applicable, the Sale of Business
Agreement.
4. INTEREST ON PURCHASE PRICE
The Parties hereby agree that interest shall be payable on the full amount
of the Purchase Price at a rate of 6.5% (six and a half per centum) per
annum, calculated daily, from 25 August 1999 to the date of payment of the
full amount of the Purchase Price, and such interest shall be paid together
with the Purchase Price.
5. CHANGE OF EFFECTIVE DATE AND IMPLEMENTATION DATE
The Parties hereby amend the Agreement as follows:
5.1 The definition of "effective date" in clause 1.2.5 is amended to read
"means the close of business on 19 November 1999".
5.2 The definition of "implementation date" in clause 1.2.6 is amended to
read "means close or business on 19 November 1999".
6. AMENDMENT OF CLAUSE 2.1 OF SALE OF BUSINESS AGREEMENT
It being recorded that a management agreement has been concluded between
Colorsmart.Com Inc. and Dimitri Haralambous, the Parties hereby amend the
Sale of Business Agreement by deleting clause 2.1 and replacing it with the
following:
"2.1 This agreement is subject to the suspensive condition contained in
clause 2.3."
7. BREACH
7.1 The Parties hereby amend clause 13 of the Sale of Business Agreement
by adding a new clause 13.3 to the Sale of Business Agreement which
reads as follows:
"13.3 Notwithstanding the provisions of Causes 13.1 and 13.2, the
parties hereby agree that should the purchaser fail to pay the
full amount or the purchase price on or before the effective
date (being 19 November 1999) or fail to fulfill the condition
precedent contained in clause 2.3 of this agreement, or
otherwise breach any provision of this agreement, the seller
shall be entitled to either:
<PAGE>
Page 6
13.3.1 cancel the agreement by written notice to the purchaser
to such effect and claim damages from the purchaser for
the loss, including consequential loss, suffered by the
seller, arising out of such breach and/or cancellation; or
8. RIGHT OF NOMINATION
It is recorded that the Parties wish to give the Purchaser a right of
nomination in terms of the Sale of Business Agreement and hereby amend the
Sale of Business Agreement by adding a new clause 21 which reads as
follows:
"21.1 The purchaser shall be entitled to nominate a company in which it is
the sole beneficial shareholder as the purchaser of the business in
terms of this agreement provided that it shall exercise such right by
way of giving to the seller notice of its nomination by no later than
30 (thirty) calendar days after the effective date wherein the
identity of its nominee shall be set out and which notice shall be
accompanied by true copies of the nomination, and of the acceptance of
its nomination by, the nominee.
<PAGE>
Page 7
21.2 Should the purchaser exercise its right of nomination hereunder its
nominee shall, with effect from the signature date hereof, be deemed
substituted in the place of the purchaser as the purchaser of the
business under this agreement whereupon all references in this
agreement to the "purchaser" shall, unless otherwise required by the
context, be deemed to be references to such nominee and whereupon,
further, any acts performed by the purchaser prior to such deemed
substitution, shall be deemed to have been performed by such nominee.
21.3 In the event that a nominee is substituted as the purchaser as
contemplated above, the purchaser hereby binds itself as surety for
and co-principal debtor with such nominee for the performance of all
its obligations in terms of this agreement."
9. COUNTERPARTS
This Agreement may be entered into any number of counterparts and by the
Parties to it on separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument.
10. GENERAL
10.1 This Agreement constitutes the entire agreement between the Parties
regarding the subject matter hereof, No agreements, guarantees or
representations, whether verbal or in writing, have been concluded,
issued or made, upon which either party is relying in concluding this
Agreement, save to the extent set out herein.
10.2 The headings appearing in this Agreement have been used for reference
purposes only and will not affect its interpretation.
10.3 No waiver, indulgence, leniency or extension of time which a party
(the "Grantor") may grant or show to the other, will in any way
prejudice the Grantor or preclude the Grantor from exercising any of
his rights in the future.
10.4 If any particular provision and/or term of this Agreement is found to
be defective or unenforceable or is cancelled for any reason (whether
by any competent Court or otherwise) then the remaining provisions
and/or term shall continue to be of full force or effect.
<PAGE>
Page 8
10.5 Neither party hereto shall be entitled to cede or assign any of its
rights, or delegate any of its obligations hereunder without prior
written consent of the other first being obtained.
10.6 The provisions of this Agreement shall, where applicable, be binding
of the executors, administrators, trustees, curators and heirs of all
natural persons who are or become parties hereto.
11. COSTS
All costs incurred in the negotiation, drafting, conclusion and
implementation of this Agreement and previous amendments to the sale of
Business Agreement shall be borne by the Seller.
SIGNED on behalf of Topy Copy CC at CAPETOWN on the 8th of October 1999 in the
presence of the undersigned witnesses:
AS WITNESSES:
1. /s/ ILLEGIBLE for: Top Copy CC
--------------------------------
2. /s/ ILLEGIBLE /s/ ILLEGIBLE
-------------------------------- ---------------------------------------
Member, who warrants that he is duly
authorised
SIGNED on behalf of Colorsmart.Com Inc. at ___________________________ on the
___ of ________________ 19__ in the presence of the undersigned witnesses:
AS WITNESSES:
1. for: Colorsmart.Com Inc.
--------------------------------
2. /s/ ILLEGIBLE /s/ ILLEGIBLE
-------------------------------- ---------------------------------------
Director, who warrants that he is duly
authorised
<PAGE>
Exhibit 2.11
AGREEMENT
entered into and between
COLORSMART.COM INC.
and
ALOIS KOCH
(Identity Number: 620308 5252 10 8)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ........................................ 2
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES .......................... 6
3. PERIOD OF EMPLOYMENT .................................................. 6
4. EFFECT OF TERMINATION OF EMPLOYMENT ................................... 7
5. SUSPENSION OF EMPLOYMENT .............................................. 8
6. DUTIES OF EMPLOYEE .................................................... 8
7. REMUNERATION .......................................................... 10
8. INVENTIONS, DISCOVERIES AND COPYRIGHT ................................. 10
9. LEAVE ................................................................. 11
10. OUT OF POCKET EXPENSES ................................................ 12
11. RESTRAINT OF TRADE .................................................... 12
12. GENERAL ............................................................... 17
13. DOMICILIUM CITANDI ET EXECUTANDI ...................................... 18
14. RESIGNATION ........................................................... 19
15. COSTS ................................................................. 19
16. SMOKING POLICY ........................................................ 19
17. SAFETY AND HEALTH ..................................................... 20
18. COUNTERPARTS .......................................................... 20
<PAGE>
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. word importing --
1.1.1. any one gender include the other two
genders;
1.1.2. the singular include the plural and vice
versa; and
1.1.3. natural persons include created entities
(corporate or unincorporate) and the state
and vice versa;
1.2. the following terms shall have the meanings assigned to
them hereunder and cognate expressions shall have
corresponding meanings, namely --
1.2.1. "Act" means the Labour Relations Act, 1995;
1.2.2. "board" means the board of directors of the
Colorsmart.com USA Inc. from time to time;
1.2.3. "competing services" means any services
rendered in competition with the prescribed
services;
1.2.4. "company" means Colorsmart.Com Inc. with
limited liability incorporated in terms of
the laws of the State of Nevada per
contract;
1.2.5. "employee" means Alois Koch;
1.2.6. "effective date" means 31 January 2000;
<PAGE>
1.2.7. "prescribed areas" means each magisterial
district in the Western Cape;
1.2.8. "prescribed clients" means any person --
1.2.8.1.1. who is or was a client of the
company at the termination date
or of the effective date; or
1.2.8.2. who is or was a prospective
client of the company at the
termination date or of at the
effective date whom the employee
had approached to do business
with the company within the
period of 1 (one) year preceding
the termination date or whom the
employee had approached to do
business with within the period
of one year preceding the
effective date; or
1.2.8.3. to whom prescribed services were
rendered by the company within
the period of 1 (one) year
preceding the termination date
or by Virtual Colour within the
period of one year preceding the
effective date;
1.2.9. "prescribed services" means any services
rendered by the company in the ordinary
course of business;
1.2.10. "prescribed suppliers" means any person who
--
1.2.10.1. is or was a supplier of
prescribed services to the
company at the termination date
or at the effective date; or
1.2.10.2. was a prospective supplier of
prescribed services to the
company at the termination date
or the effective date whom the
employee had approached to do
business with the company within
the period of 1 (one) year
preceding the termination date
or within the period of one year
of the effective date;
<PAGE>
1.2.10.3. supplied prescribed services to
the company within the period of
1 (one) year preceding the
termination date or to the
company within the period of 1
(one) year preceding the
effective date;
1.2.11. "the Virtual Colour Group" means the
business of copying and specialist printing
and bureau digital printing presently
conducted by Virtual Colour Group under the
name Virtual Colour as sold in terms of an
agreement of sale between the company and
Virtual Colour CC dated 8th November 1999;
1.2 any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date
of the last signature of this agreement;
1.3 any reference to an enactment is to that enactment as at
the date of signature hereof and as amended or
re-enacted from time to time;
1.4 if any provision in a definition is a substantive
provision conferring rights or imposing obligations on
any party, notwithstanding that it is only in the
definition clause, effect shall be given to it as if it
were a substantive provision in the body of the
agreement;
1.5 when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on
a Saturday, Sunday or public holiday, in which case the
last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.6 where figures are referred to in numerals and in words,
if there is any conflict between the two, the words
shall prevail;
1.7 expressions defined in this agreement shall bear the
same meanings in schedules or annexures to this
agreement which do not themselves contain their own
definitions;
1.8 reference to day/s, month/s or year/s shall be construed
as Gregorian calendar day/s month/s or year/s;
<PAGE>
1.9 the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation eiusdem generis) shall,
if any of the parties to this agreement is subject to
the law of any other jurisdiction, be construed as
including any equivalent or analogous proceedings under
the law of such defined jurisdiction;
1.10 where any term is defined within the context of any
particular clause in this agreement, the term so
defined, unless it is clear from the clause in question
that the term so defined has limited application to the
relevant clause, shall bear the meaning ascribed to it
for all purposes in terms of this agreement,
notwithstanding that that term has not been defined in
this interpretation clause;
1.11 the expiration for termination of this agreement shall
not affect such of the provisions of this agreement as
expressly provide that they will operate after any such
expiration or termination or which of necessity must
continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves
do not expressly provide for this;
1.12 the rule of construction that the contract shall be
interpreted against the party responsible for the
drafting or preparation of the agreement, shall not
apply.
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES
2.1 The company appoints the employee as Alois Koch,
Director Digital Printing of Virtual Colour Group.
The employee accepts such appointment;
<PAGE>
3. PERIOD OF EMPLOYMENT
The employee's employment shall commence on 1st February 2000 until
31st January 2002 hereafter it shall be terminable on not less than
1 (one) calendar months' written notice given by the company or the
employee to the other, provided that:
3.1. the company shall be entitled to terminate the
employee's employment summarily (or on such other basis
as it considers appropriate) if the employee:
3.1.1. is guilty of conduct justifying a summary
dismissal according to the common law;
and/or
3.1.2. is guilty of conduct which is likely to
bring himself or the company into disrepute
or is convicted of an offence involving
dishonesty; and or
3.1.3. commits a breach of any of the terms of this
agreement; and/or
3.1.4. becomes incapacitated, which shall mean
that --
3.1.4.1. he is precluded in terms of any
statute from holding office as a
director; or
3.1.4.2. he has suffered some illness or
disability which has precluded
him from providing his services
hereunder for a period in excess
of 28 (twenty eight) days in the
determination of which
intermittent returns to work or
service which do not constitute
a bona fide resumption of duties
shall be disregarded;
<PAGE>
Any termination in terms of this clause 3 will not be or
deemed to be unlawful, unfair or an unfair labour practice as
defined in the Act. To the extent that such termination may
otherwise have accorded the employee the right to seek
reinstatement by, or any other form of redress against the
company whether under the Act or otherwise, such right is
hereby waived by the employee.
4. EFFECT OF TERMINATION OF EMPLOYMENT
The termination of the employee's employment for any reason
whatsoever shall not affect the operation of any provisions of this
agreement to the extent to which they confer rights or impose
obligations upon the parties which are exercisable or enforceable
after the termination date, and such provisions shall to that extent
continue to be of full force and effect. The termination of the
employee's employment shall furthermore not prejudice any rights
which have accrued to the parties as at the termination date.
5. SUSPENSION OF EMPLOYMENT
If the company suspects that the employee is guilty of the conduct
referred to in clause 3.1 and/or clause 3.1.1, or any other conduct
which may, if proved, justify his dismissal, or has committed a
breach of any of the terms of this agreement, it may, pending a duly
constituted enquiry into the alleged conduct in question, but
without prejudice to its right of summary dismissal in terms of
clause 3.1 and without giving rise to any claim for damages or
otherwise against it, suspend the employee for a period not
exceeding 30 days during which the employee shall:
5.1. not be entitled to attend work at the premises of the
company;
5.2 be entitled to his normal salary.
6. DUTIES OF EMPLOYEE
The employee shall:
6.1 devote the whole of his time and attention during the
company's normal business hours, and such reasonable
amount of additional time as may be necessary on an
unpaid basis, having regard to the exigencies of the
business of the company, to the business and
<PAGE>
affairs of the company and shall not, before the
termination of this agreement or during any period after
such date in which he is employed by the company,
without the company's prior written consent, whether as
proprietor, partner, director, shareholder, member,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise, and whether for reward or not,
directly or indirectly be interested or engaged in or
concerned with or employed by any business, trade,
undertaking or concern:
6.1.1. other than that of the company; or
6.1.2. which competes with any business carried on
by the company,
the undertakings in clause 6.1.1. and 6.1.2. being
separate, provided that he shall not be deemed to have
breached his undertakings by reason of:
6.1.3. his having bona fide financial interest in
businesses, trades, undertakings or concerns
which do not directly or indirectly compete
with the company which have been disclosed
to the company in writing and/or after
disclosing his intention to do so to the
company in writing by accepting appointment
as a non-executive director of such
businesses, trades, undertaking or concerns
and devoting a reasonable amount of time to
such financial interest and directorships,
provided that no such interest of or
activities by the employee are prejudicial
to or adversely affect the performance of
his duties hereunder; and/or
6.1.4. his holding shares in any company the shares
of which are listed on a recognised stock
exchange if the shares owned by him and the
persons, companies and trusts referred to in
clause 11.3.4. do not in the aggregate
constitute more than 5% (five percent) of
any class of the issued share capital of
such company; and/or
6.1.5. he being an officer of or holding shares in
the company;
6.2. obey the orders and directions of the board, any
managing director and any properly authorised officer or
official of the company, shall carry out such functions
and duties as are from time to time assigned to him and
are consistent with his status and use his
<PAGE>
utmost endeavours to protect and promote the business
and interest of the company and to preserve its
reputation and goodwill;
6.3. not, during the operation of this agreement or
thereafter, regardless of the reason for termination of
his employment, use for his own benefit or for the
benefit of any other person or divulge or communicate to
any person or person's except to those of the officials
of the company whose province it is to know the same,
any of the company's secrets or any other information
which he may receive or obtain in relation to the
company's affairs or its customers or to the working of
any process or invention or to any marketing technique
which is carried on or used by the company;
6.4. be true and faithful to the company in all dealings and
transactions whatsoever relating to its business and
interests;
6.5. submit to the board or to any person nominated by it,
such information and reports as may be required of him
in connection with the performance of his duties and the
business of the company;
6.6. not, at any time during the operation of this agreement,
directly or indirectly, act in the manner referred to in
clause 11.3. and 11.4. or attempt to do so;
6.7. disclose to the board forthwith all acts and omissions
known to him of any other employee of the company which
constitute a breach of his or her obligations to the
company from whatsoever cause arising;
7. REMUNERATION
7.1. As remuneration for his services hereunder the company
shall pay the employee a salary at the rate of R20,000
(Twenty Thousand Rand) per month which shall be payable
on the last business day of each month and which shall
be subject to review, but not reduction, by the company
from time to time. The package may be structured in such
a manner as may lawfully achieve the optimum for
efficiency for the benefit of the employee.
<PAGE>
7.2. The company shall pay the employee a performance-based
bonus at the end of each financial year in accordance
with the criteria to be agreed upon between the company
and the employee within a reasonable period after the
commencement of his employment, and such bonus shall be
based upon the performance of The Virtual Colour Group.
8. INVENTIONS, DISCOVERIES AND COPYRIGHT
8.1. Any discovery or invention or secret process or
improvement in procedure made or discovered by the
employee in the course and scope of his employment by
the company in connection with or in any way affecting
or relating to the business of the company or capable of
being used or adapted for use by the company or in
connection with its business shall be disclosed to the
company any shall belong to and be the absolute property
of the company.
8.2. The employee shall, if and when required by the company,
apply or join with the company at its expense in
applying for Letters Patent or other equivalent
protection in the Republic of South Africa or in any
other part of the world for such discovery, invention,
process or improvement and shall at the company's
expense execute all instruments and do all things
necessary for vesting the said Letters Patent or other
equivalent protection in the name of the company as sole
beneficial owner or in the name of such other person as
the company may nominate.
8.3. Insofar as may be necessary the employee assigns to the
company the copyright in all present and future works
eligible for copyright, including, without limitation,
literary or artistic works or software programmes of
which he may be the author, which works were or are
created, compiled, devised or brought into being during
the course and scope of the employment by the company.
No consideration shall be payable by the company to the
employee in respect of this assignment.
8.4. All reports, manuals, financial statements, budgets,
indices, research papers, letters or other similar
documents (the nature of which is not limited by the
specific reference to the foregoing items) which are
created, compiled or devised or brought into being by
the employee or come into the employee's possession
during the course and scope of his
<PAGE>
employment by the company and all copies thereof will be
the property of the company and, upon the termination
date or earlier if required by the company, such
documents and all copies shall be returned to the
company.
9. LEAVE
The employee shall be entitled to 20 (twenty) days leave on full pay
in respect of each 12 (twelve) months' cycle of employment, to be
taken at such time or times as are convenient to the company. Leave
not taken when it is due otherwise than at the instance of the
company may not be accumulated.
10. OUT OF POCKET EXPENSES
The company shall refund to the employee the out-of-pocket expenses
incurred by him on behalf of the company which are substantiated by
vouchers therefor and which have been approved by the board or are
incurred in accordance with the principles determined by it from
time to rime.
11. RESTRAINT OF TRADE
11.1. It is agreed that in the course of his duties the
employee:
11.1.1. has acquired and/or will acquire
considerable know-how in and will learn of
the company's techniques and/or business
methods relating to the provision of and
other related services;
11.1.2 will have access to names of clients and
suppliers with whom the company does
business whether embodied in written form or
otherwise;
11.1.3. will have the opportunity of forging
personal links with clients and suppliers of
the company; and
11.1.4. generally will have the opportunity of
learning and acquiring the trade secrets,
business connections and other confidential
information appertaining to the company's
business.
<PAGE>
11.2. It is acknowledged that the only effective and
reasonable manner in which the company's rights in
respect of its business secrets and client connection
can be protected is the restraint imposed upon the
employee in terms of this clause 11, subject to the
payment by the company to the employee of the amount of
R168,000 (One Hundred and Sixty Eight Rand) which said
amount shall be payable by the company to the employee
in 2 (two) equal annual payments of R84,000 (Eighty Four
Thousand Rand) each, the first whereof shall be due and
payable by the company to the employee on 1st February
2001.
11.3. Without derogating from the employee's obligations under
clause 6.1. the employee shall not, for 2 (two) years
from the termination date, whether as proprietor,
partner, director, shareholder, member, employee,
consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise and whether for reward or not,
directly or indirectly:
11.3.1. carry on; or
11.3.2. be interested or engaged in or concerned
with or employed by any company, close
corporation, firm, undertaking or concern
which carries on,
In any of the prescribed areas any business which sells
prescribed goods or renders prescribed services or
competing services or in the course of which prescribed
goods are sold or prescribed services or competing
services are rendered; provided that the employee shall
not be deemed to have breached his undertaking by reason
of his:
11.3.3. holding share in the company; or
11.3.4. holding shares in any company the shares of
which are listed on a recognised stock
exchange if the shares owned by -
<PAGE>
11.3.4.1. him;
1.3.4.2. his ascendants and descendants;
11.3.4.3. his spouse;
11.3.4.4. any person related to him or his
spouse within the third degree
of consanguinity;
11.3.4.5. any trust created primarily for
the benefit of one or more of
the persons referred to in
clauses 11.3.4.1. to 11.3.4.5.;
and
11.3.4.6. any company effectively
controlled by one or more of the
persons and trusts referred to
in clauses 11.3.4.1. to
11.3.4.5.
do not in the aggregate constitute more than
5% (five percent) of any class of the issued
share capital of such company.
11.4. The employee undertakes that neither he nor any company,
close corporation, firm, undertaking or concern in or by
which he is directly or indirectly interested of
employed will within 2 (two) years after the termination
date and whether for reward or not, directly or
indirectly --
11.4.1. encourage or entice or incite or persuade or
induce any other employee of the company,
who was employed whilst the employee was
employed by the company and who is engaged
or participates in the sale or other
marketing by the company of the prescribed
goods, or in a material respect in the
rendering or in the marketing of the
prescribed services, to terminate his
employment by the company; or
11.4.2. furnish any information or advice to any
employee to whom clause 11.4.1. applies or
to any prospective employer of such employee
or use any other means which are directly or
indirectly designed, or in the
<PAGE>
ordinary course of events calculated, to
result in any such employee terminating his
employment by the company and/or becoming
employed by or directly or indirectly in any
way interested in or associated with any
other company, close corporation, firm,
undertaking or concern; or
11.4.3. furnish any information or advice (whether
oral or written) to any prescribed client
that the employee intends to or will
(whether as proprietor, partner, director,
shareholder, member employee, consultant,
contractor, financier, agent, representative
or otherwise) directly or indirectly, be
interested or engaged in or concerned with
or employed by any company, close
corporation, firm, undertaking or concern
carried on in any of the prescribed areas
which sells prescribed goods or competing
goods or renders prescribed services or
competing services or in the course of which
prescribed goods or competing goods are sold
or prescribed services or competing services
are rendered after the expiry of 2 (two)
years after the termination date; or
11.4.4. furnish any information or advice (whether
oral or written) to any prescribed client or
use any other means or take any other action
which is directly or indirectly designed, or
in the ordinary course of events calculated,
to result in any such prescribed client
terminating its associating with the company
and/or transferring its business to or
purchasing any prescribed goods or competing
goods or accepting the rendering of any
prescribed services or competing services
from any person other than the company, or
attempt to do so.
11.5. Without derogating from the obligations imposed by this
clause 11 the employee undertakes that neither he nor
any company, firm, undertaking or concern in or by which
he is directly or indirectly interested, engaged,
concerned or employed will for a period of 2 (two) years
after the termination date directly or indirectly,
whether as proprietor, partner, director, shareholder,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise in any part of the prescribed areas
and whether for reward or not:
<PAGE>
11.5.1. solicit orders from prescribed clients for
the prescribed services or any competing
services;
11.5.2. canvass business in respect of the
prescribed services from prescribed clients;
11.5.3. sell or otherwise supply to any prescribed
client;
11.5.4. render any competing service to any
prescribed client;
11.5.5. purchase from any prescribed supplier or
accept the rendering of any prescribed
services from it;
11.5.6. solicit appointment as a distributor,
licensee, agent or representative of any
prescribed supplier in respect of prescribed
services'
including on behalf of or for the benefit of a
prescribed supplier.
11.6. Each of the undertakings set out in this clause 11
(including those appearing in a single clause) is
severable inter alia as to:
11.6.1. nature of interest, act or activity;
11.6.2. the categories of persons falling within the
definition of prescribed clients;
11.6.3. the categories of goods falling within the
definition of he competing goods;
11.6.4. the categories of services falling within
the definition of the prescribed services
and competing services;
11.6.5. the categories of persons falling within the
definition of prescribed supplier;
<PAGE>
11.6.6. the individual magisterial districts and
areas which are defined as the prescribed
areas
and are acknowledged to be reasonably required for the
protection of the Company and are generally fair an
reasonable.
11.7. The employee acknowledges that the Company will suffer
financial harm and loss if he breaches any provision of
this clause 11. Upon the breach of any of the provisions
of clause 11.3. the company shall be entitled to enforce
the restraint in question and, in addition or
alternatively thereto, as the company may elect, be
entitled to claim and recover from the employee the sum
of ten thousand rand per month during the period of the
breach, and to the extent that it is not prohibited from
doing so by any law, to set off its claim against any
amount due by it to the employee (and he authorises the
company to do so) and to recover its claim from any
benefits due to the employee from any pension funds due
to the employee and, to the extent not precluded by law,
he cedes his right to those benefits to the company
accordingly.
12. GENERAL
12.1. No remedy granted by this agreement shall exclude any
other remedy available at law.
12.2. No amendment of this agreement or any consensual
cancellation thereof or any part thereof shall be
binding on the parties unless reduced to a written
document and signed by them.
12.3. If any of the terms of this agreement, such as the rate
of remuneration payable to the employee, are varied, the
other terms shall, unless otherwise agreed in writing,
remain of full force and effect.
12.4. No relaxation or indulgence which the company may show
to the employee shall in any way prejudice or be deemed
to be a waiver of its rights hereunder nor shall such
relaxation or indulgence preclude or estop the company
from exercising its rights in terms of this agreement in
respect of any further breach.
<PAGE>
12.5. This agreement constitutes the whole agreement between
the parties and no warranties or representation whether
express or implied have been given or made by the
company to the employee.
12.6. Subject to the provisions of clause 3 the employee's
employment by the company shall be governed by the
provisions of any applicable agreement or determination
concluded in terms of the Act and/or the Wage Act of
1957, and/or the provisions of any applicable law.
12.7. Any term of this agreement which conflicts with the
provisions of any agreement or determination referred to
in this agreement, or any applicable law shall be
treated as pro non scripto and shall be severed from the
balance of this agreement, which shall continue to be of
full force and effect.
12.8. The company shall be entitled to cede and delegate all
or any of its rights and obligations under this
agreement to the successor in title of the undertakings
of the company or any member thereof, whether such
cession and delegation takes place before or after the
termination date.
<PAGE>
13. DOMICILIUM CITANDI ET EXECUTANDI
13.1. The parties choose as their domicilia citandi et
executandi for all purposes under this agreement,
whether in respect of court process, notices or other
documents or communications of whatsoever nature, the
following addresses:
13.1.1. The company: Colorsmart.Com Inc
Physical: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Postal: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Telefax: 9091 615 612 4005
13.1.2. The employee: Virtual Colour
Physical: 2nd Floor Castle Mews
16A New Market Street,
WOODSTOCK, 8001
Postal: P 0 Box 1212,
WOODSTOCK, 7915
Telefax: (021) 462 1660
13.2. Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent
to give notice by telefax.
13.3. Either party may by notice to the other party change the
physical address chosen as its domicilium citandi et
executandi to another physical address where postal
delivery occurs in South Africa or its postal address or
its telefax number, provided that the change shall
become effective on the 7th business day from the deemed
receipt of the notice by the other party.
13.4. Any notice to a party:
13.4.1. sent by prepaid registered post (by airmail
if appropriate) in a correctly addressed
envelope to it at an address chosen as its
domicilium citandi et executandi to which
post is delivered shall be deemed to have
been
<PAGE>
received on the 7th business day after
posting (unless the contrary is proved);
13.4.2. delivered by hand to a responsible person
during ordinary business hours at the
physical address chosen as its domicilum
citandi et executandi shall be deemed to
have been received on the day of delivery;
or
13.4.3. sent by telefax to its chosen telefax number
stipulated in clause 13.1., shall be deemed
to have been received on the date of
despatch (unless the contrary is proved).
13.5. Notwithstanding anything to the contrary herein
contained a written notice or communication actually
received by a party shall be an adequate written notice
or communication to it notwithstanding that it was not
sent to or delivered at its chosen domicilium citandi et
executandi.
14. RESIGNATION
14.1. If the employee is a Director of the company on
termination date the employee will ipso facto resign as
a Director of the company.
14.2. The employee hereby irrevocably appoints the then
auditors of the company as his agent in dem suam to sign
all such documents and to do all such acts as may be
necessary to effect and implement such resignation.
15. COSTS
The costs of and incidental to the drawing of this agreement and the
stamp duty hereon shall be paid by the company.
<PAGE>
16. SMOKING POLICY
It is the policy of the company not to permit smoking in the
premises from which the company conducts its business.
17. SAFETY AND HEALTH
The employee acknowledges that he is aware of the dangers to his
safety and health attached to the work be has to perform, any
article or substance he has to produce, process, use, handle, store
or transport and any plant and machinery, which he is required or
permitted to use, and also with the precautionary measures to be
taken and observed with respect of those dangers.
18. COUNTERPARTS
This agreement may be entered into in any number of counterparts and
by the parties to this agreement on separate counterparts, each of
which when so executed and delivered shall be an original, but all
the counterparts shall together constitute one and the same
instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. /s/ [ILLEGIBLE] For:
-----------------
18 November 99 Cape Town 2. /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- -------------- ----------- ----------------- ----------------------
1. /s/ Roger Finchum, Jr.
----------------------
Colorsmart.com Inc.
18 November 99 Madison, TN 2. /s/ S. Finchum /s/ Roger D. Finchum Sr.
- -------------- ----------- ----------------- ------------------------
CEO
<PAGE>
Exhibit 2.12
AGREEMENT
entered into between
VIRTUAL SUPPORT CC
(Registration No. CK96/38134/23)
and
COLORSMART.com, Inc. USA
(Registration No. 95/08558/07)
and
KEITH HOWARD REDMAN
and
HERBERT MARIA TRISCHLER
and
ALOIS KOCH
and
AARDT DAVIDTZ
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ................................. 2
2. CONDITIONS PRECEDENT ........................................... 7
3. SALE OF THE BUSINESS ........................................... 8
4. PURCHASE PRICE ................................................. 9
5. STOCKTAKING .................................................... 11
6. EMPLOYEES ...................................................... 13
7. SECTION 34 ADVERTISEMENT ....................................... 15
8. DELIVERY ....................................................... 15
9. THE NAME ....................................................... 18
10. WARRANTIES ..................................................... 19
11. INDEMNITY ...................................................... 24
12. RESTRAINT ...................................................... 25
13. AGENT'S COMMISSION ............................................. 29
14. BREACH ......................................................... 29
15. DOMICILIUM CITANDI ET EXECUTANDI ............................... 30
16. WHOLE AGREEMENT ................................................ 33
17. COSTS .......................................................... 34
18. VALUE-ADDED TAX ................................................ 35
19. JOINT AND SEVERAL LIABILITY OF THE SELLER ...................... 35
21. EXECUTION IN COUNTERPARTS ...................................... 35
ANNEXURE A - DESIGNATED FIXED ASSETS ........................................ 1
ANNEXURE B - CONTRACTS (INCLUDING LIST OF EMPLOYEES) ........................ 1
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<PAGE>
Page 2
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. words importing -
1.1.1. any one gender include the other two genders;
1.1.2. the singular include the plural and vice versa;
and
1.1.3. natural persons include created entities
(corporate or unincorporate) and vice versa;
1.2. the following terms shall have the meanings assigned to them
hereunder and cognate expressions shall have corresponding
meanings, namely -
1.2.1. "Act" means the Companies Act, 1973;
1.2.2. "business" means the business of authorising
service and distributing agent for Apple computers
support and spares services currently conducted by
Virtual Support CC;
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<PAGE>
Page 3
1.2.3. "Colorsmart.Com" means a corporation incorporated
in terms of the laws of the State of Nevada with
its principal place of business at 537 Myart
Drive, Madison Tennessee 37115 USA;
1.2.4. "condition precedent" means the conditions
precedent in clause 2;
1.2.5. "designated fixed assets" means those fixed assets
reflected in Annexure B hereto;
1.2.6. "designated liabilities" means those liabilities
of the business owing at the effective date to
trade and hire purchase and lease creditors of the
business as reflected in the effective financial
statements but excluding:
1.2.6.1. any product liability, warranty or
implied guarantee in respect of goods
sold and delivered prior to the
effective date but in respect of
liabilities relating to products sold
and delivered during the period 1 April
1999 to the effective date, such
liabilities shall be taken into account
as liabilities being acquired as part of
the designated liabilities in an amount
not exceeding the nett profits earned
during the period 1 April 1999 to the
effective date from the sale of products
during that period;
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<PAGE>
Page 4
1.2.6.2. any contingent liabilities at the
effective date;
1.2.6.3. any liability of the seller in respect
of any unfunded deficit of its provident
fund for its employees; which shall
remain the sole responsibility of the
seller
1.2.7. "effective date" means the close of business on 31
January 2000;
1.2.8. "fixed assets" means all the fixed assets used in
connection with and comprising part of the
business including at least the designated fixed
assets;
1.2.9. "implementation date" means 31 January 2000;
1.2.10. "name" means Virtual Support CC and all such other
names under which the business is or has been
conducted;
1.2.11. "NASDAQ" means the NASDAQ Stock Market in the
United States of America;
1.2.12. "premises" means the leased premises at which the
business is carried on, being 2nd Floor, Castle
Mews, 16A New Market Street, Cape Town 8001;
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<PAGE>
Page 5
1.2.13. "prime rate" means the publicly quoted basic rate
per annum ruling from time to time at which Nedcor
Bank lends on overdraft;
1.2.14. "purchaser" means COLORSMART.com, Inc. USA a
company with limited liability duly incorporated
in terms of the company laws of South Africa with
registration number 95/08558/07, or its nominee;
1.2.15. "seller" means Virtual Support CC a close
corporation duly incorporated in terms of the
Close Corporation Act of South Africa with
registration number CK96/38134/23;
1.2.16. "stock" means finished stock, work-in-progress and
raw materials on hand in respect of the business
as at the effective date including
stock-in-transit and any slow moving stock, but
excluding damaged or unsaleable stock;
1.3. any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date of
the last signature of this agreement;
1.4. any reference to an enactment is to that enactment as at the
date of signature hereof and as amended or re-enacted from
time to time;
1.5. if any provision in a definition is a substantive provision
conferring rights or imposing obligations on any party,
notwithstanding that it is only in the
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definition clause, effect shall be given to it as if it were
a substantive provision in the body of the agreement;
1.6. when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on a
Saturday, Sunday or public holiday, in which case the last
day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.7. where figures are referred to in numerals and in words, if
there is any conflict between the two, the words shall
prevail;
1.8. expressions defined in this agreement shall bear the same
meanings in schedules or annexures to this agreement which
do not themselves contain their own definitions;
1.9. reference to day/s, month/s or year/s shall be construed as
Gregorian calendar day/s, month/s or year/s;
1.10. the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation eiusdem generis) shall, if
any of the parties to this agreement is subject to the law
of any other jurisdiction, be construed as including any
equivalent or analogous proceedings under the law of such
defined jurisdiction;
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1.11. where any term is defined within the context of any
particular clause in this agreement, the term so defined,
unless it is clear from the clause in question that the term
so defined has limited application to the relevant clause,
shall bear the meaning ascribed to it for all purposes in
terms of this agreement, notwithstanding that that term has
not been defined in this interpretation clause;
1.12. the expiration or termination of this agreement shall not
affect such of the provisions of this agreement as expressly
provide that they will operate after any such expiration or
termination or which of necessity must continue to have
effect after such expiration or termination, notwithstanding
that the clauses themselves do not expressly provide for
this;
1.13. the rule of construction that the contract shall be
interpreted against the party responsible for the drafting
or preparation of the agreement, shall not apply.
2. CONDITIONS PRECEDENT
2.1. This agreement, is subject to the suspensive conditions,
contained in this clause 2.1 namely:
2.1.1. the conclusion of a management agreement between
the purchaser and A Davidtz prior to 31 January
2000;
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2.1.2. Approval of the members of the seller in terms of
s46(b)(ii) of the Close Corporation Act.
2.1.3. Exchange Control approval from the South African
Reserve Bank.
2.1.4. The listing of Colorsmart.Com in the United States
of America on the NASDAQ by 31 January 2000.
2.2. Forthwith after the signature of this agreement, the parties
shall use their best endeavours to procure the fulfilment of
the conditions referred to in this clause 2.1.
3. SALE OF THE BUSINESS
The seller sells, transfers and cedes to the purchaser as an
indivisible whole and as a going concern with effect from the
effective date from which date the risk in and benefit of the business
shall vest in the purchaser, the business comprising -
3.1. the goodwill thereof;
3.2. the exclusive right to use the name;
3.3. the fixed assets;
3.4. the stock;
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3.5. deposits made by the seller in respect of the business;
3.6. the debtors; (any debtors not recovered within 90 (ninety)
days from the effective date will be refunded by the seller
to the purchaser);
3.7. the creditors;
3.8. the bank overdrafts and bank accounts;
3.9. all contracts of the business concluded in the ordinary
course of business, including orders relating to stock
undelivered as at the effective date, the purchaser
acknowledging having been given copies of the contracts
listed in Annexure B,
but excluding any debts and any liabilities other than any liabilities
contemplated in clause 8.1.1 in respect of the contracts and the name.
4. PURCHASE PRICE
4.1. The purchase price of the business is based on the net asset
value at 28 February 1999 and is the sum R200 000,00 (two
hundred thousand rand) allocated as follows -
4.1.1. the fixed assets R50 000,00 (fifty thousand
rand);
4.1.2. the stock, R5 000,00 (five thousand rand);
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4.1.3. the name, R12 425,00 (twelve thousand four hundred
and twenty five rand);
4.1.4. goodwill, R109 900,00 (one hundred and nine
thousand nine hundred rand).
4.1.5. debtors, R45 000,00; (forty five thousand rand);
4.1.6. cash at bank and on deposit, R25 000,00 (twenty
five thousand rand);
4.1.7. creditors, R34 900,00 (thirty four thousand nine
hundred rand);
4.1.8. bank overdraft, R0,00 (Nil);
4.2. Any differences in net asset value at the effective date
will be reconciled with the values in clause 4.1. Any
shortfall will be deducted from the purchase price, and any
increase will be added to the purchase price.
4.3. The purchase price shall be paid as follows -
4.3.1. by the purchaser discharging the designated
liabilities on due date, and the purchaser
indemnifies the seller against the purchaser's
failure to do so on due date;
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4.3.2. by the purchaser paying, on the implementation
date against the delivery of the business to the
seller, the sum of R200 000,00 (two hundred
thousand rand);
4.4. All payments to be effected by the purchaser to the seller
in terms of this agreement shall be made at Cape Town.
5. STOCKTAKING
5.1. The parties shall cause the stock to be taken in accordance
with the following provisions -
5.1.1. the stocktaking shall take place during the course
of the 48 (forty eight) hours prior to the
effective date, that being 31 January 2000;
5.1.2. each of the parties' auditors shall be present or
represented at the stocktaking;
5.1.3. after the stocktaking has been completed,
schedules reflecting the stocktaking shall be
prepared and initialled by the parties;
5.1.4. the stock reflected in the schedules referred to
in clause 5.1.3 shall be valued -
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5.1.4.1. in the case of undamaged finished stock
which is not slow moving, at the lower
of the cost thereof to the seller and
net realisable value;
5.1.4.2. in the case of undamaged work in
progress which is not slow moving, at
the cost thereof to the seller;
5.1.4.3. in the case of slow moving finished
stock and slow moving work in progress,
at a discount of 20% (twenty per cent)
on the nett realisable value;
5.1.4.4. in the case of undamaged raw materials,
at the cost thereof to the seller.
5.2. For the purpose of this clause -
5.2.1. "slow moving" means finished stock or work in
progress in respect of which firm orders have been
placed the implementation date for which is more
than 1 (one) month after the effective date or the
date of completion of the work in progress, or in
respect of which no firm orders have been placed
at all as at the effective date;
5.2.2. "cost to the seller" -
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5.2.2.1. means the price paid by the seller to
the ;
5.2.2.2. shall take into account all the
discounts including settlement discounts
granted to the seller.
5.3. Should there be any dispute in regard to the value of any
item of stock or in regard to whether any item of the stock
is damaged or slow moving, the dispute shall be determined
by the respective auditors of the purchaser and the seller,
acting jointly and, failing agreement between such auditors,
by independent auditors appointed by the respective auditors
of the purchaser and the seller (or failing agreement
between them, by the Chairman for the time being of the Cape
Society of Chartered Accountants (or the successor body
thereto)). Such auditors in resolving the dispute shall act
as experts and not as arbitrators and their decision shall
be final and binding on the parties and their charges shall
be paid by the purchaser and the seller in equal shares.
6. EMPLOYEES
6.1. The parties agree that section 197(2) of the Labour
Relations Act, 1995 is applicable to the seller in terms of
this agreement and that accordingly the employment of each
employee of the seller employed in regard to the business,
will continue in force with the purchaser as the "new
employer". The parties agree that no agreements contemplated
in terms of section 197(3) of that Act will be concluded.
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6.2. The employees contemplated in clause 6.1 are members of the
seller's provident fund. The purchaser shall be entitled to
take over the seller's fund which relates solely to the
business if it so desires and to operate such fund as its
own fund, with effect from the effective date. The seller
shall furnish the purchaser with a certificate from the
actuaries of the fund as to the position of the fund at the
effective date. The seller undertakes that the actuaries of
the seller's provident fund will, as soon as is reasonably
possible, establish the value of the accrued liabilities of
the seller's provident fund in respect of the employees in
question as at the effective date. The amount of the
liabilities shall be expressed as a proportion of the total
liabilities of the seller's provident fund as at the
effective date and that proportion of the assets, adjusted
to account for income and expenditure from the effective
date to the date of transfer, shall be transferred to the
purchaser's provident fund. The seller warrants that the
said assets shall cover the said liabilities. The bases used
by the actuaries of the provident fund(s) for the valuation
of liabilities and assets in terms hereof shall be agreed
with an actuary appointed by the purchaser or, failing such
agreement, the said bases shall be determined by an actuary
appointed by the President for the time being of the
Actuarial Society of South Africa, such appointee to act as
an expert and not as an arbitrator and his decision to be
final and binding on the parties including any decision as
to liability for his costs.
6.3. The purchaser undertakes to procure that the employees
contemplated in clause 6.1 who are members of the seller's
provident fund shall be transferred to a provident fund on
the basis that such employees shall
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only acquire such share in the new provident fund as shall
be available using the assets to be transferred from the
seller's provident fund as contemplated below, and to the
extent that such employees are retrenched by the purchaser
within 30 (thirty) days, the purchaser shall be obliged to
pay to any such employees their pro rata share of such fund
as at the date of retrenchment determined mutatis mutandis
in accordance with clause 6.2.
6.4. The seller shall pay the purchaser an amount equivalent to
the accrued leave pay due to any employee whose employment
continues in force with the purchaser after the effective
date.
7. SECTION 34 ADVERTISEMENT
The seller shall be obliged to advertise the transaction in terms of
section 34 of the Insolvency Act, 1936.
8. DELIVERY
8.1. The business shall be delivered to the purchaser on the
implementation date (against payment of the relevant portion
of the purchase price) from which date the purchaser shall
take legal possession of the business. Delivery shall
include -
8.1.1. The cession by the seller to the purchaser of the
debts subject to the resolutive condition that
such debt will be fully recoverable (save to the
extent, in respect of all the debts in aggregate,
of the provision allowed for any effective
financial
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statements) within 30 (thirty) days from the
effective date the last day of the month during
which the debts in question were incurred. Should
any of the debts not have been recovered by the
purchaser within the period specified herein the
sale of the debts shall be deemed ipso facto to be
of no force and with effect from the effective
date and the purchase price payable in terms of
this agreement shall be adjusted accordingly. The
seller shall repay to the purchaser an amount
equal to the amount of such irrecoverable debt
less the provision as reflected in the effective
financial statements, together with interest
thereon at the prime rate compounded monthly in
arrear from the implementation date to date of
payment. The amount so due by the seller to the
purchaser shall be paid against cession by the
purchaser to the seller of such irrecoverable
debt;
8.1.2. the assignment (with effect from the effective
date) of the seller's rights and prospective
obligations in respect of the contracts
contemplated in clause 3.9, to the extent that the
other parties to such contracts consent thereto.
The seller undertakes to use its best endeavours
to procure the assignment of the contracts to the
purchaser. To the extent that the other parties to
the contracts do not consent to such assignment -
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8.1.2.1. the purchaser shall be entitled as
between it and the seller to the benefit
of and shall bear the risk of such
contracts from the implementation date
and the seller shall bear the risk and
be entitled to the benefit of such
contracts prior to the implementation
date;
8.1.2.2. the seller shall be obliged to discharge
any obligations under the contracts in
respect of the period from the effective
date to the implementation date;
8.1.2.3. the purchaser shall be obliged at its
cost but in the seller's name to
discharge the seller's obligations under
the contracts after the implementation
date;
8.1.2.4. the parties respectively indemnify each
other against any loss of any nature
which may arise as a result of the other
of them failing to comply with their
obligations hereunder.
8.1.3. the handing over to the purchaser on loan for a
period of 120 (one hundred and twenty) days of the
seller's documents, books and records and all
information relating to the business subject to
the auditors being given access as necessary. The
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purchaser shall be entitled to make copies of all
such documents, books and records. After the
expiry of the 120 (one hundred and twenty) day
period, the purchaser shall have reasonable access
thereto;
8.1.4. the physical delivery of all assets forming part
of the business to the purchaser by handing them
to the purchaser at the premises;
8.1.5. insofar as motor vehicles are concerned, all
necessary licence papers and transfer documents,
but on the basis that the purchaser shall obtain
roadworthy certificates if necessary;
8.1.6. the cession of any restraint of trade given to the
seller in respect of the business, to the
purchaser.
8.2. The seller shall account to the purchaser for any receipts
of the business paid directly to the seller after the
effective date in respect of transactions that were entered
into after the effective date.
9. THE NAME
The seller shall be obliged to procure that within 30 (thirty) days of
signature hereof, its name is changed, so as to enable the purchaser
to register such name as a defensive name in its favour.
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10. WARRANTIES
10.1. The seller warrants that -
10.1.1. the fixed assets and the name are beneficially
owned by the seller which will be able to give
free and unencumbered title thereof as well as of
any current assets sold, to the purchaser on the
implementation date;
10.1.2. the designated fixed assets will be delivered to
the purchaser on the implementation date without
any of such assets missing;
10.1.3. there will not be fixed assets in addition to the
designated assets, the value of which is more than
R1 000,00 (one thousand rand);
10.1.4. none of the liabilities imposed on the seller
under the contracts forming part of the sale will
be payable in or linked to foreign currencies;
10.1.5. between date of signature and the implementation
date, the seller will not have entered into any
transaction or acquired or disposed of any assets
or incurred any liabilities, otherwise than in the
normal, ordinary and regular course of business,
nor will it have increased the salaries of
employees during that period other than normal or
merit increases determined in the
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normal course and no events will have taken place
which have or will have had the effect of
impairing the goodwill of the business;
10.1.6. all products which have been manufactured and/or
sold by the seller in respect of the business have
been manufactured and/or sold in compliance with
the requirements of all competent authorities, if
any;
10.1.7. the seller is not in default of any material
obligation affecting the business, whether under
the contracts contemplated in clause 3.9 or under
any legislation or (without limitation eiusdem
generis) otherwise;
10.1.8. the books, accounts and records of the seller do
and will until the implementation date continue to
accurately reflect in accordance with generally
accepted accounting principles and practice all of
the transactions entered into by the seller or to
which it is a party in respect of the business;
10.1.9. the business will not have generated a loss
between the period 1 June 1999 to the
implementation date;
10.1.10. the seller has disclosed to the purchaser all
facts and circumstances material to this
transaction and which are or
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would be material to an independent purchaser of
the business;
10.1.11. no person who has any claim in connection with the
business, has instituted proceedings in a division
of the High Court having jurisdiction in the
district in which the business is carried on or in
the Magistrates' Court of that district nor is the
seller aware of any circumstances which may give
rise thereto prior to the implementation date;
10.1.12. the copies of the contracts listed in Annexure B
which have been furnished to the purchaser fully
and correctly reflect all the terms and conditions
thereof and have not been amended in any respects
and all such contracts are of full force and
effect according to their tenor;
10.1.13. the seller will have complied with all its
obligations as tenant under leases in respect of
the premises and will have no unfulfilled
obligations whether in respect of restoration or
repair of such property or otherwise;
10.1.14. the seller is not aware of any facts or
circumstances which could result in the licences,
authorities or consents in respect of the premises
and the business not being renewed from time to
time;
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10.1.15. to the best of the seller's knowledge and belief,
the purchaser will not be required to effect any
repairs or alterations or additions to the
premises as a pre-requisite to the granting of any
necessary trading licences, authorities or
consents;
10.1.16. all general sales tax or value added tax owing to
the Department of Inland Revenue as at the
effective date in respect of the business will
have been paid in full;
10.1.17. all fixtures, fittings, furniture, plant and
equipment and the other items listed on Annexure A
as well as any other assets comprising the
business will be in good and proper working
condition and together with contracts contemplated
in clause 3.9 and the name are the only assets
required for the conduct of the business;
10.1.18. it has not sold or otherwise disposed of or
encumbered any of the rights attaching to the name
(nor purported nor agreed to do so) to any person
other than the purchaser nor has it granted any
right, licence, option or privilege with respect
thereto nor encumbered them in any way;
10.1.19. to the best of the seller's knowledge and belief
the use of the name does not infringe nor will it
infringe any rights of any third party;
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10.1.20. no other person has the right to exploit the
rights attaching to the name and to the best of
the seller's knowledge and belief there is nothing
which will preclude the purchaser from exploiting
such rights at any time;
10.1.21. no person save as contemplated in this agreement,
has nor will on the effective date have any right
to participate in any of the revenues or profits
generated pursuant to the exploitation of the name
acquired in terms hereof;
10.1.22. to the best of the seller's knowledge and belief
the use of the name by the purchaser will be
unimpeachable by any third party;
10.1.23. to the best of the seller's knowledge and belief
there is no infringement or suspected infringement
of the rights to the name;
10.1.24. between the effective date and the date of
signature hereof, the seller will not have done
anything which could prejudice the rights to the
name in any way whatsoever;
10.1.25. the profits generated by the business in the 3
(three) years preceding the effective date shall
not differ from each other by more than 20%
(twenty per cent);
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10.2. The seller warrants that no application for the winding up
of the seller has been presented at date of signature hereof
nor will any such application have been presented on the
implementation date.
10.3. Nothing herein contained shall relieve the seller from its
obligation to make those disclosures which it is in law
obliged to make.
10.4. No warranties or representations which are not set forth in
this agreement shall be binding on the seller and the
business is purchased on the basis that it is taken
voetstoots.
11. INDEMNITY
11.1. The seller indemnifies the purchaser against any claims,
which may be made in respect of finished products and
work-in-progress which are included in the stock forming
part of the business, provided that to the extent that any
claims are made against the purchaser in respect of any such
stock which was sold and delivered to third parties in the
course of the business during the period 1 January 1998 to
the implementation date, the seller's indemnity shall only
operate in respect of claims the amount of which exceeds the
amount of net profits earned by the business during the
period from 1 January 1998 to the implementation date in
respect of such products sold and delivered during such
period. Should any claims be made against the purchaser in
respect of such stock, the purchaser shall afford the seller
an opportunity to assist the purchaser to contest the claim
and, subject to an indemnity in a form acceptable to the
purchaser against costs being given by the seller, shall
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engage attorneys and counsel nominated by the seller for the
said purpose.
11.2. The seller indemnifies the purchaser against any losses or
damages of whatsoever nature which the purchaser may sustain
by reason of assuming all the obligations of the seller
under the contracts of employment with the employees of the
business, the cause of which arose prior to the effective
date.
12. RESTRAINT
12.1. In this clause, unless clearly inconsistent with the
context, words and phrases defined hereunder shall bear the
meanings assigned to them in this sub-clause -
12.1.1. "competitive activity" shall mean the business of
authorising service and distribution agent for
Apple computers;
12.1.2. "the restraint period" shall mean a period of 1
(one) year from the effective date;
12.1.3. "territory" shall mean the Republic of South
Africa;
12.2. The seller hereby undertakes to the purchaser that it will
not, either alone or jointly -
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12.2.1. during any part of the restraint period, whether
as proprietor, partner, director, shareholder,
employee, member, consultant, contractor,
financier, agent, representative, assistant or
otherwise, and whether for reward or not, directly
or indirectly, -
12.2.1.1. carry on in the territory any
undertaking; or
12.2.1.2. be interested or engaged in or concerned
with any company, close corporation,
firm, undertaking or concern operating
in any part of the territory; or
12.2.1.3. be employed by any company, close
corporation, firm, undertaking or
concern operating in any part of the
territory in a competitive activity;
12.2.2. during any part of the restraint period and
thereafter, to the extent that the same are
protected by law, disclose any trade secrets
and/or confidential information of the business
other than to persons connected with the business
and who are required to know such secrets or to
have such confidential information. Trade secrets
and confidential information shall include (but
not be limited to) all and whatever information
relating to the business and its suppliers and
customers which
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is not readily available in the ordinary course of
business to its competitors, provided that nothing
herein contained shall prohibit the seller from
entering into any joint ventures with persons who
are concerned in competitive activities in the
territory, provided that the subject matter of the
joint venture is not a competitive activity in the
territory.
12.3. The seller acknowledges and agrees that -
12.3.1. the restraints imposed upon it in terms of this
clause (interpreted initially in their widest
sense as provided in clause 12.3.3) are reasonable
as to subject matter, period and territorial
limitation and are not more than reasonably and
necessarily required by the purchaser to maintain
the goodwill of, and its legitimate business
interests in respect of the business;
12.3.2. the provisions of clauses 12.2 and 12.3.1 shall be
construed as imposing separate, severable and
independent restraints in respect of -
12.3.2.1. each of the months falling within the
restraint period;
12.3.2.2. each magisterial district falling within
the territory;
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12.3.2.3. each activity falling within the ambit
of a competitive activity;
12.3.2.4. each capacity in relation to a
competitive activity which the
covenantor is prohibited from holding in
terms of this clause;
12.3.3. the restraints set out in clause 12.2 shall
initially be given the widest possible
interpretation and no restraint or combination of
restraints shall be limited by reference to or
inference from any other restraint or combination
of restraints, provided however that the
invalidity or unenforceability of any one or
combination of restraints referred to in clause
12.2 (including the restraints interpreted in
their widest cumulative sense as aforesaid) shall
not affect the validity or enforceability of any
of the other restraints referred to in clause 12.2
or another combination of such restraints.
12.4. No restraints referred to in this clause shall apply to any
direct or indirect shareholding by the seller in any company
listed on a recognised stock exchange where the aggregate
direct and indirect holdings of the seller do not exceed 5%
(five per cent) of any class of that listed company's issued
share capital and the interest of the seller in that company
is solely that of a shareholder.
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12.5. The above restraints shall enure also in favour of the
successors in title of the business. The term "successors in
title" shall mean any person who -
12.5.1. acquires the goodwill of the business; or
12.5.2. becomes the beneficial owner of such goodwill
through his shareholding in any company; or
12.5.3. has acquired by cession the right to enforce the
restraints embodied herein.
12.6. The provisions of this clause 12 shall apply mutatis
mutandis to A Davidtz who undertake to be bound thereby, any
reference to the seller being read as a reference to K
Redman, H Trischler, A Koch.
13. AGENT'S COMMISSION
It is recorded that the sale was not concluded through the
instrumentality of any agent.
14. BREACH
If any party breaches any material provision or term of this agreement
(other than those which contain their own remedies or limit the
remedies in the event of a breach thereof) and fails to remedy such
breach within 14 (fourteen) days of receipt of written notice
requiring it to do so (or if it is not reasonably possible to remedy
the breach within 14 (fourteen) days, within such further period as
may be reasonable in the circumstances provided that the party in
breach furnishes
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evidence within the period of 14 (fourteen) days, reasonably
satisfactory to the other party, that it has taken whatever steps are
available to it, to commence remedying the breach) then the aggrieved
party shall be entitled without notice, in addition to any other
remedy available to it at law or under this agreement, including
obtaining an interdict, to cancel this agreement or to claim specific
performance of any obligation whether or not the due date for
performance has arrived, in either event without prejudice to the
aggrieved party's right to claim damages.
15. DOMICILIUM CITANDI ET EXECUTANDI
15.1. The parties choose as their domicilia citandi et executandi
for all purposes under this agreement, whether in respect of
court process, notices or other documents or communications
of whatsoever nature (including the exercise of any option),
the following addresses:
15.1.1. PURCHASER
Physical: 2nd Floor, Ransen House
Constitution Street
Cape Town
7748
Postal: PO Box 1O118
Caledon Square
7905
Telefax: (021) 441 2287
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15.1.2. SELLER
Physical: 2nd Floor, Castle Mews
16A Newmarket Street
Cape Town
8001
Postal: V Vasson & Co.
P0 Box 48
Gatesville
7764
Telefax: (021) 462 1660
15.1.3. Alois Koch
Physical: 20 Ottenhout Street
Plattekloof
15.1.4. Keith Howard Redman
Physical: 17 Melody Lane
Kirstenhof
15.1.5. Herbert Maria Trischler
Physical: 35 Graaff Avenue
Milnerton
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15.1.6. Aardt Davidtz
Physical: 8 Redcliff Close
Parklands
Blaauberg
15.2. Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent to
give notice by telefax.
15.3. Either party may by notice to the other party change the
physical address chosen as its domicilium citandi et
executandi to another physical address where postal delivery
occurs in the Republic of South Africa or its postal address
or its telefax number, provided that the change shall become
effective on the 7th business day from the deemed receipt of
the notice by the other party.
15.4. Any notice to a party -
15.4.1. sent by prepaid registered post (by airmail if
appropriate) in a correctly addressed envelope to
it at an address chosen as its domicilium citandi
et executandi to which post is delivered shall be
deemed to have been received on the 7th business
day after posting (unless the contrary is proved);
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15.4.2. delivered by hand to a responsible person during
ordinary business hours at the physical address
chosen as its domicilium citandi et executandi
shall be deemed to have been received on the day
of delivery; or
15.4.3. sent by telefax to its chosen telefax number
stipulated in clause 15.1, shall be deemed to have
been received on the date of despatch (unless the
contrary is proved).
15.5. Notwithstanding anything to the contrary herein contained a
written notice or communication actually received by a party
shall be an adequate written notice or communication to it
notwithstanding that it was not sent to or delivered at its
chosen domicilium citandi et executandi.
16. WHOLE AGREEMENT
16.1. This agreement constitutes the whole agreement between the
parties relating to the subject matter hereof.
16.2. No amendment or consensual cancellation of this agreement or
any provision or term hereof or of any agreement, bill of
exchange or other document issued or executed pursuant to or
in terms of this agreement and no settlement of any disputes
arising under this agreement and no extension of time,
waiver or relaxation or suspension of or agreement not to
enforce or to suspend or postpone the enforcement of any of
the provisions or terms of this agreement or of any
agreement, bill of exchange or other document issued
pursuant to or in terms of this
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agreement shall be binding unless recorded in a written
document signed by the parties. Any such extension, waiver
or relaxation or suspension which is so given or made shall
be strictly construed as relating strictly to the matter in
respect whereof it was made or given.
16.3. No extension of time or waiver or relaxation of any of the
provisions or terms of this agreement or any agreement, bill
of exchange or other document issued or executed pursuant to
or in terms of this agreement, shall operate as an estoppel
against any party in respect of its rights under this
agreement, nor shall it operate so as to preclude such party
thereafter from exercising its rights strictly in accordance
with this agreement.
16.4. To the extent permissible by law no party shall be bound by
any express or implied term, representation, warranty,
promise or the like not recorded herein, whether it induced
the contract and/or whether it was negligent or not.
17. COSTS
All the costs on an attorney and own client basis of EDWARD NATHAN &
FRIEDLAND INC of and incidental to the preparation of this agreement
(including prior drafts and consultations) and the stamp duty shall be
borne by the purchaser. The costs of Smiedt-Witz shall be borne by the
seller.
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18. VALUE-ADDED TAX
18.1. The seller and the purchaser agree that the business is
disposed of as a going concern and for the purposes of
section 11(1)(e) of the Value-Added Tax Act, 1991, agree
that the business will be an income-earning activity on the
implementation date and that the assets which are necessary
for carrying on such business have been disposed of by the
seller to the purchaser in terms of this agreement.
18.2. If, notwithstanding the aforegoing, value-added tax is
payable in respect of any of the assets sold in terms
hereof, same shall be borne and paid by the purchaser.
19. JOINT AND SEVERAL LIABILITY OF THE SELLER
The liability of the persons comprising the seller vis-a-vis the
purchaser shall be joint and several.
20. JOINT AND SEVERAL LIABILITY OF THE PURCHASER
The liability of the persons comprising the purchaser vis-a-vis the
seller shall be joint and several.
21. EXECUTION IN COUNTERPARTS
This agreement may be executed in several counterparts, each of which
shall together constitute one and the same instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
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DATE PLACE WITNESS SIGNATURE
1.______________________
9/11/99 Cape Town /s/ [ILLEGIBLE]
- ------- ------------ -------------------------
2.______________________ VIRTUAL SUPPORT CC
1.______________________
- ------- ------------ -------------------------
2.______________________ COLORSMART.com, Inc. USA
1.______________________
9/11/99 Cape Town /s/ KEITH HOWARD REDMAN
- ------- ------------ -------------------------
2.______________________ KEITH HOWARD REDMAN
1.______________________
9/11/99 Cape Town /s/ HERBERT MARIA TRISCHLER
- ------- ------------ -------------------------
2.______________________ HERBERT MARIA TRISCHLER
1.______________________
9/11/99 Cape Town /s/ AARDT DAVIDTZ
- ------- ------------ -------------------------
2.______________________ AARDT DAVIDTZ
1.______________________
9/11/99 Cape Town /s/ ALOIS KOCH
- ------- ------------ -------------------------
2.______________________ ALOIS KOCH
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ANNEXURE A - DESIGNATED FIXED ASSETS
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<PAGE>
ANNEXURE B - CONTRACTS (INCLUDING LIST OF EMPLOYEES)
1. Skibbe, Darran 082 822 0821 34 Main Road, Muizenberg
2. Theron, Martin 439 9819
082 772 3195 DS Normanhurst, 239 High Level
Road, Sea Point
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Exhibit 2.13
AGREEMENT
entered into between
VIRTUAL COLOUR PRINTING CC
(Registration No. CK97/43010/23)
and
COLORSMART.com, Inc. USA
(Registration No. 95/08558/07)
and
K REDMAN
and
K TRISCHLER
and
A KOCH
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1 INTERPRETATION AND PRELIMINARY .................................. 2
2 CONDITIONS PRECEDENT ............................................ 7
3 SALE OF THE BUSINESS............................................. 7
4 PURCHASE PRICE................................................... 8
5 STOCKTAKING......................................................10
6 EMPLOYEES........................................................12
7 SECTION 34 ADVERTISEMENT.........................................14
8 DELIVERY.........................................................14
9 THE NAME.........................................................17
10 WARRANTIES.......................................................17
11 INDEMNITY........................................................22
12 RESTRAINT........................................................22
13 AGENT'S COMMISSION...............................................26
14 BREACH...........................................................26
15 DOMICILIUM CITANDI ET EXECUTANDI.................................27
16 WHOLE AGREEMENT..................................................29
17 COSTS............................................................30
18 VALUE-ADDED TAX..................................................31
19 JOINT AND SEVERAL LIABILITY OF THE SELLER........................31
20 JOINT AND SEVERAL LIABILITY OF THE PURCHASER.....................31
21 EXECUTION IN COUNTERPARTS........................................31
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ANNEXURE A - DESIGNATED FIXED ASSETS.......................................... 1
ANNEXURE B - CONTRACTS (INCLUDING LIST OF EMPLOYEES).......................... 1
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WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the interpretation
of nor modify nor amplify the terms of this agreement nor any clause
hereof. Unless a contrary intention clearly appears -
1.1. words importing -
1.1.1. any one gender include the other two genders;
1.1.2. the singular include the plural and vice versa; and
1.1.3. natural persons include created entities (corporate or
unincorporate) and vice versa;
1.2. the following terms shall have the meanings assigned to them
hereunder and cognate expressions shall have corresponding meanings,
namely -
1.2.1. "Act" means the Companies Act, 1973;
1.2.2. "business" means the business of digital and large format
printing, currently conducted by Virtual Colour Printing
CC;
1.2.3. "Colorsmart.Com" means a corporation incorporated in terms
of the laws of the State of Nevada with its principal place
of business at 537 Myart Drive, Madison Tennessee 37115 USA;
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1.2.4. "condition precedent" means the conditions precedent in
clause 2;
1.2.5. "designated fixed assets" means those fixed assets
reflected in Annexure A hereto;
1.2.6. "designated liabilities" means those liabilities of the
business owing at the effective date to trade and hire
purchase and lease creditors of the business as reflected
in the effective financial statements but excluding:-
1.2.6.1. any product liability, warranty or implied
guarantee in respect of goods sold and delivered
prior to the effective date but in respect of
liabilities relating to products sold and delivered
15 during the period 1 April 1999 to the effective
date, such liabilities shall be taken into account
as liabilities being acquired as part of the
designated liabilities in an amount not exceeding
the nett profits earned during the period 1 April
1999 to the effective date from the sale of
products during that period;
1.2.6.2. any contingent liabilities at the effective date;
1.2.6.3. any liability of the seller in respect of any
unfunded deficit of its pension fund for its
employees; which shall remain the sole
responsibility of the seller
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1.2.7. "effective date" means the close of business on 31 January
2000;
1.2.8. "fixed assets" means all the fixed assets used in connection
with and comprising part of the business including at least
the designated fixed assets;
1.2.9. "implementation date" means the 31 January 2000 or such date
as mutually in writing between the parties;
1.2.10. "NASDAQ" means the NASDAQ Stock Market in the United States
of America;
1.2.11. "name" means Virtual Colour Printing CC and all such other
names under which the business is or has been conducted;
1.2.12. "premises" means the leased premises at which the business
is carried on, being 2nd Floor, Castle Mews, 16A Market
Street, Cape Town 8001;
1.2.13. "prime rate" means the publicly quoted basic rate per annum
ruling from time to time at which Nedcor Bank lends on
overdraft;
1.2.14. "purchaser" means COLORSMART.com, Inc. USA a company with
limited liability duly incorporated in terms of the company
laws of South Africa with registration number 95/08558/07,
or its nominee;
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1.2.15. "seller" means Virtual Colour Printing CC a close
corporation duly incorporated in terms of the Close
Corporation Act of South Africa with registration number
CK97/43010/23;
1.2.16. "stock" means finished stock, work-in-progress and raw s
materials on hand in respect of the business as at the
effective date including stock-in-transit, excluding
damaged or unsaleable stock;
1.3. any reference in this agreement to "date of signature hereof" shall
be read as meaning a reference to the date of the last signature of
this agreement;
1.4. any reference to an enactment is to that enactment as at the date of
signature hereof and as amended or re-enacted from time to time;
1.5. if any provision in a definition is a substantive provision
conferring rights or imposing obligations on any party,
notwithstanding that it is only in the definition clause, effect
shall be given to it as if it were a substantive provision in the
body of the agreement;
1.6. when any number of days is prescribed in this agreement, same shall
be reckoned exclusively of the first and inclusively of the last day
unless the last day falls on a Saturday, Sunday or public holiday,
in which case the last day shall be the next succeeding day which is
not a Saturday, Sunday or public holiday;
1.7. where figures are referred to in numerals and in words, if there is
any conflict between the two, the words shall prevail;
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1.8. expressions defined in this agreement shall bear the same meanings
in schedules or annexures to this agreement which do not themselves
contain their own definitions;
1.9. reference to day/s, month/s or year/s shall be construed as
Gregorian calendar day/s, month/s or year/s;
1.10. the use of any expression in this agreement covering a process
available under South African law such as a winding-up (without
limitation eiusdem generis) shall, if any of the parties to this
agreement is subject to the law of any other jurisdiction, be
construed as including any equivalent or analogous proceedings under
the law of such defined jurisdiction;
1.11 where any term is defined within the context of any particular
clause in this agreement, the term so defined, unless it is clear
from the clause in question that the term so defined has limited
application to the relevant clause, shall bear the meaning ascribed
to it for all purposes in terms of this agreement, notwithstanding
that that term has not been defined in this interpretation clause;
1.12. the expiration or termination of this agreement shall not affect
such of the provisions of this agreement as expressly provide that
they will operate after any such expiration or termination or which
of necessity must continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves do not
expressly provide for this;
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1.13. the rule of construction that the contract shall be interpreted
against the party responsible for the drafting or preparation of the
agreement, shall not apply.
2. CONDITIONS PRECEDENT
2.1. This agreement, is subject to the suspensive conditions, contained
in this clause 2.1 namely:
2.1.1. the conclusion of a management agreement between the
purchaser and A Koch prior to 31 January 2000;
2.1.2. Approval of the members of the seller in terms of s46(b)(ii)
of the Close Corporation Act.
2.1.3. Exchange Control approval from the South African Reserve
Bank.
2.1.4. The listing of Colorsmart.Com in the United States of America
on the NASDAQ by 31 January 2000.
2.2. Forthwith after the signature of this agreement, the parties shall
use their best endeavours to procure the fulfilment of the
conditions referred to in this clause 2.1.
3. SALE OF THE BUSINESS
The seller sells, transfers and cedes to the purchaser as an indivisible
whole and as a going concern with effect from the effective date from
which date the risk in and benefit of the business shall vest in the
purchaser, the business comprising -
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3.1. the goodwill thereof;
3.2. the exclusive right to use the name;
3.3. the fixed assets;
3.4. the stock;
3.5. deposits made by the seller in respect of the business;
3.6. the debtors; (any debtors not recovered within 90 (ninety) days from
the effective date will be refunded by the seller to the purchaser);
3.7. the creditors;
3.8. the bank overdrafts and bank accounts;
3.9. all contracts of the business concluded in the ordinary course of
business, including orders relating to stock undelivered as at the
effective date, the purchaser acknowledging having been given copies
of the contracts listed in Annexure B,
but excluding any debts and any liabilities other than any liabilities
contemplated in clause 8.1.1 in respect of the contracts and the name.
4. PURCHASE PRICE
4.1. The purchase price of the business is based on the net asset value
at 28 February 1999 and is the sum of R836 1 78,00 (eight hundred nd
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thirty six thousand one hundred and seventy eight rand) allocated as
follows -
4.1.1. the fixed assets R2 500,00 (two thousand five hundred rand);
4.1.2. the stock, R80 000,00 (eighty thousand rand);
4.1.3. the name, R91 219,00 (ninety one thousand two hundred and
nineteen rand);
4.1.4. goodwill, R83 459,00 (eighty three thousand four hundred
fifty nine rand).
4.1.5. debtors, R835 000,00 (eight hundred and thirty five thousand
rand);
4.1.6. cash at bank and on deposit, R131 000,00 (one hundred and
thirty one thousand rand);
4.1.7. creditors, R125 000,00 (one hundred and twenty five
thousand rand);
4.1.8. bank overdraft, R131 000,00 (one hundred and thirty one
thousand rand);
4.2. Any differences in net asset value at the effective date will be
reconciled with the values in 4.1. Any shortfall will be deducted
from the purchase price and any increase will be added to the
purchase price.
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4.3. The purchase price shall be paid as follows -
4.3.1. by the purchaser discharging the designated liabilities on
due date, and the purchaser indemnifies the seller against
the purchaser's failure to do so on due date;
4.3.2. by the purchaser paying, on the implementation date against
the delivery of the business to the seller, the sum of R836
178,00 (eight hundred and thirty six thousand one hundred and
seventy eight rand);
4.4. All payments to be effected by the purchaser to the seller in terms
of this agreement shall be made at Cape Town.
5. STOCKTAKING
5.1. The parties shall cause the stock to be taken in accordance with the
following provisions -
5.1.1. the stocktaking shall take place during the course of the 48
(forty eight) hours prior to the implementation date, that
being 31 January 2000;
5.1.2. each of the parties' auditors shall be present or represented
at the stocktaking;
5.1.3. after the stocktaking has been completed, schedules
reflecting the stocktaking shall be prepared and initialled
by the parties;
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5.1.4. the stock reflected in the schedules referred to in clause
5.1.3 shall be valued -
5.1.4.1. in the case of undamaged finished stock, at the
lower of the cost thereof to the seller and net
realisable value;
5.1.4.2. in the case of undamaged work in progress, at the
cost thereof to the seller;
5.1.4.3. in the case of undamaged raw materials, at the cost
thereof to the seller.
5.2. For the purpose of this clause -
5.2.1. "cost to the seller" -
5.2.1.1. means the price paid by the seller to the supplier;
5.2.1.2. shall take into account all the discounts including
settlement discounts granted to the seller.
5.3. Should there be any dispute in regard to the value of any item of
stock or in regard to whether any item of the stock is damaged or
slow moving, the dispute shall be determined by the respective
auditors of the purchaser and the seller, acting jointly and,
failing agreement between such auditors, by independent
auditors appointed by the respective
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auditors of the purchaser and the seller (or failing agreement
between them, by the Chairman for the time being of the Cape Society
of Chartered Accountants (or the successor body thereto)). Such
auditors in resolving the dispute shall act as experts and not as
arbitrators and their decision shall be final and binding on the
parties and their charges shall be paid by the purchaser and the
seller in equal shares.
6. EMPLOYEES
6.1. The parties agree that section 197(2) of the Labour Relations Act,
1995 is applicable to the seller in terms of this agreement and that
accordingly the employment of each employee of the seller employed
in regard to the business, will continue in force with the purchaser
as the "new employer". The parties agree that no agreements
contemplated in terms of section 197(3) of that Act will be
concluded.
6.2. The employees contemplated in clause 6.1 are members of the seller's
provident fund. The purchaser shall be entitled to take over the
seller's provident fund which relates solely to the business if it
so desires and to operate such fund as its own fund, with effect
from the effective date. The seller shall furnish the purchaser with
a certificate from the actuaries of the fund as to the position of
the fund at the effective date. The seller undertakes that the
actuaries of the seller's pension fund will, as soon as is
reasonably possible, establish the value of the accrued liabilities
of the seller's provident fund in respect of the employees in
question as at the effective date. The amount of the liabilities
shall be expressed as a proportion of the total liabilities of the
seller's pension fund as at the effective date and that proportion
of the assets, adjusted to account for income and expenditure from
the effective date to the date of transfer, shall be transferred to
the purchaser's provident fund. The seller warrants
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that the said assets shall cover the said liabilities. The bases
used by the actuaries of the provident fund(s) for the valuation of
liabilities and assets in terms hereof shall be agreed with an
actuary appointed by the purchaser or, failing such agreement, the
said bases shall be determined by an actuary appointed by the
President for the time being of the s Actuarial Society of South
Africa, such appointee to act as an expert and not as an arbitrator
and his decision to be final and binding on the parties including
any decision as to liability for his costs.
6.3. The purchaser undertakes to procure that the employees contemplated
in clause 6.1 who are members of the seller's provident fund shall
be transferred to a provident fund on the basis that such employees
shall only acquire such share in the new provident fund as shall be
available using the assets to be transferred from the seller's
provident fund as contemplated below, and to the extent that such
employees are retrenched by the purchaser within 30 (thirty) days,
the purchaser shall be obliged to pay to any such employees their
pro rata share of such fund as at the date of retrenchment
determined mutatis mutandis in accordance with clause 6.2.
6.4. The seller shall pay the purchaser an amount equivalent to the
accrued leave pay due to any employee whose employment continues in
force with the purchaser after the effective date.
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7. SECTION 34 ADVERTISEMENT
The seller shall be obliged to advertise the transaction in terms of
section 34 of the Insolvency Act, 1936.
8. DELIVERY
8.1. The business shall be delivered to the purchaser on the
implementation date (against payment of the relevant portion of the
purchase price) from which date the purchaser shall take legal
possession of the business. Delivery shall include -
8.1.1. The cession by the seller to the purchaser of the debts
subject to the resolutive condition that such debt will be
fully recoverable (save to the extent, in respect of all the
debts in aggregate, of the provision allowed for any
effective financial statements) within 90 (ninety) days.
Should any of the debts not have been recovered by the
purchaser within the period specified herein the sale of the
debts shall be deemed ipso facto to be of no force and with
effect from the effective date and the purchase price payable
in terms of this agreement shall be adjusted accordingly. The
seller shall repay to the purchaser an amount equal to the
amount of such irrecoverable debt less the provision as
reflected in the effective financial statements, together
with interest thereon at the prime rate compounded monthly in
arrear from the implementation date to date of payment. The
amount so due by the seller to the purchaser shall be paid
against cession by the purchaser to the seller of such
irrecoverable debt;
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8.1.2. the assignment (with effect from the effective date) of the
seller's rights and prospective obligations in respect of the
contracts contemplated in clause 3.9, to the extent that the
other parties to such contracts consent thereto. The seller
undertakes to use its best endeavours to procure the
assignment of the contracts to the purchaser. To the extent
that the other parties to the contracts do not consent to
such assignment -
8.1.2.1. the purchaser shall be entitled as between it and
the seller to the benefit of and shall bear the risk
of such contracts from the implementation date and
the seller shall bear the risk and be entitled to
the benefit of such contracts prior to the effective
date;
8.1.2.2. the seller shall be obliged to discharge any
obligations under the contracts in respect of the
period from the effective date to the implementation
date;
8.1.2.3. the purchaser shall be obliged at its cost but in
the seller's name to discharge the seller's
obligations under the contracts after the
implementation date;
8.1.2.4. the parties respectively indemnify each other
against any loss of any nature which may arise
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as a result of the other of them failing to comply
with their obligations hereunder.
8.1.3. the handing over to the purchaser on loan for a period of 120
(one hundred and twenty) days of the seller's documents,
books and records and all information relating to the
business subject to the auditors being given access as
necessary. The purchaser shall be entitled to make copies of
all such documents, books and records. After the expiry of
the 120 (one hundred and twenty) day period, the purchaser
shall have reasonable access thereto;
8.1.4. the physical delivery of all assets forming part of the
business to the purchaser by handing them to the purchaser at
the premises;
8.1.5. insofar as motor vehicles are concerned, all necessary
licence papers and transfer documents, but on the basis that
the purchaser shall obtain roadworthy certificates if
necessary;
8.1.6. the cession of any restraint of trade given to the seller in
respect of the business, to the purchaser.
8.2. The seller shall account to the purchaser for any receipts of the
business paid directly to the seller after the effective date in
respect of transactions that were entered into after the effective
date.
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9. THE NAME
The seller shall be obliged to procure that within 30 (thirty) days of the
implementation date, its name is changed, so as to enable the purchaser to
register such name as a defensive name in its favour.
10. WARRANTIES
10.1. The seller warrants that -
10.1.1. the fixed assets and the name are beneficially owned by the
seller which will be able to give free and unencumbered
title thereof as well as of any current assets sold, to the
purchaser on the implementation date;
10.1.2. the designated fixed assets will be delivered to the
purchaser on the implementation date without any of such
assets missing;
10.1.3. there will not be fixed assets in addition to the designated
assets, the value of which is more than R1 000,00 (one
thousand rand);
10.1.4. none of the liabilities imposed on the seller under the
contracts forming part of the sale will be payable in or
linked to foreign currencies;
10.1.5. between date of signature and the implementation date, the
seller will not have entered into any transaction or
acquired or disposed of any assets or incurred any
liabilities, otherwise, than in the normal, ordinary and
regular course of business,
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nor will it have increased the salaries of employees during
that period other than normal or merit increases determined
in the normal course and no events will have taken place
which have or will have had the effect of impairing the
goodwill of the business;
10.1.6. the seller is not in default of any material
obligation affecting the business, whether under the
contracts contemplated in clause 3.9 or under any
legislation or (without limitation eiusdem generis)
otherwise;
10.1.7. the books, accounts and records of the seller do and will
until the implementation date continue to accurately reflect
in accordance with generally accepted accounting principles
and practice all of the transactions entered into by the
seller or to which it is a party in respect of the business;
10.1.8. the business will not have generated a loss between
the period 1 June 1999 to the implementation date;
10.1.9. the seller has disclosed to the purchaser all facts and
circumstances material to this transaction and which are or
would be material to an independent purchaser of the
business;
10.1.10. no person who has any claim in connection with the business,
has instituted proceedings in a division of the High Court
having jurisdiction in the district in which the business is
carried on or in the Magistrates' Court of that district nor
is
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the seller aware of any circumstances which may give rise
thereto prior to the implementation date;
10.1.11. the copies of the contracts listed in Annexure B which have
been furnished to the purchaser fully and correctly reflect
all the terms and conditions thereof and have not been
amended in any respects and all such contracts are of full
force and effect according to their tenor;
10.1.12. the seller will have complied with all its obligations as
tenant under leases in respect of the premises and will have
no unfulfilled obligations whether in respect of restoration
or repair of such property or otherwise;
10.1.13. the seller is not aware of any facts or circumstances which
could result in the licences, authorities or consents in
respect of the premises and the business not being renewed
from time to time;
10.1.14. to the best of the seller's knowledge and belief, the
purchaser will not be required to effect any repairs or
alterations or additions to the premises as a pre-requisite
to the granting of any necessary trading licences,
authorities or consents;
10.1.15. all general sales tax or value added tax owing to the
Department of Inland Revenue as at the effective date in
respect of the business will have been paid in full;
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10.1.16. all fixtures, fittings, furniture, plant and equipment and
the other items listed on Annexure A as well as any other
assets comprising the business will be in good and proper
working condition and together with contracts contemplated
in clause 3.9 and the name are the only assets required for
the conduct of the business;
10.1.17. it has not sold or otherwise disposed of or encumbered any
of the rights attaching to the name (nor purported nor
agreed to do so) to any person other than the purchaser nor
has it granted any right, licence, option or privilege with
respect thereto nor encumbered them in any way;
10.1.18. to the best of the seller's knowledge and belief the use of
the name does not infringe nor will it infringe any rights
of any third party;
10.1.19. no other person has the right to exploit the rights
attaching to the name and to the best of the seller's
knowledge and belief there is nothing which will preclude
the purchaser from exploiting such rights at any time;
10.1.20. no person save as contemplated in this agreement, has nor
will on the effective date have any right to participate in
any of the revenues or profits generated pursuant to the
exploitation of the name acquired in terms hereof;
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10.1.21. to the best of the seller's knowledge and belief the use of
the name by the purchaser will be unimpeachable by any third
party;
10.1.22. to the best of the seller's knowledge and belief there is no
infringement or suspected infringement of the rights to the
name;
10.1.23. between the effective date and the date of signature hereof,
the seller will not have done anything which could prejudice
the rights to the name in any way whatsoever;
10.1.24. the profits generated by the business in the 3 (three) years
preceding the effective date shall not differ from each
other by more than 20% (twenty per cent);
10.2. The seller warrants that no application for the winding up of the
seller has been presented at date of signature hereof nor will any
such application have been presented on the implementation date.
10.3. Nothing herein contained shall relieve the seller from its
obligation to make those disclosures which it is in law obliged to
make.
10.4. No warranties or representations which are not set forth in this
agreement shall be binding on the seller and the business is
purchased on the basis that it is taken voetstoots.
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11. INDEMNITY
11.1. The seller indemnifies the purchaser against any claims, which may
be made in respect of finished products and work-in-progress which
are included in the stock forming part of the business, provided
that to the extent that any claims are made against the purchaser in
respect of any such stock which was sold and delivered to third
parties in the course of the business during the period 1 January
1998 to the implementation date, the seller's indemnity shall only
operate in respect of claims the amount of which exceeds the amount
of net profits earned by the business during the period from 1
January 1998 to the implementation date in respect of such products
sold and delivered during such period. Should any claims be made
against the purchaser in respect of such stock, the purchaser shall
afford the seller an opportunity to assist the purchaser to contest
the claim and, subject to an indemnity in a form acceptable to the
purchaser against costs being given by the seller, shall engage
attorneys and counsel nominated by the seller for the said purpose.
11.2. The seller indemnifies the purchaser against any losses or damages
of whatsoever nature which the purchaser may sustain by reason of
assuming all the obligations of the seller under the contracts of
employment with the employees of the business, the cause of which
arose prior to the effective date.
12. RESTRAINT
12.1. In this clause, unless clearly inconsistent with the context, words
and phrases defined hereunder shall bear the meanings assigned to
the this sub-clause -
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12.1.1. "competitive activity" shall mean digital and large format
printing;
12.1.2. "the restraint period" shall mean a period of 1 (one) year
from the effective date;
12.1.3. "territory" shall mean the Republic of South Africa
12.2. The seller hereby undertakes to the purchaser that it will not,
either alone or jointly -
12.2.1. during any part of the restraint period, whether as
proprietor, partner, director, shareholder, employee,
member, consultant, contractor, financier, agent,
representative, assistant or otherwise, and whether for
reward or not, directly or indirectly, -
12.2.1.1. carry on in the territory any undertaking; or
12.2.1.2. be interested or engaged in or concerned with
any company, close corporation, firm, undertaking
or concern operating in any part of the territory;
or
12.2.1.3. be employed by any company, close corporation,
firm, undertaking or concern operating in any part
of the territory in a competitive activity;
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12.2.2. during any part of the restraint period and thereafter, to
the extent that the same are protected by law, disclose any
trade secrets and/or confidential information of the
business other than to persons connected with the business
and who are required to know such secrets or to have such
confidential information. Trade secrets and confidential
information shall include (but not be limited to) all and
whatever information relating to the business and its
suppliers and customers which is not readily available in
the ordinary course of business to its competitors, provided
that nothing herein contained shall prohibit the seller from
entering into any joint ventures with persons who are
concerned in competitive activities in the territory,
provided that the subject matter of the joint venture is not
a competitive activity in the territory.
12.3. The seller acknowledges and agrees that -
12.3.1. the restraints imposed upon it in terms of this clause
(interpreted initially in their widest sense as provided in
clause 12.3.3) are reasonable as to subject matter, period
and territorial limitation and are not more than reasonably
and necessarily required by the purchaser to maintain the
goodwill of, and its legitimate business interests in
respect of the business;
12.3.2. the provisions of clauses 12.2 and 12.3.1 shall be construed
as imposing separate, severable and independent restraints
in respect of -
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12.3.2.1. each of the months falling within the restraint
period;
12.3.2.2. each magisterial district falling within the
territory;
12.3.2.3. each activity falling within the ambit of a
competitive activity;
12.3.2.4. each capacity in relation to a competitive
activity which the covenantor is prohibited from
holding in terms of this clause;
12.3.3. the restraints set out in clause 12.2 shall initially be
given the widest possible interpretation and no restraint or
combination of restraints shall be limited by reference to
or inference from any other restraint or combination of
restraints, provided however that the invalidity or
unenforceability of any one or combination of restraints
referred to in clause 12.2 (including the restraints
interpreted in their widest cumulative sense as aforesaid)
shall not affect the validity or enforceability of any of
the other restraints referred to in clause 12.2 or another
combination of such restraints.
12.4. No restraints referred to in this clause shall apply to any direct
or indirect shareholding by the seller in any company listed on a
recognised stock exchange where the aggregate direct and indirect
holdings of the seller do not exceed 5% (five per cent) of any class
of that listed company's issued
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share capital and the interest of the seller in that company is
solely that of a shareholder.
12.5. The above restraints shall enure also in favour of the successors in
title of the business. The term "successors in title" shall mean any
person who -
12.5.1. acquires the goodwill of the business; or
12.5.2. becomes the beneficial owner of such goodwill through his
shareholding in any company; or
12.5.3. has acquired by cession the right to enforce the restraints
embodied herein.
12.6. The provisions of this clause 12 shall apply mutatis mutandis to K
Redman, H Trischler, A Koch, who undertake to be bound thereby, any
reference to the seller being read as a reference to K Redman, H
Trischler, A Koch.
13. AGENT'S COMMISSION
It is recorded that the sale was not concluded through the instrumentality
of any agent.
14. BREACH
If any party breaches any material provision or term of this agreement
(other than those which contain their own remedies or limit the
remedies in the event of a breach thereof) and fails to remedy such breach
within 14 (fourteen) days of receipt of written notice requiring it to do
so (or if it is not reasonably possible to remedy the breach within 14
(fourteen) days, within such further period as may
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be reasonable in the circumstances provided that the party in breach
furnishes evidence within the period of 14 (fourteen) days, reasonably
satisfactory to the other party, that it has taken whatever steps are
available to it, to commence remedying the breach)) then the aggrieved
party shall be entitled without notice, in addition to any other remedy
available to it at law or under this agreement,including obtaining an
interdict, to cancel this agreement or to claim specific performance of
any obligation whether or not the due date for performance has arrived, in
either event without prejudice to the aggrieved party's right to claim
damages.
15. DOMICILIUM CITANDI ET EXECUTANDI
15.1. The parties choose as their domicilia citandi et executandi for all
purposes under this agreement, whether in respect of court process,
notices or other documents or communications of whatsoever nature
(including the exercise of any option), the following addresses:
15.1.1. THE PURCHASER
Physical: 2nd Floor, Ransen House
Constitution Street
Cape Town
Postal: PO Box l0118
Caledon Square
7905
Telefax: (021) 441 2287
15.1.2. THE SELLER
Physical: 2nd Floor, Castle Mews
16A Newmarket Street
Cape Town
8001
Postal: V Vasson & Co.
P0 Box 48
Gatesville
7764
Telefax: (021) 462 1660
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15.1.3. Alois Koch
Physical: 20 Ottenhout Street
Plattekloof
15.1.4. Keith Howard Redman
Physical: 17 Melody Lane
Kirstenhof
15.1.5. Herbert Maria Trischler
Physical: 35 Graaff Avenue
Milnerton
15.2. Any notice or communication required or permitted to be given in
terms of this agreement shall be valid and effective only if in
writing but it shall be competent to give notice by telefax.
15.3. Either party may by notice to the other party change the physical
address chosen as its domicilium citandi et executandi to another
physical address where postal delivery occurs in the Republic of
South Africa or its postal address or its telefax number,
provided that the change shall become effective on the 7th business
day from the deemed receipt of the notice by the other party.
15.4. Any notice to a party -
15.4.1. sent by prepaid registered post (by airmail if appropriate)
in a correctly addressed envelope to it at an address chosen
as its domicilium citandi et executandi to which post is
delivered
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shall be deemed to have been received on the 7th business
day after posting (unless the contrary is proved);
15.4.2. delivered by hand to a responsible person during ordinary
business hours at the physical address chosen as its
domicilium citandi et executandi shall be deemed to have
been received on the day of delivery; or
15.4.3. sent by telefax to its chosen telefax number stipulated in
clause 15.1, shall be deemed to have been received on the date
of despatch (unless the contrary is proved).
15.5. Notwithstanding anything to the contrary herein contained a written
notice or communication actually received by a party shall be an
adequate written notice or communication to it notwithstanding that
it was not sent to or delivered at its chosen domicilium citandi et
executandi.
16. WHOLE AGREEMENT
16.1. This agreement constitutes the whole agreement between the parties
relating to the subject matter hereof.
16.2. No amendment or consensual cancellation of this agreement or any
provision or term hereof or of any agreement, bill of exchange or
other document issued or executed pursuant to or in terms of this
agreement and no settlement of any disputes arising under this
agreement and no extension of time, waiver or relaxation or
suspension of or agreement not
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to enforce or to suspend or postpone the enforcement of any of the
provisions or terms of this agreement or of any agreement, bill of
exchange or other document issued pursuant to or in terms of this
agreement shall be binding unless recorded in a written document
signed by the parties. Any such extension, waiver or relaxation or
suspension which is so given or made shall be strictly construed as
relating strictly to the matter in respect whereof it was made or
given.
16.3. No extension of time or waiver or relaxation of any of the
provisions or terms of this agreement or any agreement, bill of
exchange or other document issued or executed pursuant to or in
terms of this agreement, shall operate as an estoppel against any
party in respect of its rights under this agreement, nor shall it
operate so as to preclude such party thereafter from exercising its
rights strictly in accordance with this agreement.
16.4. To the extent permissible by law no party shall be bound by any
express or implied term, representation, warranty, promise or the
like not recorded herein, whether it induced the contract and/or
whether it was negligent or not.
17. COSTS
All the costs on an attorney and own client basis of EDWARD NATHAN &
FRIEDLAND INC of and incidental to the preparation of this agreement
(including prior drafts and consultations) and the stamp duty shall be
borne by the purchaser. The cost of SMIEDT-WITZ will be paid by the
seller.
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18. VALUE-ADDED TAX
18.1. The seller and the purchaser agree that the business is disposed of
as a going concern and for the purposes of section 11(1)(e) of the
Value-Added Tax Act, 1991, agree that the business will be an
income-earning activity on the implementation date and that the
assets which are necessary for carrying on such business have been
disposed of by the seller to the purchaser in terms of this
agreement.
18.2. If, notwithstanding the aforegoing, value-added tax is payable in
respect of any of the assets sold in terms hereof, same shall be
borne and paid by the purchaser.
19. JOINT AND SEVERAL LIABILITY OF THE SELLER
The liability of the persons comprising the seller vis-a-vis the purchaser
shall be joint and several.
20. JOINT AND SEVERAL LIABILITY OF THE PURCHASER
The liability of the persons comprising the purchaser vis-a-vis the seller
shall be joint and several.
21. EXECUTION IN COUNTERPARTS
This agreement may be executed in several counterparts, each of which
shall together constitute one and the same instrument.
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SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. __________________
9/11/99 Cape Town /s/ [ILLEGIBLE]
--------------------------
2. __________________ VIRTUAL COLOUR PRINTING CC
1. __________________
_____ ____________ --------------------------
2. __________________ COLORSMART.com Inc. USA
1. __________________
9/11/99 Cape Town
/s/ Keith Redman
--------------------------
KEITH HOWARD REDMAN
2. __________________
1. __________________
9/11/99 Cape Town /s/ Herbert Trischler
--------------------------
HERBERT MARIA TRISCHLER
2. __________________
1. __________________
9/11/99 Cape Town /s/ Alois Koch
--------------------------
ALOIS KOCH
2. __________________
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ANNEXURE A - DESIGNATED FIXED ASSETS
<PAGE>
ANNEXURE B - LIST OF EMPLOYEES
1. Draper, Roger 58 1565 13 Elsendal, Edgemead
2. February, Liezel 63 75052 12b Thornton Road, Alicedale,
Athlone
3. Fortune, Tony 082 496 4486
4. Green, Keith 59 32448 7 Hind Avenue, Kensington
5. Hendricks, Andrew 391 1888 35 Zenith Road, Rocklands,
Mitchells Plain
6. Rabie, Morne 694 7020 36 Saaffraan Road, Bonteheuwel
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Exhibit 2.14
AGREEMENT
entered into between
VIRTUAL COLOUR PROPERTY CC
(Registration No. CK97/18915/23)
and
COLORSMART.com, Inc. USA
(Registration No. 95/08558/07)
and
KEITH HOWARD REDMAN
and
HERBERT MARIA TRISCHLER
and
ALOIS KOCH
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ............................. 2
2. CONDITIONS PRECEDENT ....................................... 6
3. SALE OF THE BUSINESS ....................................... 7
4. PURCHASE PRICE ............................................. 8
5. SECTION 34 ADVERTISEMENT ................................... 9
6. DELIVERY ................................................... 9
7. THE NAME ................................................... 11
8. WARRANTIES ................................................. 11
9. INDEMNITY .................................................. 13
10. AGENT'S COMMISSION ......................................... 13
11. BREACH ..................................................... 14
12. DOMICILIUM CITANDI ET EXECUTANDI ........................... 14
13. WHOLE AGREEMENT ............................................ 16
14. COSTS ...................................................... 17
15. VALUE-ADDED TAX ............................................ 17
16. JOINT AND SEVERAL LIABILITY OF THE SELLER .................. 18
17. JOINT AND SEVERAL LIABILITY OF THE PURCHASER ............... 18
18. EXECUTION IN COUNTERPARTS .................................. 18
ANNEXURE A - DESIGNATED FIXED ASSETS ................................. 1
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WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the interpretation
of nor modify nor amplify the terms of this agreement nor any clause
hereof. Unless a contrary intention clearly appears -
1.1. words importing -
1.1.1. any one gender include the other two genders;
1.1.2. the singular include the plural and vice versa; and
1.1.3. natural persons include created entities (corporate or
unincorporate) and vice versa;
1.2. the following terms shall have the meanings assigned to them
hereunder and cognate expressions shall have corresponding meanings,
namely -
1.2.1. "Act" means the Companies Act, 1973;
1.2.2. "business" means the business of holding and owning
property;
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1.2.3. "condition precedent" means the conditions precedent in
clause 2;
1.2.4. "designated fixed assets" means those fixed assets reflected
in Annexure A hereto;
1.2.5. "effective date" means the close of business on 31 January
2000;
1.2.6. "fixed assets" means all the fixed assets used in connection
with and comprising part of the business including at least
the designated fixed assets;
1.2.7. "implementation date" means 31 January 2000;
1.2.8. "name" means Virtual Colour Property CC and all such other
names under which the business is or has been conducted;
1.2.9. "NASDAQ" means the NASDAQ Stock Market in the United States
of America;
1.2.10. "premises" means the leased premises at which the business
is carried on, being Units 19 and 20 together with the
parking bays allocated to these units, 2nd Floor, Castle
Mews Building, 16A Newmarket Street, Cape Town 8001.
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1.2.11. "prime rate" means the publicly quoted basic rate per annum
ruling from time to time at which Nedcor Bank lends on
overdraft;
1.2.12. "property" means 2nd Floor, Castle Mews Building, 16A
Newmarket Street, Cape Town 8001;
1.2.13. "purchaser" means COLORSMART.com, Inc. USA a company with
limited liability duly incorporated in terms of the company
laws of South Africa with registration number 95/08558/07
or its nominee;
1.2.14. "seller" means Virtual Colour Property CC a close
corporation duly incorporated in terms of the Close
Corporation Act of South Africa with registration number
CK97/18915/23;
1.3. any reference in this agreement to "date of signature hereof" shall
be read as meaning a reference to the date of the last signature of
this agreement;
1.4. any reference to an enactment is to that enactment as at the date of
signature hereof and as amended or re-enacted from time to time;
1.5. if any provision in a definition is a substantive provision
conferring rights or imposing obligations on any party,
notwithstanding that it is only in the definition clause, effect
shall be given to it as if it were provision in the body of the
agreement;
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1.6. when any number of days is prescribed in this agreement, same shall
be reckoned exclusively of the first and inclusively of the last day
unless the last day falls on a Saturday, Sunday or public holiday,
in which case the last day shall be the next succeeding day which is
not a Saturday, Sunday or public holiday;
1.7. where figures are referred to in numerals and in words, if there is
any conflict between the two, the words shall prevail;
1.8. expressions defined in this agreement shall bear the same meanings
in schedules or annexures to this agreement which do not themselves
contain their own definitions;
1.9. reference to day/s, month/s or year/s shall be construed as
Gregorian calendar day/s, month/s or year/s;
1.10. the use of any expression in this agreement covering a process
available under South African law such as a winding-up (without
limitation eiusdem generis) shall, if any of the parties to this
agreement is subject to the law of any other jurisdiction, be
construed as including any equivalent or analogous proceedings
under the law of such defined jurisdiction;
1.11. where any term is defined within the context of any particular
clause in this agreement, the term so defined, unless it is clear
from the clause in question that the term so defined has limited
application to the relevant clause, shall bear the meaning
ascribed to it for all purposes in terms of
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this agreement, notwithstanding that that term has not been defined
in this interpretation clause;
1.12. the expiration or termination of this agreement shall not affect such
of the provisions of this agreement as expressly provide that they
will operate after any such expiration or termination or which of
necessity must continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves do not
expressly provide for this;
1.13. the rule of construction that the contract shall be interpreted
against the party responsible for the drafting or preparation of the
agreement, shall not apply.
2. CONDITIONS PRECEDENT
2.1. This agreement, is subject to the suspensive conditions, contained
in this clause 2.1:
2.1.1. the conclusion of a management agreement between the
purchaser and K Redman, H Trischler and A Koch prior to 31
January 2000;
2.1.2. Approval of the members of the seller in terms of s46(b)(ii)
of the Close Corporation Act.
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2.1.3. Exchange Control approval from the South African Reserve
Bank.
2.1.4. The listing of Colorsmart.Com in the United States of
America on the NASDAQ by 31 January 2000.
2.2. Forthwith after the signature of this agreement, the parties shall
use their best endeavours to procure the fulfilment of the condition
referred to in this clause 2.
3. SALE OF THE BUSINESS
The seller sells, transfers and cedes to the purchaser as an indivisible
whole and as a going concern with effect from the effective date from
which date the risk in and benefit of the business shall vest in the
purchaser, the business comprising -
3.1. the exclusive right to use the name;
3.2. the fixed assets;
3.3. deposits made by the seller in respect of the business;
3.4. the debtors (any debtors not recovered within 90 (ninety) days from
the effective date will be refunded by the seller to the purchaser);
3.5. the creditors;
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3.6. the bank overdrafts and bank accounts; but excluding any debts and
any liabilities other than any liabilities contemplated in clause
8.1.1 in respect of the contracts and the name.
4. PURCHASE PRICE
4.1. The purchase price of the business is based on the nett asset value
at 28 February 1999 and is the sum of R920 996 (nine hundred and
twenty thousand nine hundred and ninety six rand) allocated as
follows -
4.1.1. the property R729 350 (seven hundred and twenty nine
thousand three hundred and fifty rand);
4.1.2. the stock, RNIL;
4.1.3. the name, R100 472,00 (one hundred thousand four hundred and
seventy two rand);
4.1.4. goodwill, R91 924,00 (ninety one thousand nine hundred and
twenty four rand);
4.1.5. the debtors, R12 400 (twelve thousand four hundred rand);
4.1.6. cash at the bank and on deposit, RNIL;
4.1.7. the creditors, R13 000 (thirteen thousand rand);
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4.1.8. bank overdraft, R150,00 (one hundred and fifty rand);
4.2. Any differences in asset value at the effective date will be
reconciled with the values in 4.1. Any shortfall will be deducted
from the purchase price, and any gain will be added to the purchase
price.
4.3. The purchase price shall be paid as follows -
4.3.1. by the purchaser discharging the designated liabilities on
due date, and the purchaser indemnifies the seller against
the purchaser's failure to do so on due date;
4.3.2. by the purchaser paying, on the implementation date against
the delivery of the business to the seller, the balance of
the purchase price;
4.4. All payments to be effected by the purchaser to the seller in terms
of this agreement shall be made at Cape Town.
5. SECTION 34 ADVERTISEMENT
The seller shall be obliged to advertise the transaction in terms of
section 34 of the Insolvency Act, 1936.
6. DELIVERY
6.1. The business shall be delivered to the purchaser on the
implementation date (against payment of the relevant portion of the
purchase price) from
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which date the purchaser shall take legal possession of the
business. Delivery shall include -
6.1.1. the purchaser shall be entitled as between it and the seller
to the benefit of and shall bear the risk of such contracts
from the implementation date and the seller shall bear the
risk and be entitled to the benefit of such contracts prior
to the effective date;
6.1.2. the seller shall be obliged to discharge any obligations
under the contracts in respect of the period from the
effective date to the implementation date;
6.1.3. the purchaser shall be obliged at its cost but in the
seller's name to discharge the seller's obligations under
the contracts after the implementation date;
6.1.4. the parties respectively indemnify each other against any
loss of any nature which may arise as a result of the other
of them failing to comply with their obligations hereunder.
6.1.5. the handing over to the purchaser on loan for a period of
120 (one hundred and twenty) days of the seller's documents,
books and records and all information relating to the
business subject to the auditors being given access as
necessary. The purchaser shall be entitled to make copies of
all such
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documents, books and records. After the expiry of the 120 (one
hundred and twenty) day period, the purchaser shall have reasonable
access thereto;
6.1.6. the physical delivery of all assets forming part of the
business to the purchaser by handing them to the purchaser
at the premises;
6.1.7. insofar as motor vehicles are concerned, all necessary
licence papers and transfer documents, but on the basis that
the purchaser shall obtain roadworthy certificates if
necessary;
6.2. The seller shall account to the purchaser for any receipts of the
business paid directly to the seller after the effective date in
respect of transactions that were entered into after the effective
date.
7. THE NAME
The seller shall be obliged to procure that within 30 (thirty) days of
signature hereof, its name is changed, so as to enable the purchaser to
register such name as a defensive name in its favour.
8. WARRANTIES
8.1. The seller warrants that -
8.1.1. the corporation will be the registered owner of the property;
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8.1.2. the property is zoned for commercial and business use;
8.1.3. no person will have any right (including any option or right
of first refusal) to purchase the property, the building
thereon or any part thereof or any other assets of the
corporation;
8.1.4. the sole business of the corporation will be that of a
property owner and apart from the purchase of the property,
the corporation will not have purchased or sold any immovable
property, shares or other investments;
8.1.5. the property has not been provisionally or finally declared
as a national monument under the National Monuments Act,
1969.
8.2. The seller warrants that no application for the winding up of the
seller has been presented at date of signature hereof nor will any
such application have been presented on the implementation date.
8.3. Nothing herein contained shall relieve the seller from its
obligation to make those disclosures which it is in law obliged to
make.
8.4. No warranties or representations which are not set forth in this
agreement shall be binding on the seller and the business is
purchased on the basis that it is taken voetstoots.
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9. INDEMNITY
9.1. The seller indemnifies the purchaser against any claims, which may
be made in respect of finished products and work-in-progress which
are included in the stock forming part of the business, provided
that to the extent that any claims are made against the purchaser in
respect of any such stock which was sold and delivered to third
parties in the course of the business during the period 1 January
1998 to implementation date, the seller's indemnity shall only
operate in respect of claims the amount of which exceeds the amount
of net profits earned by the business during the period from 1
January 1998 to the implementation date in respect of such products
sold and delivered during such period. Should any claims be made
against the purchaser in respect of such stock, the purchaser shall
afford the seller an opportunity to assist the purchaser to contest
the claim and, subject to an indemnity in a form acceptable to the
purchaser against costs being given by the seller, shall engage
attorneys and counsel nominated by the seller for the said purpose.
9.2. The seller indemnifies the purchaser against any losses or damages
of whatsoever nature which the purchaser may sustain by reason of
assuming all the obligations of the seller under the contracts of
employment with the employees of the business, the cause of which
arose prior to the effective date.
10. AGENT'S COMMISSION
It is recorded that the sale was not concluded through the instrumentality
of any agent.
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11. BREACH
If any party breaches any material provision or term of this agreement
(other than those which contain their own remedies or limit the remedies
in the event of a breach thereof) and fails to remedy such breach within 7
(seven) days of receipt of written notice requiring it to do so (or if it
is not reasonably possible to remedy the breach within 7 (seven) days,
within such further period as may be reasonable in the circumstances
provided that the party in breach furnishes evidence within the period of
7 (seven) days, reasonably satisfactory to the other party, that it has
taken whatever steps are available to it, to commence remedying the
breach)) then the aggrieved party shall be entitled without notice, in
addition to any other remedy available to it at law or under this
agreement, including obtaining an interdict, to cancel this agreement or
to claim specific performance of any obligation whether or not the due
date for performance has arrived, in either event without prejudice to the
aggrieved party's right to claim damages.
12. DOMICILIUM CITANDI ET EXECUTANDI
12.1. The parties choose as their domicilia citandi et executandi for all
purposes under this agreement, whether in respect of court process,
notices or other documents or communications of whatsoever nature
(including the exercise of any option), the following addresses:
12.1.1. PURCHASER
Physical: 2nd Floor, Ransen House
Constitution Street
Cape Town
Postal: P O Box 10118
Caledon Square
7905
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Page 15
12.1.2. SELLER
Physical: 2nd Floor, Castle Mews
16A Newmarket Street
Cape Town
8001
Telefax: (021) 462-1660
Postal: V Vasson & Co.
P 0 Box 48
Gatesville
7764
12.1.3. Alois Koch
Physical: 20 Ottenhout Street
Plattekloof
12.1.4. Keith Howard Redman
Physical: 17 Melody Lane
Kirstenhof
12.1.5. Herbert Maria Trischler
Physical: 35 Graaff Avenue
Milnerton
12.2. Any notice or communication required or permitted to be given in
terms of this agreement shall be valid and effective only if in
writing but it shall be competent to give notice by telefax.
12.3. Either party may by notice to the other party change the physical
address chosen as its domicilium citandi et executandi to another
physical address where postal delivery occurs in the Republic of
South Africa or its postal
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Page 16
address or its telefax number, provided that the change shall become
effective on the 7th business day from the deemed receipt of the
notice by the other party.
12.4. Any notice to a party -
12.4.1. sent by prepaid registered post (by airmail if appropriate)
in a correctly addressed envelope to it at an address chosen
as its domicilium citandi et executandi to which post is
delivered shall be deemed to have been received on the 7th
business day after posting (unless the contrary is proved);
12.4.2. delivered by hand to a responsible person during ordinary
business hours at the physical address chosen as its
domicilium citandi et executandi shall be deemed to have
been received on the day of delivery; or
12.4.3. sent by telefax to its chosen telefax number stipulated in
clause 12.1, shall be deemed to have been received on the
date of despatch (unless the contrary is proved).
12.5. Notwithstanding anything to the contrary herein contained a written
notice or communication actually received by a party shall be an
adequate written notice or communication to it notwithstanding that
it was not sent to or delivered at its chosen domicilium citandi et
executandi.
13. WHOLE AGREEMENT
13.1. This agreement constitutes the whole agreement between the parties
relating to the subject matter hereof.
13.2. No amendment or consensual cancellation of this agreement or any
provision or term hereof or of any agreement, bill of exchange or
other document issued or executed pursuant to or in terms of this
agreement and no settlement of any disputes arising under this
agreement and no extension of time, waiver or relaxation or
suspension of or agreement not
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Page 17
to enforce or to suspend or postpone the enforcement of any of the
provisions or terms of this agreement or of any agreement, bill of
exchange or other document issued pursuant to or in terms of this
agreement shall be binding unless recorded in a written document
signed by the parties. Any such extension, waiver or relaxation or
suspension which is so given or made shall be strictly construed
as relating strictly to the matter in respect whereof it was made or
given.
13.3. No extension of time or waiver or relaxation of any of the
provisions or terms of this agreement or any agreement, bill of
exchange or other document issued or executed pursuant to or in
terms of this agreement, shall operate as an estoppel against any
party in respect of its rights under this agreement, nor shall it
operate so as to preclude such party thereafter from exercising its
rights strictly in accordance with this agreement.
13.4. To the extent permissible by law no party shall be bound by any
express or implied term, representation, warranty, promise or the
like not recorded herein, whether it induced the contract and/or
whether it was negligent or not.
14. COSTS
All the costs on an attorney and own client basis of EDWARD NATHAN &
FRIEDLAND INC of and incidental to the preparation of this agreement
(including prior drafts and consultations) and the stamp duty shall be
borne by the purchaser. The costs of Smiedt-Witz shall be borne by the
seller.
15. VALUE-ADDED TAX
15.1. The seller and the purchaser agree that the business is disposed of
as a going concern and for the purposes of section 11(1)(e) of the
Value-Added Tax Act, 1991, agree that the business will be an
income-earning activity on the implementation date and that the
assets which are necessary for carrying on such business have been
disposed of by the seller to the purchaser in terms of this
agreement.
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15.2. If, notwithstanding the aforegoing, value-added tax is payable in
respect of any of the assets sold in terms hereof, same shall be
borne and paid by the purchaser.
16. JOINT AND SEVERAL LIABILITY OF THE SELLER
The liability of the persons comprising the seller vis-a-vis the purchaser
shall be joint and several.
17. JOINT AND SEVERAL LIABILITY OF THE PURCHASER
The liability of the persons comprising the purchaser vis-a-vis the seller
shall be joint and several.
18. EXECUTION IN COUNTERPARTS
This agreement may be executed in several counterparts, each of which
shall together constitute one and the same instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. __________________
9/11/99 Cape Town /s/ [ILLEGIBLE]
- ------- --------- --------------------------
2. __________________ VIRTUAL COLOUR PRINTING CC
1. __________________
_____ ____________ --------------------------
2. __________________ COLORSMART.com Inc. USA
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
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1. __________________
9/11/99 Cape Town
- ------- --------- /s/ Keith Redman
--------------------------
KEITH HOWARD REDMAN
2. __________________
1. __________________
9/11/99 Cape Town /s/ Herbert Trischler
- ------- --------- --------------------------
HERBERT MARIA TRISCHLER
2. __________________
1. __________________
9/11/99 Cape Town /s/ Alois Koch
- ------- --------- --------------------------
ALOIS KOCH
2. __________________
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ANNEXURE A - DESIGNATED FIXED ASSETS
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<PAGE>
EXHIBIT 2.15
AGREEMENT
THIS AGREEMENT is executed this ____ day of December, 1999, NUNC PRO
TUNC to August __, 1999, by and among:
JAMBERRY LAKE, LLC
443 Springfield Avenue
Summit, New Jersey 07901
(hereinafter "Jamberry" and/or "Shareholder");
JAMBERRY LAKE DIGITAL MEDIA,INC.
443 Springfield Avenue
Summit, New Jersey 07901
(hereinafter the "Corporation")
and
COLORSMART.COM, INC.
537 Myatt Drive
Madison, Tennessee 37115
(hereinafter "ColorSmart" and/or "Purchaser")
WITNESSETH:
WHEREAS, Jamberry owns one hundred (100) shares of the common stock of
the Corporation, which represent one hundred (100%) percent of the issued and
outstanding shares of common stock (hereinafter the "Shares") of the
Corporation; and
WHEREAS, the Corporation is in the business of designing, distributing
and implementing multi-media applications for electronic commerce; and
WHEREAS, the Corporation is in need of additional working capital to
fund its operations; and
<PAGE>
WHEREAS, the Purchaser intends to engage in an Initial Public Offering
("IPO") of the Purchaser's stock; and
WHEREAS, Jamberry desires to sell to the Purchaser, and the Purchaser
desires to purchase from Jamberry the Shares, upon the terms and subject to
the conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE SHARES/ADDITIONAL CONSIDERATION.
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions
contained herein, Jamberry shall sell, transfer and deliver to the
Purchaser, and the Purchaser shall purchase and acquire from Jamberry the
Shares, which Shares shall be free of any adverse claim or encumbrance.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be ONE MILLION AND 00/100 DOLLARS ($1,000,000.00). The Purchase
Price is subject to potential increase as set forth in Section 1.3.
1.3 PAYMENT OF THE PURCHASE PRICE. In payment of the Purchase Price,
Jamberry shall receive, at the time of the Purchaser's IPO, ONE HUNDRED
TWENTY-FIVE THOUSAND SHARES (125,000) of common stock of the Purchaser (the
"Minimum
<PAGE>
Stock Consideration"). The Minimum Stock Consideration is the minimum
compensation which Jamberry shall receive for the sale and transfer of the
Shares. On the thirtieth (30th) day after the IPO, Jamberry shall receive
common stock of the Purchaser with a fair market value equal to ten percent
(10%) of the amount by which the average equity market capitalization of the
Purchaser during the thirty (30) day period following the IPO (the "Initial
Period") exceeds SEVENTY-FIVE MILLION AND 00/100 DOLLARS ($75,000,000.00).
The average equity market capitalization during that Initial Period will be
considered the "Threshold Level". Sixty (60) days after the IPO, Jamberry
shall receive common stock of the Purchaser with a fair market value equal to
ten percent (10%) of the amount by which the average equity market
capitalization of the Purchaser, during the thirty (30) days that begin
thirty-one (31) days after the Initial Period exceeds the Threshold Level. The
average equity market capitalization during that thirty (30) day period will
be considered the "Second Threshold Level". Ninety days after the IPO,
Jamberry shall receive common stock of the Purchaser with a fair market value
equal to ten (10%) of the amount by which the average equity market
capitalization of the Purchaser, during the thirty (30) days that begin
sixty-one (61) days after the Initial Period, exceeds the "Second Threshold
Level".
1.4 ADDITIONAL CONSIDERATION - PURCHASER'S OBLIGATION TO PROVIDE WORKING
CAPITAL. In addition to the payment of the Purchase Price as set forth
herein, and as further consideration for Jamberry's transfer of the Shares,
Purchaser shall be required to pay to Jamberry ONE HUNDRED THOUSAND AND
00/100 DOLLARS ($100,000.00) per month until the completion of the
Purchaser's IPO (collectively the "Capital
<PAGE>
Contribution Payments", individually a "Capital Contribution Payment"). Each
Capital Contribution Payment is non-refundable and shall be due and payable
on the fifteenth (15th) day of each month beginning on August 15, 1999.
Jamberry hereby acknowledges receipt of TWO HUNDRED FORTY-FIVE THOUSAND AND
00/100 DOLLARS ($245,000.00) representing two (2) whole and one (1) partial
Capital Contribution Payment from the Purchaser. Notwithstanding any
provision contained herein to the contrary, in the event the Purchaser
completes its IPO prior to Jamberry's receipt of Capital Contribution Payment
totaling at least ONE MILLION AND 00/100 DOLLARS ($1,000,000.00), Purchaser
shall be required to pay to Jamberry, at the closing of the IPO, an amount
equal to the difference between ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) and the total amount of the Capital Contribution Payments
received by Jamberry.
ARTICLE 2
TRANSFER OF SHARES
1.1 SHARE TRANSFER. Within five (5) business days of receipt of each
Capital Contribution Payment Jamberry shall deliver to Durkin & Durkin, Esqs.
(the "Escrow Agent") ten percent (10%) of the issued and outstanding shares
of common stock of the Corporation duly endorsed (or accompanied by
appropriate stock powers duly endorsed) in blank for transfer (individually a
"Share Installment", collectively the "Share Installments"). All of the Share
Installments delivered to the Escrow Agent pursuant to this Section 2.1 shall
be held under the terms of the Escrow Agreement attached hereto as Exhibit
A. In the event that all of the issued and outstanding Shares of common stock
have not been delivered to the Escrow Agent at the time of the Purchaser's
IPO, Jamberry shall, provided it has received the required number of
<PAGE>
shares of the common stock of the Purchaser due Jamberry pursuant to Section
1.3 herein, deliver the remaining shares directly to the Purchaser at the
Closing as set forth in Section 5.1.
2.2 NON-OCCURANCE OF IPO. Notwithstanding anything to the contrary
contained herein, in the event the Purchaser's IPO has not occurred by March
31, 1999, either party may cancel this Agreement upon ten (10) days advance
written notice to the other party, and the parties shall thereafter have no
further rights or obligations to each other, except as set forth in this
Section 2.2. Upon cancellation of this Agreement pursuant to this Section
2.2, Purchaser shall be entitled to receive from the Escrow Agent one percent
(1%) of the issued and outstanding common stock of the Corporation for each
TWENTY THOUSAND AND 00/100 DOLLARS ($20,000.00) in Capital Contribution
Payments which have been made by the Purchaser at the time of cancellation up
to a maximum of fifty percent (50%) of the issued and outstanding shares of
common stock of the Corporation.
2.3 TAXES ON TRANSFER; EXPENSES OF SHAREHOLDERS.
Jamberry shall pay all state and/or federal taxes and governmental
charges assessable against Jamberry regarding the transfer of the Shares to
the Purchaser. Each party shall be required to pay its respective fees and
expenses of counsel, and any accounting and other costs and expenses
incurred, by them in connection with the Agreement and the transactions
provided for herein.
2.4 ASSUMPTION OF JAMBERRY'S LEASE OBLIGATIONS. The parties hereto
acknowledge that Jamberry is the Guarantor on the Lease for the premises
located at 443 Springfield Avenue, Summit, New Jersey, (the "Leased
Premises"), a copy of which is hereto attached as Exhibit "B". Purchaser
hereby agrees to replace Jamberry as the Guarantor on
<PAGE>
the Lease within fifteen (15) business days of the day on which Purchaser
receives a Share Installment or Share Installments such that Purchaser at the
time of receipt of said Share Installment or Share Installments owns a
minimum of fifty percent (50%) of the issued and outstanding shares of
commons stock of the Corporation. In the event the Landlord of the Leased
Premises refuses to consent to the substitution of the Purchaser as the
Guarantor, Purchaser agrees to indemnify and hold Jamberry harmless from any
damage, loss, claim, liability, deficiency or expense inclusive of reasonable
attorneys' and accountants' fees arising out of or relating to Jamberry's
obligations as Guarantor under the Lease.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.
Jamberry represents and warrants to Purchaser that:
3.1 ORGANIZATION, STANDING, POWER AND AUTHORITY OF THE CORPORATION. The
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority to own, lease and operate its properties and to conduct its
business as it has been and is now conducted. The Corporation has no
subsidiary corporation and owns no interest, directly or indirectly in any
other business, enterprise, firm or corporation.
3.2 SHAREHOLDERS OF THE CORPORATION. Jamberry is the sole holder of
record and the sole beneficial owner of the Shares. The Shares are held by
Jamberry free and clear of any
<PAGE>
adverse claim or encumbrance.
3.3 CAPACITY OF SHAREHOLDER; CONSENT; EXECUTION OF AGREEMENT; GOOD
TITLE. Jamberry has all requisite power, authority and capacity to enter into
this Agreement and to perform the obligations to be performed hereunder.
Jamberry represents that it is not required to obtain any consents and
approvals from any persons, other than Greg E. Dukoff, Todd Dukoff, and
Phyllis Dukoff, so as to sell the Shares to Purchaser pursuant to the terms
and conditions of this Agreement. This Agreement has been duly executed and
delivered by and constitutes the valid and legally binding obligation of
Jamberry. Upon delivery of the Shares to Purchaser as herein contemplated,
Purchaser shall acquire legal and beneficial ownership of, and shall have
good and marketable title to, all of the issued and outstanding Shares, which
constitute all of the issued and outstanding shares of capital stock of the
Corporation, free of any adverse claim or encumbrance.
3.4 NONVIOLATION OF LAWS, ORDERS AND AGREEMENTS. The execution and
delivery of this Agreement by Jamberry and the performance of its obligations
hereunder are not prohibited by, are not in violation of breach of, do not
conflict with or constitute a default under, and will not accelerate or
permit the acceleration of the performance required by, any of the terms or
provisions of the Articles of Incorporation or By-Laws of the Corporation or
any note, debt instrument, security agreement, deed, lease or mortgage, or
any other material commitment, license, purchase order, contract, agreement
or other instrument, written or oral, to which the Corporation or Jamberry or
any of their respective assets or properties are bound, and will not be an
event which, after notice or lapse of time or both, will result in any such
violation, breach, conflict, default or acceleration. The execution and
delivery of this Agreement by Jamberry and
<PAGE>
the performance of its obligations hereunder will not violate any law,
judgment, decree, order, rule or regulation of any governmental authority or
court, whether federal, state or local, at law or in equity, applicable to
the Corporation or Jamberry and will not result in the creation or
imposition of any lien, encumbrance, equity, mortgage, restriction or claim in
favor of any third person upon any of the properties, assets or common or
preferred stock of the Corporation.
3.5 ABSENCE OF DEFAULT. The Corporation is not in default (i) under any
of the terms or provisions of any note, debt instrument, security agreement,
deed, lease, or mortgage or under any other commitment, contract, agreement,
license, purchase order, lease or other instrument, whether written or oral,
to which the Corporation is a party or by which it or any of its properties
or assets is bound; (ii) under any law, judgment, decree, order, notice, rule
or regulation of any governmental authority or court, whether federal, state
or local, at law or in equity, and applicable to the Corporation or to
any of its respective operations, properties or assets; or (iii) in the
payment of any of its respective monetary obligations or debts; and to the
best of Jamberry's knowledge and belief, there exists no condition or event
which, after notice or lapse of time or both, would constitute a default in
connection with any of the foregoing, which default (or the curing of which
default) could have a material, adverse effect on the business, assets,
properties or operations of the Corporation.
3.6 FINANCIAL STATEMENTS. Exhibit "C" to this Agreement sets forth the
balance sheet for the Corporation as of September 30, 1999, and the statement
of income and retained earnings of the Corporation for the most recent year,
which has been prepared by the Corporation and which accurately reflect the
financial condition of the Corporation as noted therein and thereon by
management.
<PAGE>
3.7 ACTIONS BY THE CORPORATION. The Corporation has not, since the date
of the balance sheet as of September 30, 1999, referenced in Section 3.6
above, acquired or disposed of any real property or material interests
therein or material fixtures attached thereto, paid any dividend or made any
distribution on its shares, incurred any indebtedness, or (except for this
Agreement) entered into any transaction not in the ordinary course of
business.
3.8 TAXES OF THE CORPORATION AND THE SHAREHOLDERS. The Corporation and
Jamberry are not delinquent in the payment of any taxes to the United States
Government, the States of New Jersey or Delaware, or to any other taxing
authority.
3.9 ASSETS OF THE CORPORATION; GOOD TITLE. The assets shown in the most
current balance sheet of the Corporation constitute all the property, real
and personal, tangible and intangible, used by the Corporation in the
conduct of its business. To the best of the knowledge of the Shareholders,
all of the personal properties and assets of the Corporation used in the
conduct of its business are in operating condition (subject to normal wear
and tear, consistent with the age of the properties or assets). Except as set
forth in Exhibit D to this Agreement, the Corporation has good and marketable
title to all of its personal and real properties and assets (tangible and
intangible), free and clear of any and all liens, charges, encumbrances,
claims, restrictions, or equities. No such asset is subject to or held under
any lease, mortgage, security agreement, conditional sales contract or other
title retention agreement, or is other than in the sole possession and under
the sole control of the Corporation.
3.10 CONTRACTS OF THE CORPORATION. Exhibit "E" to this Agreement
constitutes a full and complete list of each contract or agreement to which
the Corporation is a party or bound thereby in any respect.
<PAGE>
3.11 ARTICLES OF INCORPORATION AND BY-LAWS OF THE CORPORATION. The
copies of the Articles of Incorporation of the Corporation, certified by the
Secretary of State of the State of Delaware, and the By-Laws of the
Corporation, certified by the Secretary, heretofore delivered by the
Corporation, are true, complete and correct. The corporate records and stock
books of the Corporation heretofore provided to Purchaser or its authorized
representatives for inspection and review are current and up-to-date, true,
complete and correct. All such information which Jamberry and the Corporation
have made available or provided to, or have caused to be made available or to
be provided to, Purchaser or any of its authorized representatives is true,
correct and complete as to the subject matter thereof.
3.12 LITIGATION OF THE CORPORATION. There are no outstanding suits,
proceedings, actions, claims and investigations, at law or in equity, pending
against or affecting the Corporation or involving any of its respective
properties, assets or capital stock, before any court, agency or authority.
The Corporation is not subject to nor in default with respect to any notice,
order, writ, injunction or decree of any court, agency or authority.
3.13 LICENSES OF THE CORPORATION. Exhibit "F" to this Agreement
constitutes a full and complete list of all registrations, licenses, permits,
approvals, qualifications, or the like, issued or to be issued to the
Corporation by any government or any governmental unit, agency, body or
instrumentality, whether federal, state, local or other. No other
registrations, licenses, permits, approvals, qualifications or the like are
necessary to conduct the respective business of the Corporation as it is now
being conducted. No registration with, approval by, clearance from or
prenotification to any governmental agency is required in connection with the
execution and performance of this Agreement by the Shareholders.
<PAGE>
3.14 BANK ACCOUNT OF THE CORPORATION. Exhibit "G" to this Agreement
constitutes a full and complete list of (i) all the bank and Security
Brokerage accounts of the Corporation, together with the names of the persons
authorized to draw thereon and (ii) the names of all persons holding powers
of attorney from the Corporation and a summary statement of the terms thereof.
3.15 ACCURACY OF INFORMATION FURNISHED BY OR ON BEHALF OF THE
CORPORATION AND THE SHAREHOLDER. This Agreement, including the Exhibits
hereto, to the best of Jamberry's knowledge and belief, does not contain any
untrue statement of a material fact and does not omit to state any material
fact necessary to make any such statement, in light of the circumstances
under which such statement is made, not misleading.
3.16 COMPLIANCE BY THE CORPORATION WITH LAWS, REGULATIONS, AND ORDERS.
Except where limited or qualified by the terms of this Agreement or any
exhibits attached hereto, and to the best knowledge and belief of Jamberry,
the Corporation has complied with all laws, regulations, and orders
applicable to the operation of its business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Jamberry that:
4.1 ORGANIZATION, STANDING, POWER AND AUTHORITY OF PURCHASER; EXECUTION
OF AGREEMENT. Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada, and has all requisite
power and authority to own, lease and operate its properties and to conduct
its business as it has been and is know conducted. Purchaser has all
requisite corporate power and authority to enter into this Agreement and to
<PAGE>
perform the obligations to be performed by it hereunder. This Agreement has
been duly authorized, executed and delivered by and constitutes the valid and
legally bind obligation of, Purchaser.
4.2 BROKER, FINDER, OR AGENT. Purchaser has not expressly or impliedly
engaged any broker, finder or agent with respect to any transaction
contemplated by this Agreement.
4.3 NONVIOLATION OF LAWS, ORDER AND AGREEMENT. The execution and
delivery of this Agreement by Purchaser and the performance of its obligation
hereunder are not prohibited by, are not in violation or breach of, do not
conflict with or constitute a default under, and will not accelerate or
permit the acceleration of the performance required by, any of the terms or
provisions of the Articles of Incorporation or By-Laws of Purchaser or any
material note, debt instrument, security agreement or mortgage, or any other
contract, agreement or instrument, written or oral, to which Purchaser is a
party or by which Purchaser is bound, and will not be an event which, after
notice or lapse of time or both, will result in any such violation, breach,
conflict, default or acceleration. The execution and delivery of this
Agreement by Purchaser and the performance of its obligations hereunder will
not violate any law, judgment, decree, order, rule or regulation of any
governmental authority or court, whether federal, state or local, at law or
in equity, applicable to Purchaser, and will not result in the creation or
imposition of any material lien, possibility of lien, encumbrance, equity,
restriction or claim in favor of any third person upon any of the properties,
assets or common stock of Purchaser.
1.4 CONSENT AND APPROVALS. There is no requirement for any consent,
approval or
<PAGE>
authorization of, or filing with any court, governmental authority or
regulatory agency of validity of the execution and delivery of this Agreement
and the performance by Purchaser hereof which has not been fulfilled.
ARTICLE 5
BOARD OF DIRECTORS
5.1 COMPOSITION OF THE BOARD OF DIRECTORS. Jamberry and the Purchaser
acknowledge that the current Board of Directors (the "Board") of the
Corporation consists of the following three (3) members: Greg E. Dukoff, Todd
Dukoff and Phyllis Dukoff, (collectively the "Dukoffs"). Jamberry shall, upon
,
execution of this Agreement, take such actions as shall be necessary to elect
Roger Finchum, Sr., or his designee, to the Board of Directors of the
Corporation. Purchaser agrees that from and after the Closing the Board shall
consist of no more than seven (7) members. Purchaser further agrees that for
a period of three (3) years, and for so long thereafter as Greg E. Dukoff
and/or Todd Dukoff are employed by the Purchaser, Purchaser shall use all
reasonable efforts to cause the Dukoffs, to be elected to the Board at every
annual meeting or special meeting of the Corporations shareholders held for
the election of directors. During the three (3) year period referenced above
and any subsequent period during which Greg Dukoff or Todd Dukoff are
employed by the Purchaser, neither the Corporation nor the Purchaser shall
take any action to remove the Dukoffs, or any one of them, from the Board.
ARTICLE 6
CLOSING
6.1 CLOSING DEFINED. The "Closing" means the time at which the sale of
the Shares to Purchaser is consummated by the delivery to the Purchaser of
certificates representing all of the issued and outstanding shares of the
Corporation. Provide all of the conditions set forth
<PAGE>
in this Agreement have been satisfied (or waived by the appropriate party),
the closing shall take place at the law offices of Durkin & Durkin, 1120
Bloomfield Avenue, West Caldwell, New Jersey 07006, or at any other place or
on any other date mutually agreed upon in writing by the parties hereto,
within three (3) business days from the date of the IPO.
6.2 ACTIONS BY SHAREHOLDERS AT CLOSING. At the Closing, in addition to
any other document specifically required to be delivered pursuant to this
Agreement, Jamberry shall deliver or cause to be delivered to Purchaser, in
form and substance satisfactory to Purchaser and its counsel:
(a) Certificates representing all of the Shares, duly endorsed (or
accompanied by appropriate stock powers duly endorsed) in blank for transfer
with the signatures duly guaranteed, together with such supporting documents
as may in the opinion of Purchaser's counsel be necessary to permit Purchaser
to acquire the Shares free of any adverse claim or encumbrance;
(b) The stock books, stock ledgers, minute books and corporate seal of
the Corporation;
(c) A certificate executed by Jamberry, dated the date of the Closing,
to the effect that, as of such date (i) each of the representations and
warranties of Jamberry set forth in Article 3 is true and correct, (ii)
Jamberry has performed and complied with all agreements, undertakings and
obligations which are required to be performed or complied with by it at or
prior to the Closing, and (iii) there has been no material adverse change, or
discovery of a condition or the occurrence of any event which might reasonably
be expected to result in a change in the financial condition, assets,
liabilities or business of the Corporation;
<PAGE>
6.3 ACTIONS BY PURCHASER AT CLOSING. Purchaser shall deliver to
Jamberry and their counsel, a certificate, signed by an officer of Purchaser
and dated the date of the Closing, to the effect that (i) each of the
representations and warranties of Purchaser set forth in Article 4 hereof
is true and correct and (ii) Purchaser has performed and complied with all
agreements, undertakings and obligations which are required to be performed
or complied with by it at prior to the Closing.
ARTICLE 7
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligation upon Purchaser to effect the purchase of the Shares shall
be subject to the fulfillment of each of the following conditions:
7.1 ACCURACY OF JAMBERRY'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Jamberry set forth in Article 3 shall be
true and correct both on the date hereof and on the date of the Closing as if
made at that time, except insofar as changes shall have occurred after the
date hereof which are permitted by this Agreement.
7.2 PERFORMANCE OF JAMBERRY' OBLIGATIONS. Jamberry shall have performed
and complied with all agreements, undertakings and obligations which are
required to be performed or complied with by it at or prior to the Closing.
7.3 NO ADVERSE CHANGE IN THE CORPORATION. Since the date hereof, there
shall have been no material adverse change, or discovery of a condition or
the occurrence of any event which might reasonably be expected to result in
such material adverse change, in the financial condition, assets, liabilities
or business of the Corporation, other than as permitted by this Agreement.
<PAGE>
7.4 DELIVERY OF SHAREHOLDER'S CERTIFICATE. At the Closing, Jamberry
shall have delivered to Purchaser a certificate, dated the date of the
Closing, to the effect that to the best of its knowledge and belief, after
due inquiry, the conditions specified in Sections 7.1, 7.2 and 7.3 hereof
have been fulfilled.
1.5 SATISFACTION WITH LEGAL MATTERS. All legal matters in connection
with this Agreement and the transactions contemplated hereby, and the form
and substance of all legal proceedings and of all papers, instruments and
documents used or delivered hereunder or incidental hereto shall be
reasonably satisfactory to Purchaser, and at its request, to Lynch, Rowin,
Novack, Burnbaum & Crystal, counsel to Purchaser.
1.5 ABSENCE OF LITIGATION. No litigation shall have been commenced or
threatened with regard to the transactions provided for in this Agreement.
1.6 ABSENCE OF IMPAIRMENT OF CONTRACTS OR LICENSES OF ANY OF THE
CORPORATION. There shall be no agreement, contract, license, lease,
franchise, permit or other instrument of the Corporation as to which the
interest of the Corporation will be impaired by the purchase of the Shares of
the Corporation which will materially and adversely affect the value of the
Shares.
1.5 RECEIPT OF CONSENTS. There shall have been received by Shareholder
all consents and/or amendments or modifications referred to in Section 9.3
hereof, and any approvals of, or any indication of no action by, any United
States, state or local government authority reasonably deemed necessary by
Purchaser to the consummation of the transactions
<PAGE>
provided for in this Agreement.
ARTICLE 8
CONDITIONS PRECEDENT TO JAMBERRY'S OBLIGATIONS
The obligation upon Jamberry to effect the sale of the Shares shall be
subject to the fulfillment of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES OF PURCHASER. Each of the
representations and warranties of Purchaser set forth in Article 4 hereof
shall be true and correct both on the date hereof and on the date of
Closing as if made at that time, except insofar as changes shall have occurred
after the date hereof which are permitted by this Agreement.
8.2 PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall have
performed and complied with all agreements, undertakings and obligations
which are required to be performed or complied with by it at or prior to the
Closing.
8.3 DELIVERY OF CERTIFICATE OF PURCHASER. At the Closing, Purchaser
shall have delivered to Jamberry a certificate, signed by an officer of
Purchaser and dated the date of the Closing, to the effect that to the best
of the knowledge and belief of such officer, after due inquiry, the conditions
specified in Sections 8.1 and 8.2 hereof have been fulfilled.
8.4 SATISFACTION WITH LEGAL MATTERS. All legal matters in connection with
this Agreement and the transactions contemplated hereby, and the form and
substance of all legal proceedings and of all papers, instruments and
documents used or delivered hereunder or incidental hereto, shall be
reasonably satisfactory to Jamberry, and at its request, to Durkin & Durkin,
counsel for the Shareholders.
8.5 PAYMENT OF PURCHASE PRICE. Purchaser shall have delivered to
Shareholder
<PAGE>
the Purchase Price, as provided in Sections 1.2 and 1.3 hereof, and all of
the Capital Contribution Payments required herein.
ARTICLE 9
CERTAIN AGREEMENTS AND ASSURANCES OF JAMBERRY PRIOR TO CLOSING
9.1 ACCESS TO PROPERTIES AND RECORDS OF THE CORPORATION. Jamberry shall
afford, or shall cause the Corporation to afford, to the officers, attorneys,
accountants or other authorized representatives of Purchaser reasonably free
and full access during normal business hours to all of the assets,
properties, books and records of the Corporation in order to afford Purchaser
full opportunity of such review,examination and investigation as Purchaser
shall desire to make of the affairs of the Corporation, and Purchaser shall
be permitted to make extracts from such books, records (including the stock
record and minute books) or other documentation; and Jamberry and the
Corporation shall furnish or cause to be furnished to Purchaser such
reasonable financial and operating data and other information as to the
business, properties and assets of the Corporation as Purchaser or any of
its directors, officers, attorneys, accountants or other authorized
representatives may reasonably request. In the event the transactions
contemplated herein are not consummated for whatever reason, then in that
event, Purchaser agrees to promptly return all information and documents.
9.2 ACTION CONSISTENT WITH AGREEMENT. Jamberry shall not voluntarily
undertake any course of action inconsistent with the satisfaction of the
requirements of the conditions applicable to it set forth in this Agreement,
and Jamberry shall promptly do all such acts and take all such measures as
may be appropriate to enable it to perform as early as possible the
obligations herein provided to be performed by it.
<PAGE>
9.3 CONSENTS. Jamberry shall use its best efforts to obtain, to the
extent necessary, from any other party or parties to all agreements to which
the Corporation is a party, appropriate consents in writing to the
transactions contemplated by this Agreement and/or such amendments,
assignments or modifications of such documents as may be required in order
that the transactions contemplated hereby shall not result in any default
thereunder.
9.4 ACTIONS INCONSISTENT WITH REPRESENTATIONS AND WARRANTIES. From the
date of this Agreement to the Closing, except as otherwise expressly
permitted by this Agreement or as Purchaser may otherwise consent to in
writing from time to time, Jamberry shall not, and Jamberry shall cause the
Corporation not to, engage in any activity or enter into any transactions or
permit to occur any event which would be in violation of any of the
representations and warranties set forth in Article 3 of this Agreement as if
such representations and warranties were made at a time subsequent to such
activity, transaction or event and all references to the date of this
Agreement were deemed to be to such later time.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
INDEMNIFICATION AND SET-OFF.
1.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in or pursuant to this Agreement will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and shall terminate on the first (1st) anniversary of the
Closing.
10.2 INDEMNIFICATION.
(a) Jamberry shall indemnify and hold Purchaser harmless from any
damage, loss, claim, liability, deficiency or expense, inclusive of
reasonable attorneys' and accountants' fees.
<PAGE>
arising out of or relating to the breach of any representation or warranty of
Jamberry or the nonfulfillment of any agreement of Jamberry contained
herein or in the certificate to be delivered at Closing (all of the foregoing
called "Purchaser's Indemnification Damages") of which Purchaser has notified
Jamberry within one (1) year following the Closing. Jamberry shall not have
any liability under this Section, unless the aggregate of all of Purchaser's
Indemnification Damages exceeds on a cumulative basis $50,000.00 and then
only to the extent of any such excess. It is further agreed that Jamberry's
indemnification obligations pursuant to this Section shall be limited to the
amount of the Purchase Price as determined pursuant to Section 1.3.
(a) Purchaser shall indemnify and hold Jamberry harmless from any
damage, loss, claim, liability, deficiency or expense, inclusive of
reasonable attorneys' and accountants' fees, arising out of or relating to
the breach of any representation or warranty of Purchaser or the
nonfulfillment of any agreement of Purchaser contained herein or in the
certificate to be delivered at Closing of which Jamberry has notified
Purchaser within one (1) year following the Closing.
10.3 COOPERATION IN THE DEFENSE OF CLAIMS. In the event that a claim is
asserted against Purchaser, any of its direct or indirect subsidiaries or the
Corporation with respect to transactions, matters, events, or conditions
occurring or existing prior to the Date of the Closing, Jamberry agrees to
fully cooperate with Purchaser in the defense of any such claim.
ARTICLE 11
MISCELLANEOUS
<PAGE>
11.1 ASSIGNMENT OF AGREEMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, heirs, legatees, successors and assigns. No party hereto may
make any assignment of this Agreement or of any of his rights or interest
herein without the prior written consent of the other.
11.2 ENTIRE AGREEMENT. Except as herein expressly set forth or in an
instrument in writing signed by the party to be bound thereby which makes
reference to this Agreement, this Agreement embodies the entire agreement in
relation to the subject matter hereof, and no representations, warranties,
covenants, understandings or agreements, whether written, oral or otherwise,
in relation thereto exist between the parties hereto.
11.3 SEVERABILITY OF AGREEMENT. Each Section, subsection and lesser
section of this Agreement constitutes a separate and distinct undertaking,
covenant and/or provision hereof. In the event that any provision of this
Agreement shall finally be determined to be unlawful, such provision shall be
deemed severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
11.4 NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be deemed to have been given when received, and shall
be addressed as follows:
(a) If to Purchaser;
Colorsmart.com, Inc.
537 Myatt Drive
Madison, Tennessee 37115
Attention: Roger Finchum, Sr., Chairman
with a copy to:
Lynch, Rowin, Novack, Burnbaum & Crystal
<PAGE>
300 East 42nd Street, 10th Floor
New York, New York 10017
Attention: Edward Burnbaum
(b) If to Jamberry:
Jamberry Lake, L.L.C.
443 Springfield Avenue
Summit, New Jersey 07901
with a copy to:
Durkin & Durkin
1120 Bloomfield Avenue
P.O. Box 1289
West Caldwell, New Jersey 07007
Attention: David D.F. Lawrence, Esq.
or at such other address or addresses as the party addressed may from time to
time designate in writing.
11.5 LIMITATION OF RIGHTS AND REMEDIES UNDER THE AGREEMENT. Nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any person, firm or corporation, other than Purchaser and
the Shareholder, any rights or remedies under or by reason of this Agreement.
11.6 HEADINGS. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11.7 DUPLICATE ORIGINALS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute the same agreement.
11.8 GOVERNING LAW. This Agreement shall be deemed to be a contract made
<PAGE>
under, and shall be construed in accordance with, and governed by the laws of
the State of Tennessee.
11.9 GENDER AND PLURAL. If required by the context of this Agreement,
singular language shall be construed as plural, plural language shall be
construed as singular, and the gender of personal pronouns shall be construed
as either masculine, feminine, or neuter.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ATTEST Colorsmart.Com, Inc.
By:
- ------------------------------- -------------------------------
Roger Finchum, Sr.,
Chairman
WITNESS Jamberry Lake, LLC
By:
- ------------------------------- -------------------------------
Greg E. Dukoff,
Managing Member
ATTEST Jamberry Lake Digital Media, Inc.
By:
- ------------------------------- -------------------------------
Greg E. Dukoff,
President
<PAGE>
Exhibit 3.01
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 18 1997
NO. C15536-97
- ----------------
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
COLORSMART, INC.
THE UNDERSIGNED natural persons of the age of twenty-one (21) years or
more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the corporation is COLORSMART, INC.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
The purpose or purposes for which this corporation is organized are:
(a) To engage in the specific business of color signs and graphics, and to
engage in any other lawful acts, activities and pursuits for which a
corporation may be organized under Nevada law. Also, to acquire,
develop, explore arms otherwise deal in and with all kinds of real and
personal property and all related activities, and for any and all
other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage, pledge, hypothecate, sell,
assign, transfer, exchange, or otherwise dispose of or deal in or with
its own corporate securities or stock or other securities including,
without limitations, any shares of stock, bonds,
<PAGE>
debentures, notes, mortgages, or other obligations, and any
certificates, receipts or other instruments representing rights or
interests therein on any property or assets created or issued by any
person, firm, associate, or corporation, or instrumentalities thereof;
to make payment therefor in any lawful manner or to issue in exchange
therefor its unreserved earned surplus for the purchase of its own
shares, and to exercise as owner or holder at any securities, any and
all rights, powers, and privileges in respect thereof.
(c) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or
more of the subjects herein enumerated, or which may, at any time,
appear conducive to or expedient for the protection or benefit of this
corporation, and to do said acts as fully and to the same extent as
natural persons might, or could do in any part of the world as
principals, agents, partners, trustees, or otherwise, either alone or
in conjunction with any other person, association, or corporation.
(d) The foregoing clauses shall be construed both as purposes and powers
and shall not be held to limit or restrict in any manner the general
powers of the corporation, and the enjoyment and exercise thereof, as
conferred by the laws of the State of Nevada; and it is the intention
that the purposes and powers specified in each of the paragraphs
-2-
<PAGE>
of this Article III sha11 be regarded as independent purposes and
powers.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have authority
to issue is 24,000,000 shares of Common Stock having a par value of $.001 per
share and 1,000,000 shares of Preferred stock having a par value of $.001 per
share. All Common stock of the corporation sha11 be of the same class, and shall
have the same rights and preferences. The corporation shall have authority to
issue the shares of Preferred Stock in one or more series with such rights,
preferences and designations as determined by the Board of Directors of the
corporation. Fully-paid stock of this corporation shall not be liable to any
further call or assessment.
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of
"a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
The authorized but unissued stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - INITIAL OFFICE AND RESIDENT AGENT
The name of the Corporation's resident agent in the State of Nevada and
the street address of the resident agent where process
-3-
<PAGE>
may be served in:
The Corporation Trust Company of Nevada
One East First Street
Reno, Nevada 89501
ARTICLE VIII - DIRECTORS
The directors are hereby given the authority to do any act on behalf of the
corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorise such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is two. The name and address of each person who will serve as
director until the first annual meeting of stockholders or until any
successor(s) are elected and qualify, is:
NAME ADDRESS
---- -------
Roger D. Finchum 135 North Country Club Drive
Hendersonville, TN 37075
William P. Jones 103 Bluegrass Commons Blvd.
Hendersonville, TN 37075
ARTICLE IX - INCORPORATION
The name and address of each incorporator is:
NAME ADDRESS
---- -------
Van L. Butler 311 South State, Suite 440
Salt Lake City, UT 84111
-4-
<PAGE>
ARTICLE X
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any one or
more of its directors or officers or any other corporation, firm, association,
or entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such person is present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or ratifies
the contract or transaction in good faith by votes or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorise, approve, or ratify such
contract or transaction by vote or written consent, (c) the fact of the common
directorship, office or financial interest is not disclosed or known to the
director or officer at the time the transaction is brought before the board of
directors of the corporation for action; or (d) the contract or transaction is
fair and reasonable to the corporation at the time it is approved.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or
-5-
<PAGE>
committee thereof which authorizes, approves, or ratifies such contract or
transaction.
ARTICLE XI
LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extent provided by applicable law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the Corporation for
or with respect to any acts or omissions of such person occurring prior to the
date hereof.
Under penalties of perjury, I declare that these Articles of
Incorporation have been examined by me and are, to the best of my knowledge and
belief, true, correct and complete.
DATED this 18 day of July, 1997.
/s/ Van L. Butler
-------------------------
Van L. Butler
-6-
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 18th day of July, 1997 personally appeared before me, Van L.
Butler, who duly acknowledged to me that he signed the foregoing Articles of
Incorporation.
/s/ Diane L. Holbrook
- ---------------------------------------- ------------------------------
[SEAL] NOTARY PUBLIC NOTARY PUBLIC
DIANE L. HOLBROOK Residing at Salt Lake County
311 [ILLEGIBLE] State St. Ste. 440
Salt Lake City, UT 84111
My commission expires:
5/13/2000
STATE OF UTAH
- ----------------------------------------
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accepts the appointment as
Resident Agent of the above named corporation.
The Corporation Trust Company of Nevada
Dated: 7-18-97 By: /s/ Marcia J. Sunahara
----------- -----------------------------------
Marcia J. Sunahara
Asst. Secy.
-7-
<PAGE>
[STOCK CERTIFICATE]
NUMBER SHARES
- ---------------- ----------------
1 6,650,000
- ---------------- ----------------
COLORSMART, INC.
Incorporated under the laws of the state of nevada
24,000,000 common shares, authorized, at $.001 par value
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED. UNDER THE
SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 19?? OR
RELIANCE UPON RULE 144. THE PRIOR WRITTEN APPROVAL OF COUNSEL FOR THE ISSUER
MUST BE OBTAINED PRIOR TO ANY TRANSFER OR SALE OF THESE SHARES.
This Certifies that Roger D. Finchum is the registered holder of ***Six Million
Six Hundred Fifty Thousand*** Shares transferable only on the books of the
Corporation by the holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _______ day of July A.D. 97.
/s/ Roger D. Finchum /s/ William P. Jones
- ----------------------------------- ---------------------------------
Roger D. Finchum, President William P. Jones, Secretary
<PAGE>
SECRETARY OF STATE
[STATE OF NEVADA SEAL]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that COLORSMART, INC. did on July 18, 1997, file in this office
the original Articles of Incorporation; that said Articles are now on file and
of record in the office of the Secretary of State of the State of Nevada, and
further, that said Articles contain all the provisions required by the law of
said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my
hand and affixed the Great Seal of State,
at my office, in Carson City, Nevada, on
July 21, 1997.
[STATE OF NEVADA SEAL] /s/ Dean Heller
Secretary of State
By /s/ Deborah Jennings
Certification Clerk
<PAGE>
Exhibit 3.03
BY-LAWS
OF
COLORSMART, INC.
ARTICLE I - OFFICES
The registered office of the corporation in the State of Nevada shall be
located in the City of Reno, County of Washoe. The corporation may have its
principal office and such other offices, either within or without the State of
incorporation as the board of directors may designate or as the business of the
corporation may from time to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on such date as is
determined by the Board of Directors for the purpose of electing directors and
for the transaction of such other business as may come before the meeting.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than ten per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
<PAGE>
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than thirty days before
the date of the meeting, either personally or by mail, by or at the direction of
the president, or the secretary, or the officer or persons calling the meeting,
to each stockholder 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 stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, thirty days. If the stock transfer books shall
be closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. In lieu of closing the stock
transfer books, the directors may fix in advance a date as the record date for
any such determination of stockholders, such date in any case to be not more
than thirty days and, in case of a meeting of stockholders, not less than ten
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
BY-LAWS
Page 2
<PAGE>
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the principal office of
the corporation or transfer agent and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM.
Unless otherwise provided by law, at any meeting of stockholders one-third
of the outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders. If
less than said number 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 such adjourned meeting at which a quorum shall be
present `or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote for
BY-LAWS
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<PAGE>
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.
10. ORDER OF BUSINESS.
The order of business at all meetings off the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may 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 the same percentage of all
of the shareholders entitled to vote with respect to the subject matter thereof
as would be required to take such action at a meeting.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
BY-LAWS
Page 4
<PAGE>
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be as established by the
board of directors, but shall be no less than one. Each director shall hold
office until the next annual meeting of stockholders and until his successor
shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president or any director. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them. A director may attend any meeting by telephonic
participation at the meeting.
5. NOTICE.
Notice of any special meeting shall be given at least two days previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
6. QUORUM.
At any meeting of the directors a majority shall constitute a quorum for
the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
BY-LAWS
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<PAGE>
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such
BY-LAWS
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<PAGE>
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.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of three or more
directors. Each such committee shall serve at the pleasure of the board.
ARTICLES IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
BY-LAWS
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<PAGE>
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, a vice-president may perform the duties of the president, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. A vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all
BY-LAWS
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<PAGE>
funds and securities of the corporation; receive and give receipts for moneys
due and payable to the corporation from any source whatsoever, and deposit all
such moneys in the name of the corporation in such banks, trust companies or
other depositories as shall be selected in accordance with these by-laws and in
general perform all of the duties incident to the office of treasurer and such
other duties as from time to time may be assigned to him by the president or by
the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The 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 loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.
4. 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 depositaries as the directors may select.
BY-LAWS
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<PAGE>
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, 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 and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
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 directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall end on the last day of such month
in each year as the directors may prescribe.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
BY-LAWS
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<PAGE>
ARTICLE IX - SEAL
The directors may, in their discretion, provide a corporate seal which
shall have inscribed thereon the name of the corporation, the state of
incorporation, and the words, "Corporate Seal"
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, 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.
ARTICLE XI AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by action of the Board of Directors.
8-5-97 /s/ William P. Jones
- ------------------ -------------------------------------
William P. Jones, Secretary
BY-LAWS
Page 11
<PAGE>
Exhibit 10.01
COMMERCIAL RENTAL AGREEMENT
THIS AGREEMENT MADE THIS 1 DAY OF Jan 1998 BETWEEN CHRIS ENGLAND
("management") AND
ATW / Advertising That Works ("tenant") MANAGEMENT LEASES TO TENANT RENTAL UNIT
LOCATED AT:
3067 Main Street, East Point
1. TERM: THE TERM OF THIS LEASE SHALL BE 12 MONTHS, BEGINNING Jan 1, 1998 AND
ENDING Dec 31, 1998.
2. OCCUPANCY: IT UNDERSTOOD AND AGREED THAT UNDERSIGNED WILL USE PROPERTY FOR
COMMERCIAL / RETAIL BUSINESS ONLY AND THAT AT NO TIME WILL TENANT PERMIT OTHERS
TO SUB LEASE THE PREMISES WITHOUT FIRST HAVING OBTAINED WRITTEN CONSENT FROM THE
MANAGEMENT.
3. RENT: RENT IS PAYABLE IN ADVANCE AT A RATE OF $2700.00 PER MONTH ON THE FIRST
1st. DAY OF EACH MONTH PAYABLE AT THE OFFICE OF THE MANAGEMENT LOCATED AT:
CHRIS ENGLAND, 3067 MAIN STREET, EAST POINT, GA. 30344
4. DISCOUNT: TIME IS OF THE ESSENCE OF THIS AGREEMENT. IF THE RENT IS PAID ON OR
BEFORE THE CLOSE OF THE BUSINESS DAY OF THE FIRST OF EACH MONTH THE RENT WILL BE
$2800. RENT MUST BE RECEIVED ON OR BEFORE THE DAY IT IS DUE TO OBTAIN THIS $100
DISCOUNT.
5. LATE CHARGES AND OTHER: RESIDENT SHALL PAY $5.00 PER DAY LATE CHARGES FOR
EACH DAY THE RENT IS PAST DUE BEGINNING THE SECOND DAY THAT IT HAS NOT BEEN
PAID.
RESIDENT SHALL PAY $20.00 PER CHECK FOR ANY RETURNED UNPAID CHECKS PLUS ANY LATE
CHARGES AND LOST DISCOUNTS. RESIDENT SHALL PAY $8.00 COLLECTION FEE FOR EACH
ATTEMPTED COLLECTION BY THE MANAGEMENT.
6. SECURITY DEPOSIT: RESIDENT SHALL PAY A SECURITY DEPOSIT OF $0 THE SECURITY
DEPOSIT WILL BE REFUNDED TO THE RESIDENT AFTER TERMINATION OF THIS LEASE
PROVIDED:
A. NO DAMAGE EXIST ABOVE NORMAL WEAR AND TEAR.
B. CARPETS, WALLS, FLOORS, ALL APPLIANCES, BATHROOM FIXTURES, ETC. MUST BE
CLEANED AND READY FOR NEW RESIDENT.
C. 30 DAY WRITTEN NOTICE HAS BEEN GIVEN TO MANAGEMENT.
D. ALL MONIES DUE HAVE BEEN PAID TO MANAGEMENT.
THE SECURITY DEPOSIT MAY NOT BE USED FOR THE FINAL MONTHS RENT
7. CONDITION OF PREMISES: TENANT HAS BEEN GIVEN THE RIGHT TO INSPECT THE
PREMISES AND ACCEPTS IT IN IT'S PRESENT CONDITION. IF THERE ARE ANY
DISCREPANCIES THEN RESIDENT MUST DELIVER A WRITTEN STATEMENT TO THE MANAGEMENT
WITHIN (4) FOUR DAYS AFTER TAKING POSSESSION. OTHERWISE, IT WILL BE CONCLUSIVELY
PRESUMED THAT THE INVENTORY AND CONDITIONS ARE CORRECT AND RESIDENT WILL BE
RESPONSIBLE FOR ALL LOSS AND DAMAGES.
8. REPAIRS: PROPERTY IS BEING LEASED AS/IS. TENANT AGREES TO MAINTAIN THIS
PROPERTY IN AS GOOD STATE AS HE/SHE FINDS IT AND WILL HAVE REPAIRED AT HIS/HER
EXPENSE ANY DAMAGE, IMPROVEMENTS, MAINTENANCE, REMODELING, PAINTING, AND HVAC
IMPROVEMENTS OR REPAIR. ANY ADDITIONS OR IMPROVEMENTS WILL BECOME PART OF THE
EXISTING PROPERTY AND CANNOT BE REMOVED OR DISMANTLED IN ANY WAY WITHOUT FIRST
HAVING OBTAINED WRITTEN CONSENT FROM THE MANAGEMENT.
<PAGE>
9. CASUALTY: TENANT ACKNOWLEDGES THAT HE IS AWARE THAT HE IS RESPONSIBLE TO
CARRY HIS OWN INSURANCE FOR FIRE, THEFT, AND LIABILITY ON HIS OWN POSSESSIONS,
FAMILY, AND GUESTS. MANAGEMENT SHALL NOT BE LIABLE FOR ANY LOSS OF PROPERTY
CAUSED BY FIRE, THEFT OR ANY OTHER REASON, NOR ANY ACCIDENTAL DAMAGE TO PERSONS
OR PROPERTY IN OR ABOUT THE PREMISES RESULTING FROM ANYTHING AND RESIDENT SHALL
MAKE NO CLAIM FOR ANY SUCH LOSS OR DAMAGE WITH THE MANAGEMENT.
10. UTILITIES: TENANT IS RESPONSIBLE TO PAY ALL OF THE REQUIRED UTILITIES:
property taxes & all Insurance. /s/ CE
11. PETS: "NO PETS"
12. ACCESS: MANAGEMENT SHALL BE ALLOWED TO ENTER THE PREMISES AT REASONABLE
TIMES TO REPAIR, INSPECT, REMODEL, AND SHOW THE PREMISES FOR BUSINESS PURPOSES,
AND CAN ENTER AT ANY TIME IN CASE OF AN EMERGENCY TO PROTECT LIFE AND PROPERTY.
13. DEFAULT: IF TENANT FAILS TO PAY THE RENT HEREIN STIPULATED OR SHOULD FAIL TO
COMPLY WITH ANY ONE OF OR ALL OF THE PROVISIONS STATED IN THIS LEASE. THE TENANT
WOULD BE IN DEFAULT.
14. EVICTION: IF THE RENT CALLED FOR HAS NOT BEEN PAID THEN THE MANAGEMENT SHALL
HAVE THE RIGHT TO TAKE OUT A DISPOSSESSORY WARRANT AND HAVE THE TENANT AND
POSSESSIONS REMOVED FROM THE PREMISES.
15. ALTERATIONS: RESIDENT SHALL NOT MAKE ANY ALTERATIONS, INSTALLATIONS,
PAINTING OR REDECORATION'S OF ANY KIND WITHOUT WRITTEN PERMISSION OF THE
MANAGEMENT.
16. RENEWAL TERM: THIS AGREEMENT CREATED MAY BE TERMINATED AT ANY TIME BY EITHER
PARTY BY GIVING THE OTHER PARTY NOT LESS THAN 60 DAY WRITTEN NOTICE WITHOUT
CAUSE. RESIDENT AGREES THAT HIS OCCUPANCY OF SAID PREMISES BEYOND THE TERM OF
THIS LEASE SHALL NOT BE DEEMED AS A RENEWAL OF THIS LEASE FOR THE WHOLE TERM BUT
THE ACCEPTANCE OF RENT BY THE MANAGEMENT AFTER THE TERM OF THIS LEASE SHALL BE
CONSIDERED AS A RENEWAL OF THIS LEASE FOR ONE MONTH ONLY AND FOR SUCCESSIVE
PERIODS OF ONE MONTH ONLY.
17. USE AND MAINTENANCE: PREMISES SHALL BE USED FOR COMMERCIAL/RETAIL USE ONLY.
TENANT AGREES TO KEEP THE PREMISES IN A GOOD, CLEAN, AND SANITARY CONDITION AND
USE THE PREMISES FOR NO UNLAWFUL, IMMORAL OR HAZARDOUS PURPOSE. LAWNS, SHRUBBERY
AND YARD TO BE KEPT IN GOOD ORDER BY TENANT. TRASH TO BE REMOVED AT PROPER
INTERVALS AND PLACED IN PROPER CONTAINERS FOR PICKUP.
18. LOCKS: RESIDENT IS PROHIBITED FROM ADDING, CHANGING, OR ALTERING LOCKS IN
ANY WAY. ALL KEYS MUST BE RETURNED TO MANAGEMENT UPON TERMINATION OF THIS LEASE.
RESIDENT ACKNOWLEDGES:
A. THAT HE/SHE HAS READ AND UNDERSTANDS THIS AGREEMENT.
B. THAT ANY STATEMENTS IN THE RENTAL APPLICATION ARE TRUE.
C. THAT HE/SHE HAS RECEIVED AN EXECUTED COPY OF THIS AGREEMENT.
MANAGEMENT /s/ Chris England
----------------------------------------------
TENANT /s/ Chris England (for ATW)
--------------------------------------------------
RESIDENT
------------------------------------------------
<PAGE>
Exhibit 10.02
COMMERCIAL RENTAL AGREEMENT
THIS AGREEMENT MADE THIS 1 DAY OF March 1999 BETWEEN CHRIS ENGLAND
("management") AND
ATW ("tenant")
MANAGEMENT LEASES TO TENANT RENTAL UNIT LOCATED AT:
1402 Willingham
1. TERM: THE TERM OF THIS LEASE SHALL BE 24 MONTHS, BEGINNING April 1, 1999 AND
ENDING March 31, 2001.
2. OCCUPANCY: IT UNDERSTOOD AND AGREED THAT UNDERSIGNED WILL USE PROPERTY FOR
COMMERCIAL / RETAIL BUSINESS ONLY AND THAT AT NO TIME WILL TENANT PERMIT OTHERS
TO SUB LEASE THE PREMISES WITHOUT FIRST HAVING OBTAINED WRITTEN CONSENT FROM THE
MANAGEMENT.
3. RENT: RENT IS PAYABLE IN ADVANCE AT A RATE OF $450 PER MONTH ON THE FIRST
1st. DAY OF EACH MONTH PAYABLE AT THE OFFICE OF THE MANAGEMENT LOCATED AT:
CHRIS ENGLAND, 3067 MAIN STREET, EAST POINT, GA. 30344
4. DISCOUNT: TIME IS OF THE ESSENCE OF THIS AGREEMENT. IF THE RENT IS PAID ON OR
BEFORE THE CLOSE OF THE BUSINESS DAY OF THE FIRST OF EACH MONTH THE RENT WILL BE
$400. RENT MUST BE RECEIVED ON OR BEFORE THE DAY IT IS DUE TO OBTAIN THIS $50
DISCOUNT.
5. LATE CHARGES AND OTHER: RESIDENT SHALL PAY $5.00 PER DAY LATE CHARGES FOR
EACH DAY THE RENT IS PAST DUE BEGINNING THE SECOND DAY THAT IT HAS NOT BEEN
PAID.
RESIDENT SHALL PAY $20.00 PER CHECK FOR ANY RETURNED UNPAID CHECKS PLUS ANY LATE
CHARGES AND LOST DISCOUNTS. RESIDENT SHALL PAY $8.00 COLLECTION FEE FOR EACH
ATTEMPTED COLLECTION BY THE MANAGEMENT.
6. SECURITY DEPOSIT: RESIDENT SHALL PAY A SECURITY DEPOSIT OF $0 THE SECURITY
DEPOSIT WILL BE REFUNDED TO THE RESIDENT AFTER TERMINATION OF THIS LEASE
PROVIDED:
A. NO DAMAGE EXIST ABOVE NORMAL WEAR AND TEAR.
B. CARPETS, WALLS, FLOORS, ALL APPLIANCES, BATHROOM FIXTURES, ETC. MUST BE
CLEANED AND READY FOR NEW RESIDENT.
C. 30 DAY WRITTEN NOTICE HAS BEEN GIVEN TO MANAGEMENT.
D. ALL MONIES DUE HAVE BEEN PAID TO MANAGEMENT.
THE SECURITY DEPOSIT MAY NOT BE USED FOR THE FINAL MONTHS RENT
7. CONDITION OF PREMISES: TENANT HAS BEEN GIVEN THE RIGHT TO INSPECT THE
PREMISES AND ACCEPTS IT IN IT'S PRESENT CONDITION. IF THERE ARE ANY
DISCREPANCIES THEN RESIDENT MUST DELIVER A WRITTEN STATEMENT TO THE MANAGEMENT
WITHIN (4) FOUR DAYS AFTER TAKING POSSESSION. OTHERWISE, IT WILL BE CONCLUSIVELY
PRESUMED THAT THE INVENTORY AND CONDITIONS ARE CORRECT AND RESIDENT WILL BE
RESPONSIBLE FOR ALL LOSS AND DAMAGES.
8. REPAIRS: PROPERTY IS BEING LEASED AS/IS. TENANT AGREES TO MAINTAIN THIS
PROPERTY IN AS GOOD STATE AS HE/SHE FINDS IT AND WILL HAVE REPAIRED AT HIS/HER
EXPENSE ANY DAMAGE, IMPROVEMENTS, MAINTENANCE, REMODELING, PAINTING, AND HVAC
IMPROVEMENTS OR REPAIR. ANY ADDITIONS OR IMPROVEMENTS WILL BECOME PART OF THE
EXISTING PROPERTY AND CANNOT BE REMOVED OR DISMANTLED IN ANY WAY WITHOUT FIRST
HAVING OBTAINED WRITTEN CONSENT FROM THE MANAGEMENT.
<PAGE>
9. CASUALTY: TENANT ACKNOWLEDGES THAT HE IS AWARE THAT HE IS RESPONSIBLE TO
CARRY HIS OWN INSURANCE FOR FIRE, THEFT, AND LIABILITY ON HIS OWN POSSESSIONS,
FAMILY, AND GUESTS. MANAGEMENT SHALL NOT BE LIABLE FOR ANY LOSS OF PROPERTY
CAUSED BY FIRE, THEFT OR ANY OTHER REASON, NOR ANY ACCIDENTAL DAMAGE TO PERSONS
OR PROPERTY IN OR ABOUT THE PREMISES RESULTING FROM ANYTHING AND RESIDENT SHALL
MAKE NO CLAIM FOR ANY SUCH LOSS OR DAMAGE WITH THE MANAGEMENT.
10. UTILITIES: TENANT IS RESPONSIBLE TO PAY ALL OF THE REQUIRED UTILITIES: Taxes
and Insurance. /s/ CE
11. PETS: "NO PETS"
12. ACCESS: MANAGEMENT SHALL BE ALLOWED TO ENTER THE PREMISES AT REASONABLE
TIMES TO REPAIR, INSPECT, REMODEL, AND SHOW THE PREMISES FOR BUSINESS PURPOSES,
AND CAN ENTER AT ANY TIME IN CASE OF AN EMERGENCY TO PROTECT LIFE AND PROPERTY.
13. DEFAULT: IF TENANT FAILS TO PAY THE RENT HEREIN STIPULATED OR SHOULD FAIL TO
COMPLY WITH ANY ONE OF OR ALL OF THE PROVISIONS STATED IN THIS LEASE. THE TENANT
WOULD BE IN DEFAULT.
14. EVICTION: IF THE RENT CALLED FOR HAS NOT BEEN PAID THEN THE MANAGEMENT SHALL
HAVE THE RIGHT TO TAKE OUT A DISPOSSESSORY WARRANT AND HAVE THE TENANT AND
POSSESSIONS REMOVED FROM THE PREMISES.
15. ALTERATIONS: RESIDENT SHALL NOT MAKE ANY ALTERATIONS, INSTALLATIONS,
PAINTING OR REDECORATION'S OF ANY KIND WITHOUT WRITTEN PERMISSION OF THE
MANAGEMENT.
16. RENEWAL TERM: THIS AGREEMENT CREATED MAY BE TERMINATED AT ANY TIME BY EITHER
PARTY BY GIVING THE OTHER PARTY NOT LESS THAN 60 DAY WRITTEN NOTICE WITHOUT
CAUSE. RESIDENT AGREES THAT HIS OCCUPANCY OF SAID PREMISES BEYOND THE TERM OF
THIS LEASE SHALL NOT BE DEEMED AS A RENEWAL OF THIS LEASE FOR THE WHOLE TERM BUT
THE ACCEPTANCE OF RENT BY THE MANAGEMENT AFTER THE TERM OF THIS LEASE SHALL BE
CONSIDERED AS A RENEWAL OF THIS LEASE FOR ONE MONTH ONLY AND FOR SUCCESSIVE
PERIODS OF ONE MONTH ONLY.
17. USE AND MAINTENANCE: PREMISES SHALL BE USED FOR COMMERCIAL/RETAIL USE ONLY.
TENANT AGREES TO KEEP THE PREMISES IN A GOOD, CLEAN, AND SANITARY CONDITION AND
USE THE PREMISES FOR NO UNLAWFUL, IMMORAL OR HAZARDOUS PURPOSE. LAWNS, SHRUBBERY
AND YARD TO BE KEPT IN GOOD ORDER BY TENANT. TRASH TO BE REMOVED AT PROPER
INTERVALS AND PLACED IN PROPER CONTAINERS FOR PICKUP.
18. LOCKS: RESIDENT IS PROHIBITED FROM ADDING, CHANGING, OR ALTERING LOCKS IN
ANY WAY. ALL KEYS MUST BE RETURNED TO MANAGEMENT UPON TERMINATION OF THIS LEASE.
RESIDENT ACKNOWLEDGES:
A. THAT HE/SHE HAS READ AND UNDERSTANDS THIS AGREEMENT.
B. THAT ANY STATEMENTS IN THE RENTAL APPLICATION ARE TRUE.
C. THAT HE/SHE HAS RECEIVED AN EXECUTED COPY OF THIS AGREEMENT.
MANAGEMENT /s/ Chris England
----------------------------------------------
TENANT /s/ Chris England for ATW
--------------------------------------------------
RESIDENT
------------------------------------------------
<PAGE>
Exhibit 10.03
CONTRACT FOR SALE OF REALTY
August 16, 1995
The undersigned Buyer agrees to buy, and the Seller agrees to sell for all
that tract or parcel of land lying and being in Land Lot 158 of the 14th
District of Fulton County, Georgia, and being more particularly described as
follows:
BEGINNING at a marble monument located at the corner formed by the
intersection of the northerly right of way line of Center Avenue and the
northwesterly right of way line of South Main Street; running thence
northeasterly along the northwesterly right of way line of South Main Street
220.4 feet to an iron pin; running thence north 86 degrees 21 minutes 10 seconds
west 196.7 feet to a point; running thence north 59 degrees 43 minutes 30
seconds west 10.4 feet to an iron pin; running thence north 86 degrees 32
minutes 10 seconds west 54.3 feet to a fence post; running thence south 05
degrees 21 minutes 50 seconds west 70.8 feet to an iron pin; running thence
south 85 degrees 09 minutes 50 seconds east 16.6 feet to an iron pin; running
thence south 07 degrees 36 minutes 40 seconds west 57.8 feet to an iron pin;
running thence south 18 degrees 43 minutes 40 seconds west a distance of 89.5
feet to an iron pin found on the northerly right of way line of Center Avenue;
running thence easterly along the northerly right of way line of Center Avenue
208.3 feet to a marble monument located at the northwest corner of Center Avenue
and South Main Street and the point of beginning, being improved property known
as 3067 South Main street, according to the present system of numbering in the
City of East Point, Georgia, as shown on that Survey for Charles W. Crow a/k/a
Charles William Crowe prepared by A. E. Vaughn, RLS No. 1629 of Alvin E. Vaughn
& Associates, dated November 1, 1972, revised February 26, 1993
including all lighting fixtures attached thereto, and all heating, water
heating, and plumbing equipment therein.
<PAGE>
[MAP OMITTED]
[ILLEGIBLE]
C. W. CROWE
Land Lot 158, 14th. District, Fulton County, Georgia
Nov. 1, 1972 Scale 1" 50'
[ILLEGIBLE]
ALVIN E. VAUGHN & ASSOC.
[ILLEGIBLE] - Surveyors
[ILLEGIBLE] Road S.E.
Atlanta, Ga. 30316
[ALL TYPE ACCOMPANYING SURVEYOR'S SEAL ILLEGIBLE] [SEAL:
GEORGIA
REGISTERED
No. 1629
PROFESSIONAL
LAND SURVEYOR
A. E. VAUGHN]
<PAGE>
Exhibit 10.04
Memphis
LEASE AGREEMENT
Parties THIS AGREEMENT made and entered into on this the 13 day of Aug,
1996 by and between the [ILLEGIBLE], hereinafter called "Landlord",
and DISPLAY ARTS, INC. hereinafter called "Tenant";
Premises WITNESSETH: The Landlord leases to Tenant as its demised premises
office space containing an approximate 3,500 usable square feet as
outlined on the Floor Plan attached hereto (Exhibit "A")
(hereinafter called "Premises") on the Ground Floor of the William
Len Apartments (hereinafter called "Building"), located at 30 South
Main, Memphis, Shelby county, Tennessee for the
1. Term term of Five (5) years, and six (6) months, with an option for two
(2) additional Five (5) year terms at a rental rate not to be
increased by more than 5% of the Base Rental Rate from the previous
Lease Term. The Term shall commence on the earlier of (a) October 1,
1996, or (b) the date on which Tenant takes possession of the
Premises, and ending Five (5) Years and Six (6) Months hence, unless
sooner terminated as provided herein. In the event Landlord is
unable to deliver the Premises to Tenant on or prior to the
Commencement Date, Tenant's sole right and remedy shall be to delay
the commencement of the terms by the number of days that delivery of
possession is delayed. Tenant acknowledges that Landlord shall use
diligent efforts to deliver the Premises as provided herein however
delays in construction may affect Landlord's ability to deliver the
Premises to Tenant.
2. Use The demised premises are to be continuously used and occupied during
the full terms of this Lease and for no other purposes than general
office and/or retail. In the event the demised premises are
delivered on a day other than the first day of the terms the five
(5) year, six (6) month lease term shall commence as of the first
day of the month following delivery and Landlord and Tenant shall
complete and initial the following sentence. The terms commenced
____________________ and shall end _______________.
3. Base Rental
In consideration for this Lease, Tenant promises to pay to Landlord (for
Landlord's benefit) in lawful money of the United States, an annual rental of
Thirty One Thousand Five Hundred Dollars ($31,500.00), payable in equal
Installments of Two Thousand Six Hundred Twenty Five Dollars ($2,625.00), said
monthly installments of rental to be paid in advance without demand, by the
tenth (10th) day of each and every calendar month during the terms hereof,
provided, however, notwithstanding the above provisions, the monthly
installments of Base Rental for the first six (6) months of the Term (the
"Abatement Period") shall be deferred until the expiration of the base terms of
the Lease at which time, if Lessee is not in default, said Base Rental for the
Abatement Period shall be abated. In the event Lessee defaults in performance of
the covenants, conditions and requirements hereunder, then such deferred rental
shall immediately become due and payable and shall be included in the
computation hereunder. Further, Tenant agrees to prepay a sum total of rent to
Landlord in the amount of Fifteen Thousand Seven Hundred Fifty Dollars
($15,750.00) which is to be applied toward the first six (6) months of Base
Rental due subsequent to the Abatement Period referenced above.
4. Services to be Furnished by Landlord
It is agreed and understood that Tenant shall be responsible for the
payment of all utility costs for the Premises.
5. Peaceful Enjoyment
Tenant shall and may peacefully, have hold and enjoy the demised Premises
subject to the other terms hereof and provided Tenant pay the rentals herein
recited and perform all of its covenants and agreements herein contained.
6. Repairs and Re-entry
Tenant at Tenant's own cost and expense, repair or replace any damage or
injury done to the Building or any part thereof, caused by Tenant or Tenant's
agents, employees, invitees or visitors. If Tenant fails to make such repairs or
replacements promptly, or within fifteen (15) days of occurrence, Landlord may
at its option, make such repairs or replacements, and Tenant shall repay the
cost thereof to Landlord on demand. Tenant will not commit or allow any waste or
damage to be committed on any portion of the demised premises, and shall, at the
termination of this Lease, by lapse of time or otherwise, deliver up said
premises to Landlord broom clean and in as good condition as at date of
possession of Tenant, ordinary wear and tear and damage by fire and windstorm
excepted and upon such termination of Lease, Landlord shall have the right to
re-enter and resume possession of the demised premises.
7. Assignment or Subletting, Alterations, Additions, Improvements
Tenant will not assign this Lease or allow the same to be assigned by
operation of law or otherwise, or sublet the demised premises, or any part
thereof, or use or permit the same to used for any other purpose that state in
the use clause hereof, or make or allow to be made any alterations or physical
additions in or to the demised premises without prior written consent of
Landlord. Any and all such alterations, physical additions, or improvements,
when made to the demised premises by Tenant, shall at once become the property
of Landlord and shall be surrendered to Landlord upon the termination in any
manner of this Lease; but this clause shall not apply to movable fixtures or
furniture of Tenant. In the event Tenant elects to remove any fixture,
improvement, or alteration in the Premises, Tenant may do so with any necessary
repairs made to the affected areas paid for by the Tenant, and subject to
Landlord's prior written approval. Such approval shall not be unreasonably
withheld by Landlord.
8. Lawful Use
Tenant will not occupy or use, or permit any portion of the demised
premises to be occupied or used for any business or purpose which is unlawful in
part or in whole or deemed to be disreputable in any manner or extra hazardous,
or permit anything to be done that will in any way increase the rate of
insurance of the building and/or its contents, and in the events that by reason
of actions of Tenant, there shall be an increase in rate of the insurance on the
Building or its contents created by Tenant's acts or conduct business, then
Tenant hereby agrees to pay such increase and to remedy such condition upon five
(5) days written demand by Landlord.
9. Indemnity Liability
The Tenant shall save the Landlord free and harmless from any and all
claims, actions, damages, expenses, and liability whatsoever for injury
(including death) to any person, or persons, firm or corporation, including the
Landlord, or for the resultant effects of any injury (including death) to any
person or persons, firm or corporation, including the Landlord and for damage to
the property of any person or persons, firm or corporation, including the
Landlord, Arising directly or indirectly from the use or occupancy of said
demised premises or any part thereof by the Tenant, its agents, sublessees,
assignees, contractors, employees, invitees and any others on said demised
premises by reason of Tenant. Tenant agrees that no representations except such
as are contained hereon have been made to the Tenant respecting the condition of
said premises.
10. Taxes and Maintenance
A. Landlord shall pay all real estate taxes and assessments levied against
the land and Building incurred during the year in which this Lease shall
commence. Thereafter, during all remaining years of its tenancy, Tenant will pay
to Landlord as additional rent a proportionate share of any increase in such
taxes, determined by multiplying any such tax increase by the ratio which the
area of space leased to the Tenant bears to the total net rentable area of the
usable portions of the building which was included its said base tax year's tax
assessment. Tenant shall pay its proportion of such tax increases within thirty
(30) days after the notice of same is furnished to it by Landlord, accompanied
by evidence of payment thereof. Tenant and Landlord shall cooperate with each
other in the minimizing of taxes for the overall project.
B. If Landlord's building operating costs such as for repairs,
maintenance, management, waste removal, fire, extended coverage and other
insurance, janitorial or utility service, etc. in any calendar year shall exceed
Landlord's building operating costs for the calendar year in which the
commencement date hereof occurs, Tenant shall pay as additional rent for said
calendar year, upon demand, an amount equal to such proportions of the excess of
building operating costs for such year over those incurred by Landlord during
the calendar year 1996 as area of the Premises bears to the total net rental
area of the Building.
<PAGE>
11. Rules of Building
Tenant and Tenant's agents, employees, invitees, and visitors shall comply
fully with all requirements of the rules of the building which may be made by
Landlord. A copy of such rules shall be furnished to Tenant and such rules may
be changed or amended by Landlord at any time, if said rules are to the mutual
benefit and safety of both Tenant and Landlord. Such rules may be changed or
amended by Landlord from time to time. If said rules shall be printed on a
separate schedule, such schedule shall be attached to this Lease and made a part
hereto in the form of an Amendment to this Lease.
12. Entry for Repairs
Tenant will permit Landlord or its officers, agents or representatives the
right to enter into and upon any and all parts of the demised premises at all
reasonable hours to inspect same or clean or make repairs or alterations or
additions as Landlord may deem necessary.
13. Signs
Tenant shall not paint, display, inscribe, maintain, or affix any sign,
picture, advertisement, notice, lettering or directions on any part of the
outside, except on hallway doors of the premises, and then only such name or
names or matter and in such colors, size, style, character, and materials as may
be first approved by Landlord in writing, with such approval not to be
unreasonably withheld or denied by Landlord.
14. Defacing Premises and Overloading
Draperies, blinds, shades, awnings, or other forms of inside or outside
window coverings, or window ventilators or similar devices, shall not be placed
in or about the outside windows in the premises except to the extent, if any,
that the character, shape, color, material, lining and make thereof is approved
by the Landlord, and Tenant shall not do any painting or decorating in the
premises or make paint cut or drill into or in any way deface any part of the
premises or building without the prior consent of Landlord. Such consent shall
not be unreasonably withheld by Landlord.
15. Subordination Estoppel Certificate
This Lease is and shall be at the option of the holder of indebtedness
secured by a first mortgage and on the land and building of which the demised
premises fonts a part, be subject and subordinate to any such first mortgage
only and to all renewals, modifications, consolidations, replacements and
extensions of said first mortgage and although this subordination provision
shall be deemed for all purposes to be automatic and effective at the option of
the holder of said first mortgage, without any further instrument on the part of
the Tenant, Tenant shall execute any instrument requested by the Landlord to
confirm such subordination or to effect the superiority of such first mortgage
to this Lease should such first mortgage so require. Landlord and Tenant
covenant not to subordinate this Lease to any mortgage subordinate to such first
mortgage. Tenant shall at any time and from time to time upon not less than ten
days prior written notice for Landlord execute, acknowledge and deliver to
Landlord statement in writing as to the status of this Lease in form and
substance satisfactory to the first mortgage. Tenant's failure to deliver such
statement within such time shall be conclusive upon Tenant (i) that this Lease
in its full force and effect, without modification except as may be represented
by Landlord (ii) that there are not uncured defaults in Landlord's performance
and that Tenant has no right to offset, counterclaims or deduction against rent,
and (iii) that no more than one month's rent has been paid in advance, nothing
contained in this Agreement shall be construed as placing any limitation upon
Landlord's right to sell, mortgage, assign or in any manner convey an interest,
in part for for in whole of either the Land or the Building, or both.
16. Condemnation
If the demised premises be taken by virtue of eminent domain or for any
public or quasi-public use or purpose, this Lease and the estate thereby granted
shall terminate as of this date of such taking, if any part of the building
other than the demised premises be so taken, the Landlord shall have the right
to terminate this Lease at the date of such taking or within six months
thereafter by giving the Tenant thirty (30) days prior notice of the date of
such termination. Tenant shall have no claim to or interest in any award
resulting from any such condemnation proceedings.
17. Loss or Damage
In the event the Premises shall be substantially damaged or destroyed
either (i) by an insured casualty within Landlord's standard fire and extended
coverage co-insurance policies to such extent that Landlord cannot make
necessary repairs or rebuild within ninety (90) days from the date of such
damage or destruction; or (ii) by any uninsured casualty, then this Lease
Agreement may be terminated in which event Tenant shall be allowed in abatement
of rent from the date of such damage or destruction. In the event of damage by
fire or other causes resulting from fault or negligence of Tenant or Tenant's
agents, employees, invitees, or visitors, there shall be no rent abatement and
the damages shall be repaired by and at the expense of Tenant under the
direction and supervision of Landlord.
If the Premises shall be substantially damaged or destroyed by fire or
other causes and Landlord elects to repair the Premises and continue this Lease,
then this Lease Agreement shall not terminate, the Premises shall be repaired or
rebuilt by Landlord at its own expense, the Base Rental shall abate
proportionately until the repairs or rebuilding be completed and possession
thereof given to Tenant, and the term of this Lease Agreement shall be extended
for a period equal to such period of rent abatement but not otherwise affected.
Tenant shall in all events restore or repair its additions and improvements to
the Premises and all components of the Premises which are not building standard
(which are not insured by Landlord) and which Landlord shall have no obligations
to repair or restore. Tenant shall, in case of damage or destruction, give
immediate notice in writing to Landlord.
Should fifty percent (50%) or more of the total Rentable Area of the
Building at any time be damaged or destroyed by fire or any other cause,
Landlord may elect not to rebuild and may forthwith terminate this Lease
Agreement by written notice to Tenant of Landlord's election to so terminate,
with such notice being given within thirty (30) days of such damage or
destruction. In the event of a casualty loss or damage which arises out of or in
connection with the use, misuse, or occupancy of the Premises by Tenant, or
results from the acts or omissions of Tenant, its employees or agents, Tenant
shall indemnify Landlord for any claims, loss or damage not covered under
Landlord's standard insurance coverage, including the deductible portion of such
insurance.
18. Holding Over
In case of holding over by Tenant after expiration or termination of this
Lease, Tenant will pay as liquidated damages double rent (twice the amount of
base rent stated herein) for the entire holdover period. No holding over by
Tenant after the term of this Lease, either with or without consent and
acquiescence of Landlord shall operate to extend the Lease for a longer period
than one month; and any holding over with the consent of the Landlord in writing
shall thereafter constitute this Lease a Lease from month to month.
19. Attorney's Fee
In the event either party makes default in the performance of any of the
terms, covenants, agreements or conditions contained in this Lease and either
party places the enforcement of this Lease, or any part thereof, in the hands of
an attorney, or files suit upon same, the non-prevailing party agrees to pay the
prevailing' party's reasonable attorney's fees and related costs.
20. Amendment of Lease
This agreement may not be altered, changed or amended, except by an
instrument in writing, signed by both parties hereto.
21. Transfer of Landlord's Rights
Landlord shall have the right to transfer and assign, in whole or in part,
all and every feature of its rights and obligations hereunder and in building
and property referred to herein. Such transfers or assignments may be made
either to a corporation, partnership, trust company, individual or group of
individuals, and howsoever made, are to be in all things respected and
recognized by Tenant and upon assumption of Landlord's obligations hereunder.
<PAGE>
22. Default by Tenant
Default on the part of Tenant in paying said rent or any installment
thereof, as hereinabove provided or default on Tenant's part in keeping or
performing any other term, covenant, or condition of this Lease, shall authorize
Landlord, at its option am any time after such default, and after ten (10) days
written notice thereof to Tenant, to declare this Lease terminated, and upon the
occurrence of any one or more of such defaults Landlord, immediately, or at any
time thereafter, may re-enter said premises and remove all persons therefrom
with or without legal process, and without prejudice to any or its other legal
rights, and all claims for damage by reason of such re-entry are expressly
waved, as also are all claims for damages by reason of any distress warrants or
proceeding by way of sequestration which Landlord may employ to recover said
rents or possessions of said premises; provided that landlord shall not have the
right to declare this Lease terminated if, within ten (10) days after notice of
any default, Tenant fully cures all defaults. Upon such termination, Tenant
shall immediately owe and be indebted to Landlord for the entire unpaid rent for
the canceled period of this Lease, Landlord agreeing to attempt the re-renting
of the demised premises with reasonable diligence and to credit Tenant's account
with any net rental collected.
23. Waiver
Failure of Landlord to declare any default immediately upon occurrence
thereof or delay in taking any action in connection therewith shall not waive
such default, but Landlord shall have the right to declare any such default at
any time, and take such action as might be lawful or authorized hereunder,
either in law or in equity.
24. Possession
Tenant agrees that if Landlord is not able to deliver possession of the
premises as herein provided Landlord shall not be liable for any damages to
Tenant for such failure, but Landlord agrees to use due diligence to obtain
possessions for the Tenant at the earliest possible date and an abatement of
rent shall be allowed for such time as Tenant may be deprived of possessions of
said premises.
25. Bankruptcy
If voluntary bankruptcy proceedings be instigated by Tenant, or if
proceedings be instituted by any one else to adjudge Tenant a bankrupt, or if
Tenant makes an assignment for the benefit of its creditors or if execution be
issued against him or if the interest of Tenant in this contract pass by
operation of law to any person other than Tenant this Lease may at the option of
Landlord, be terminated by notice addressed to Tenant and posted in the United
States mails or delivered and Tenant shall be liable to Landlord as if this
Lease were terminated due to a default as provided herein.
26. Assignment by Landlord
This Lease shall also insure to the benefit of the successor and assigns
of Landlord and with the written consent of Landlord first had and obtained, but
not otherwise, to the benefit of the heirs, executors and/or administrators,
successors and assigns of Tenant.
27. Work to be Done by Landlord
In the event Landlord agrees to make improvements or alteration to the
Premises, such improvements shall be performed only as shown on working drawings
to be approved by Landlord and Tenant, said working drawings to be either
prepared or approved by Landlord's architect and attached hereto as Exhibit "C",
and at a cost not to exceed Twenty Eight Thousand Dollars ($28,000.00), Tenant
agreeing to pay all other costs. In addition, Landlord also agrees to install
four (4) exterior window awnings, at Landlord's sole cost and expense, and as
described on the attached proposal from Memphis Delta Tent and Awning, dated
July 31, 1996.
28. Prior Occupancy
If Tenant shall occupy the premises prior to the beginning of the terms of
this Lease, with Landlord's consent all of the provisions of this Lease shall be
in full force and effect commencing on the date of such occupancy. Such
occupancy shall be on the basis of a month to month tenancy until the beginning
of the term of this Lease, and rent for such period shall be paid at the monthly
rate set forth in Article 3 or at a daily rate of 1/30 of said monthly rate.
29. Continuation of Lease After Termination
No receipt of money by Landlord from Tenant after the termination of this
Lease, or after the service of any notice, or after commencement of any suit, or
after final judgment for possession of the premises shall reinstate, continue or
extend the term of this Lease or affect any such notice, demand or suit.
30. Waiver or Subrogation
Each of the parties hereto waives any and all rights of recovery against
the other or against the officers, employees, agents, representatives of such
other party for loss of or damage to such waiving party or its property or the
property of others under its control, arising from any cause insured against
under the standard form of fire insurance policy with all permissible extension
endorsements covering additional parts or under any other policy of insurance
carried by such waiving party in lieu thereof, provided said waiver does not
adversely affect such insurance.
31. Notices
All notices required or provided for under this Lease Agreement shall be
given in writing by registered or certified return receipt requested U.S. Mail,
postage prepaid and addressed as referenced below, or to such other addresses
or designee(s) as Landlord or Tenant may direct in writing from time to time.
Tenant shall also give such notices as are provided for herein to the Landlord
to any mortgage of the demised premises to whom Tenant is so directed by written
notice from Landlord.
TO TENANT: TO LANDLORD:
---------- -----------
Display Arts, Inc. The Hertz Group
1425 Elm Hill Pike 617 South Olive Street, Suite 1210
Nashville, Tennessee 37210 Los Angeles, California 90014
32. Brokers
Landlord and Tenant warrant and represent that other than Ron Kastner of
IRC-Interstate Realty Corporation, no real estate broker has been involved by
either in this Lease, and each party agrees to indemnify and hold the other
party harmless form and against any and all claims of any real estate broker due
to acts of such party or such party's representatives. Landlord agrees to pay
Interstate Realty Corporation a commission in accordance with the agreement
between Landlord and Interstate Realty Corporation.
33. Security Deposit
Tenant has deposited with Landlord the sum of Two Thousand Six Hundred
Twenty Five Dollars ($2,625.00) as security for the full and faithful
performance by Tenant of Tenant's covenants and obligations hereunder. Such
security deposit shall not bear interest and shall not be considered an advance
payment of Rent or a measure of Landlord's damages in case of default by Tenant.
In the event Tenant defaults in the performance of any of the covenants and
obligations hereunder, including, but not limited to the payment of all Rent to
be paid hereunder, Landlord may, from time to time, without prejudice to any
other remedy, use such security deposit to the extent necessary to make good on
arrearages in Rent or any sum as to which Tenant is in default and any other
damage, injury, expense, or liability caused to Landlord by such default,
including any damages or defiency in the reletting of the Lease Premises,
whether such damages or deficiency may accrue before or after termination of
this Lease. Following any such application of the security deposit, Tenant shall
pay to Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. If Tenant is not then in default hereunder, any
remaining balance of the security deposit shall be returned by Landlord to
Tenant within fifteen (15) days after termination of this Lease and delivery of
the entire possession of the Leased Premises to Landlord's accordance with this
Lease. If Landlord assigns its interest in the Leased Premises during the term
hereof, Landlord my assign the security deposit to the assignee, and thereafter
Landlord shall have no further liability for the return of such security
deposit, and Tenant agrees to look solely to the new Landlord for the return of
such security deposit. The provisions of the preceding sentence shall apply to
every transfer or assignment made of the security deposit to a new Landlord.
Tenant agrees that it will not assign or encumber, the moneys deposited
hereunder as security, and that Landlord
<PAGE>
and its successors and assigns shall not be bound by any such actual or any
attempted assignment or encumberance. Regardless of any assignment of this Lease
by Tenant, Landlord may return the security deposit to the original Tenant, in
the absence of evidence satisfactory to Landlord of an assignment of the right
to receive such security deposit or any part of the balance thereof.
34. Miscellaneous
LANDLORD AND TENANT MUTUALLY COVENANT WITH EACH OTHER
(1) That all rights and remedies of the Landlord under this Lease shall be
cumulative, and none shall exclude any other rights and remedies allowed by law.
(2) It is understood and agreed by the parties hereto that notice from
Landlord mailed or delivered to premises leased hereunder, shall constitute
sufficient notice to the Tenant to comply with the terms of this Lease.
(3) It is further understood and agreed that any charges against the
Tenant by the Landlord for supplies, services, or for work done on the premises
by order of the Tenant or otherwise, accruing under this Lease shall be
considered as rent due and shall be included in any lien for rent due and
unpaid.
(4) That all schedules initiated by both parties hereto and attached to
this Lease shall be a part of this Lease whether or not said schedules are
specifically referred to in the Lease.
(5) That the waiver by Landlord of any covenant or covenants of this Lease
shall be limited to the particular convenant and shall not operate nor be
deemed to waive any future breaches of the same covenant or covenants nor of any
other covenant or covenants.
(6) In the event that any provision or part of a provision of this Lease
is held invalid the other provisions and parts of provisions shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereunto executed this Lease Agreement
this the day and year first above written
LANDLORD:
[ILLEGIBLE]
--------------------------------------
/s/ [ILLEGIBLE]
--------------------------------------
TENANT:
/s/ William G. Waters
--------------------------------------
William G. Waters
--------------------------------------
Vice President Sales & Marketing
The above lease agreement is contingent on the landlords execution by
August 13, 1996
<PAGE>
RIDER NO. 101
TO LEASE BY AND BETWEEN
THE HERTZ GROUP
AS LANDLORD
AND
DISPLAY ARTS, INC.
AS TENANT
GUARANTY OF LEASE
In order to induce the Landlord to execute that certain Lease Agreement
(the "Lease") to which this Rider No. 101 is attached and made a part of, the
undersigned, whether one or more, jointly and severally, hereby guarantees the
payment and performance of, and agrees to pay and perform as a primary obligor,
all liabilities, obligations, and duties (including, but not limited to, payment
of Rent) imposed upon Tenant thereunder. The liability of the undersigned shall
also be reduced by the amount of any security deposit actually applied by
Landlord to discharge the liability of Tenant following an event of default.
The undersigned hereby waives notice of acceptance of this guarantee and
all other notices in connection herewith or in connection with the liabilities,
obligations, and duties guaranteed hereby, including notices of default by
Tenant under the Lease, and waives diligence, presentment, and suit on the part
of Landlord in the enforcement of any liability, obligation, or duty guaranteed
hereby.
The undersigned further agrees that Landlord shall not be first required
to enforce against Tenant or any other person any liability, obligation, or duty
guaranteed hereby before seeking enforcement thereof against the undersigned.
Suit may be brought and maintained against the undersigned by Landlord to
enforce any liability, obligation, or duty guaranteed hereby without joinder of
Tenant or any other person. The liability of the undersigned shall not be
affected by any indulgence, compromise, settlement, or variation of terms which
may be extended to Tenant by Landlord or agreed upon by Landlord and Tenant, and
shall not be affected by any termination of the Lease to the extent that Tenant
thereafter continues to be liable thereunder Landlord and Tenant, without
notice to or consent by the undersigned, may at any time or times enter into
such modifications, extensions, amendments, or other covenants respecting the
Lease as they may deem appropriate, and the undersigned shall not be released
thereby, but shall continue to be fully liable for the payment and performance
of all liabilities, obligations, and duties of Tenant under the Lease, as so
modified, extended, or amended.
The liability of the undersigned hereunder shall in no way be affected by
(a) the release or discharge of Tenant in any creditor, receivership,
bankruptcy, or other similar proceedings; (b) the impairment, limitation, or
modification of the liability of Tenant or the estate of Tenant in bankruptcy or
of any remedy for the enforcement of Tenant's liability under the Lease
resulting from the operation of any present or future provisions of the Federal
Bankruptcy Code or other statute or from the decision of any court (c) the
rejection or disaffirmance of the Lease in any such proceedings; (d) the
assignment or transfer of the Lease by Tenant; or (e) any disability or other
defense of Tenant.
Until all the covenants and conditions in the Lease on Tenant's part to be
performed and observed are fully performed and observed, the undersigned: (a)
shall have no right of subrogation against Tenant by reason of any payments or
acts of performance by the undersigned in compliance with the obligations of the
undersigned hereunder; (b) waives any right to enforce any remedy which the
undersigned now or hereafter shall have against Tenant by reason of any one or
more payments or acts of performance in compliance with the obligations of the
undersigned hereunder; and (c) subordinates any liability or indebtedness of
Tenant now or hereafter held by the undersigned to the obligations of Tenant to
Landlord under the Lease.
This Guaranty shall be binding upon the undersigned and the heirs,
executors, and legal representatives of the undersigned, and shall inure to the
benefit of Landlord and its successors and assigns.
EXECUTED this 8th day of August, 1996.
Guarantor: William Watters
/s/ William Watters
--------------------------------------
Signature of Guarantor
William Watters
--------------------------------------
Printed Name of Guarantor
<PAGE>
Memphis
RIDER NO. 101
TO LEASE BY AND BETWEEN
THE HERTZ GROUP
AS LANDLORD
AND
DISPLAY ARTS, INC.
AS TENANT
GUARANTY OF LEASE
In order to induce the Landlord to execute that certain Lease Agreement
(the "Lease") to which this Rider No. 101 is attached and made a part of, the
undersigned, whether one or more, jointly and severally, hereby guarantees the
payment and performance of, and agrees to pay and perform as a primary obligor,
all liabilities, obligations, and duties (including, but not limited to, payment
of Rent) imposed upon Tenant thereunder. The liability of the undersigned shall
also be reduced by the amount of any security deposit actually applied by
Landlord to discharge the liability of Tenant following an event of default.
The undersigned hereby waives notice of acceptance of this guarantee and
all other notices in connection herewith or in connection with the liabilities,
obligations, and duties guaranteed hereby, including notices of default by
Tenant under the Lease, and waives diligence, presentment, and suit on the part
of Landlord in the enforcement of any liability, obligation, or duty guaranteed
hereby.
The undersigned further agrees that Landlord shall not be first required
to enforce against Tenant or any other person any liability, obligation, or duty
guaranteed hereby before seeking enforcement thereof against the undersigned.
Suit may be brought and maintained against the undersigned by Landlord to
enforce any liability, obligation, or duty guaranteed hereby without joinder of
Tenant or any other person. The liability of the undersigned shall not be
affected by any indulgence, compromise, settlement, or variation of terms which
may be extended to Tenant by Landlord or agreed upon by Landlord and Tenant, and
shall not be affected by any termination of the Lease to the extent that Tenant
thereafter continues to be liable thereunder Landlord and Tenant, without
notice to or consent by the undersigned, may at any time or times enter into
such modifications, extensions, amendments, or other covenants respecting the
Lease as they may deem appropriate, and the undersigned shall not be released
thereby, but shall continue to be fully liable for the payment and performance
of all liabilities, obligations, and duties of Tenant under the Lease, as so
modified, extended, or amended.
The liability of the undersigned hereunder shall in no way be affected by
(a) the release or discharge of Tenant in any creditor, receivership,
bankruptcy, or other similar proceedings; (b) the impairment, limitation, or
modification of the liability of Tenant or the estate of Tenant in bankruptcy or
of any remedy for the enforcement of Tenant's liability under the Lease
resulting from the operation of any present or future provisions of the Federal
Bankruptcy Code or other statute or from the decision of any court; (c) the
rejection or disaffirmance of the Lease in any such proceedings; (d) the
assignment or transfer of the Lease by Tenant; or (e) any disability or other
defense of Tenant.
Until all the covenants and conditions in the Lease on Tenant's part to be
performed and observed are fully performed and observed, the undersigned: (a)
shall have no right of subrogation against Tenant by reason of any payments or
acts of performance by the undersigned in compliance with the obligations of the
undersigned hereunder; (b) waives any right to enforce any remedy which the
undersigned now or hereafter shall have against Tenant by reason of any one or
more payments or acts of performance in compliance with the obligations of the
undersigned hereunder; and (c) subordinates any liability or indebtedness of
Tenant now or hereafter held by the undersigned to the obligations of Tenant to
Landlord under the Lease.
This Guaranty shall be binding upon the undersigned and the heirs,
executors, and legal representatives of the undersigned, and shall inure to the
benefit of Landlord and its successors and assigns.
EXECUTED this 8th day of August, 1996.
Guarantor: Donovan McNamee
/s/ Donovan McNamee
--------------------------------------
Signature of Guarantor
Donovan McNamee, Sr.
--------------------------------------
Printed Name of Guarantor
<PAGE>
-------------------------
Loan Number
LESSORS AGREEMENT IN
SMALL BUSINESS ADMINISTRATION LOAN
STATE OF TENNESSEE LOCATION OF PROPERTY:
COUNTY OF Shelby 30 South Main St.
Memphis, TN 38103
For and an consideration of First American Bank, Memphis, Tennessee,
making a loan in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00) to Display Arts, Inc., Nashville, Tennessee, (herein called
"Lessee"), the Lessor agrees:
1. That as of this date, Lessee Is not in default under any terms
of the lease of the premises occupied by borrower.
2. That In the event of any default under such lease, Lessor will
not terminate the lease or take any action to enforce any
claim with respect thereto without giving to the holder of the
Note at least sixty days' prior written notice and the right
to cure such default within said period; and so long as the
holder of the Note has not entered in possession of the
premises leased in lease for the purpose of operating the said
business, it shall not be liable for rent or any other
obligation of Lessee pursuant to, or in connection with said
lease, and Lessee shall remain liable for all such rents and
obligations.
3. That Lessor subordinates to all liens securing the Note until
payment in full of the indebtedness evidenced by the Note,
every lien of Lessor on, and every right of Lessor to
institute proceedings to establish any lien or claim against
any or all of the property hypothecated as collateral for the
Note.
4. That Lessor has full power and authority to execute said
Instrument and has title of the leased premises or such
property rights therein as to make effective the vesting in
Lessee of rights with respect thereto in accordance with the
terms of said lease and the said instruments.
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT No. 5193
================================================================================
State of California
County of Los Angeles
On 8/13/96 before me, Sheila Holincheck, Notary Public
----------------------------------------------------------
NAME, TITLE OF OFFICER - E.G. JANE DOE/"NOTARY PUBLIC"
personally appeared Kit Marchand
------------------------------------------------------------
NAME(S) OF SIGNER(S)
|X| personally known to me - OR - |_| proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
SHEILA HOLINCHECK Witness my hand and official seal.
COMM. # 1013887
[SEAL] Notary Public - California
LOS ANGELES COUNTY /s/ Sheila Holincheck
My Comm. Expires FEB 8, 1998 --------------------------------------
SIGNATURE OF NOTARY
================================================================================
OPTIONAL SECTION
CAPACITY CLAIMED BY SIGNER
Though statute does not require the Notary to fill in the data below doing so
may prove invaluable to persons relying on the document
|_| INDIVIDUAL
|_| CORPORATE OFFICER(S)
---------------------------------
TITLE(S)
|_| PARTNER(S) |_| LIMITED
|_| GENERAL
|_| ATTORNEY-IN-FACT
|_| GUARDIAN/CONSERVATOR
|X| OTHER: AUTHORIZED SIGNATURE
--------------------------
SIGNER IS REPRESENTING
NAME OF PERSONS OR ENTITIES
JH2H
- -------------------------------------
================================================================================
OPTIONAL SECTION
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT
- --------------------------------------------------------------------------------
Though the data requested here is not required by law, it could prevent
fradulent reattachment of this form.
TITLE OR TYPE OF DOCUMENT ______________________________________________________
NUMBER OF PAGES _______________ DATE OF DOCUMENT _______________________________
SIGNER(S) OTHER THAN THOSE NAMED ABOVE _________________________________________
================================================================================
<PAGE>
[LOGO] MEMPHIS LIGHT, GAS AND WATER DIVISION
GENERAL POWER SERVICE AGREEMENT
FORM 42033 (Rev 4/95)
PLEASE TYPE OR PRINT
================================================================================
1 NAME OF BUSINESS DATE
Display Arts Inc 12-2-96
- --------------------------------------------------------------------------------
2 SERVICE ADDRESS ACCOUNT NUMBER 3 BUSINESS TELEPHONE
30 S. Main St. 0540323305 901-579-9000
- --------------------------------------------------------------------------------
4 NATURE OF BUSINESS 5 TYPE OF OWNERSHIP TRUSTEE |_|
SOLE PROPRIETOR/PRIVATE CORPORATION |X|
Exhibit Display/Graphic Sales DEBTOR IN POSSESSION |_| PARTNERSHIP |_|
- --------------------------------------------------------------------------------
6 MAILING ADDRESS IF DIFFERENT FROM SERVICE ADDRESS
- --------------------------------------------------------------------------------
ACTIVE ACCOUNT RETAINED (WATER) SEE REVERSE SIDE
FOR ADDITIONAL
32 S. Main 0540632416 SERVICE ADDRESSES
- --------------------------------------------------------------------------------
NAMES OF OWNERS OF OFFICERS HOME ADDRESS HOME TELEPHONE NO
(ADDITIONAL MAIL ADDRESS)
- --------------------------------------------------------------------------------
7 PRESIDENT OR OWNER
8149 Farmington Blvd
William G. Watters GTown, TN 38138 901-759-4830
- --------------------------------------------------------------------------------
SS NO
329448564
- --------------------------------------------------------------------------------
8 VICE PRESIDENT
- --------------------------------------------------------------------------------
SS NO
- --------------------------------------------------------------------------------
9 SECRETARY/TREASURER
- --------------------------------------------------------------------------------
SS NO
- --------------------------------------------------------------------------------
10 TAX NUMBER FEDERAL |_| STATE |_| SECURITY DEPOSIT
$155.00
================================================================================
DEPOSIT REFUND POLICY
MLGW Appreciates customers who establish and maintain good pay records. A good
pay record for thirty six consecutive months entitles you to a full return of
your deposit. Your deposit is applied to your account during the 37th month of
consecutive service, when the following conditions exist. You must have: 1) No
delinquent cut-offs during the previous two years or the current year. 2) No
balance on the current bill. 3) No returned or stopped payment checks in the
current year and no more than one the previous year. 4) No balance remaining on
Extended Payment Plan. 5) No extensions during the current year and no more than
two extensions during the previous year. If your pay record does not meet these
requirements your deposit will be held until utility services are terminated.
The deposit will be applied to your final bill.
I hereby apply to the Memphis Light, Gas and Water Division for gas and/or
electric and/or water service all to be rendered in accordance with the
following terms and conditions
The applicant, whose signature appears below and signing in said capacity,
hereinafter called the customer, hereby makes application to Memphis Light, Gas
and Water Division, hereinafter called the division, for service, and agrees to
accept service, and to pay for same as the bills are rendered therefore, in
accordance with applicable rates, rules and regulations now or hereafter in
effect. When accepted by the division as indicated by the commencement of
service, this agreement, together with applicable rate schedules and rules and
regulations of division now or hereafter in effect (all of which are consented
to be by customer) shall constitute the sole and only contract between customer
and division for the service herein applied for, unless a special written
agreement is executed. Rate schedules and rules and regulations are on file at
the division's office and are subject to inspection. Failure to receive a bill
does not release a customer form payment obligations. The customer shall pay all
collection expenses or attorney fees due to default or failure to perform the
obligations incurred as set forth in this agreement. It is agreed by the
customer and the division that this contract shall apply to the original address
of the customer and to all future addresses of the customer until said service
is requested terminated by the customer.
================================================================================
FOR CORPORATIONS ONLY
I, ___________________________, who serve the ______________________ corporation
in the capacity of _____________________, do make oath that the facts and
statements contained in the foregoing commercial contract are true to the best
of any knowledge, information and belief.
================================================================================
/s/ William G. Watters President 12-2-96 Contact Person
- ------------------------------------------- --------------------
Authorized Signature Title Date
Address
- ------------------------------------------- ---------------------------
Authorized Signature Title Date
(if applicable) Phone Number
----------------------
Sworn to and subscribed before me this ___________ day of ___________________,
19______.
- ------------------------------------------------------
Notary Public My Commission Expires
/s/ [ILLEGIBLE] 631 12-2-96
- --------------------------------------------------------------------------------
MLGW Witness Signature Area Number Date Collection Department Signature
Indicates Credit Approved Date
================================================================================
<PAGE>
Exhibit 10.05
LEASE AGREEMENT
1. PARTIES. THIS LEASE dated the 6th day of March, 1998, by and between
Michael N. Ryan and Lynda K. Ryan whose record address is 129 Woodvale Drive,
Hendersonville, TN 37075-5125 hereinafter called Lessor and Colorsmart, Inc.
whose record address is 135 North Country Club Drive, Hendersonville, TN 37075,
hereinafter called Lessee,
WITNESSETH:
2. CONSIDERATIONS. In consideration of the rental stated below and their
mutual covenants, Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor the premises described herein.
3. PREMISES. The leased premises, hereinafter called the Premises, are
identified and described as follows: An approximate 4,800 square foot building
located at 537 Myatt Drive.
4. TERM. The term of this lease is three (3) years commencing April 1,
1998 and expiring March 31, 2001.
5. BASIC RENTAL. During the full term of this Lease, Lessee shall pay to
Lessor, without notice, demand, reduction, setoff or any defense, a total rental
(the "Annual Rental") consisting of the sum total of the following:
(a) Minimum Rental. Lessee shall pay a minimum rental (the "Minimum
Rental") of Forty-Two Thousand and 00/lOOths Dollars ($42,000.00) payable in
equal monthly installments of Three Thousand Five Hundred and 00/lOOths Dollars
($3,500.00) each in advance on or before the first day of each month. If the
Occupancy Date is a date other than the first day of a calendar month, the
Minimum Rental shall be prorated daily from such date to the first day of the
next calendar month and paid on the Occupancy Date.
(b) Additional Rental. Minimum Rental after the initial twelve (12)
months of the lease term shall be adjusted in an amount equal to the percentage
increase in the Consumer Price Index for "All Urban," compiled by the United
States Department of Labor, Bureau of Labor Statistics, such percentage being
based on a comparison of the Index figure in effect three months prior to the
calendar month in which the lease term commenced with the Index figure for the
ninth (9th) month of the lease term. Such adjustments in rental shall not exceed
4% per year compounded and continue to be made for each successive twelve (12)
month period during the remaining term of this lease (including renewal terms)
in accordance with the percentages based on the Index figure in effect three
months prior to the calendar month in which the lease term commenced and the
Index figure for the ninth (9th) month of each twelve (12) month period. It is
understood and agreed that the Consumer Prices Index to be used for the calendar
month in which the lease term commences is that Index for January 1 1998, which
is three months prior to the calendar month in which the lease term commences,
and is established at 484.2, based on Consumer Prices Index of 1967 equals 100.
In no event shall the adjusted Base Rent ever be less than that for the previous
Lease Year. In all other respects, all of the terms, conditions and covenants
contained herein and any reference to the Lease term shall include the extended
term, if this option if exercised
6. FULL PAYMENT WITHOUT SET-OFF. The total rent due upon each due date
shall be paid in full to Lessor, and no set-off or counterclaims may be deducted
by Lessee from the rentals due. The burden of proof of full payment shall be
upon Lessee. In the event rent is not received by Lessor, by the 10th of the
month a 10% penalty fee will be charged.
7. KIND OF BUSINESS. Lessee shall occupy the premises throughout the full
term of the lease and the principal business to be conducted is printing.
8. ASSIGNMENT AND SUBLETTING. This lease may not be assigned, and the
premises may not be sublet, partially or fully, without prior written consent of
Lessor, which consent shall not be unreasonably withheld. Even in the event of
permitted assignment or subletting, Lessee acknowledges that is shall remain
fully responsible for compliance with all terms of the Lease.
9. LIEN FOR PAYMENT OF RENT. Lessor shall have all of the rights provided
for protection of Landlord's interest under local state law, specifically
including a lien for payment of rental. To enforce such lien, Lessor may take
and keep possession of all of Lessee's property and/or the contents of the
leased premises and may advertise and sell such property at public auction to
satisfy said debt, without any process of law and in bar of redemption, provided
that notice be posted on the premises and written notice be sent by certified
mail to Lessee and any known creditors claiming any interest in such property at
least ten (10) days prior to the sale date.
10. ALTERATIONS. Lessee shall make no alterations, additions, replacements
or improvements to the premises without the express written permission of
Lessor. Any alterations, additions, replacements and improvements made to or
upon the premises during the term of the lease shall immediately become the
property of Lessor and considered a part of the leased premises. Lessee agrees
that should it make any alterations, additions, replacements or improvements to
the premises it will not be acting as agent or servant of Lessor and that it
will promptly pay the cost or expense for same.
1
<PAGE>
However, trade fixtures, machinery and equipment installed by Lessee
solely for use in its business shall remain the property of Lessee and may be
removed at the expiration of the lease, provided the lease shall not then be in
default, and provided the premises be returned to Lessor in the condition as
provided in Paragraph 11 herein.
11. DELIVERY AT END OF LEASE. Upon termination of the lease, by expiration
of term, or otherwise, Lessee shall redeliver to Lessor the premises in good
order and condition, cleared of all goods and broom cleaned, and shall make good
all damages to the premises, ordinary wear and tear excepted, and shall remain
liable for holdover rent until the premises shall be returned in such order to
Lessor.
12. LAWFUL USE. Lessee covenants and agrees that it will observe and
comply with all laws, orders, rules and regulations of any governmental
authority relating to the demised premises, and will not permit same to be used
for illegal purposes nor permit any nuisance to be created or maintained
thereon.
13. CLEANLINESS. Lessee shall keep the leased premises and adjacent
grounds, including parking lot, in a good, clean, and sanitary condition and
appearance, free from dirt, filth, waste, oiled rags or any flammable, dangerous
or detrimental material, also from noxious or objectionable odors. If same are
not maintained in this manner, Lessor may, upon giving ten (10) days written
notice to Lessee during which time Lessee fails to correct the matter of which
Lessor complains, take the corrective action, and the cost of same shall be born
by Lessee, which Lessee agrees to pay upon receipt of the bill for same from
Lessor.
14. HOLDOVER. Should Lessee hold over the term hereby created, and with
the consent of Lessor, Lessee shall become a tenant from month to month at the
monthly rental payable hereunder for the prior month, and otherwise upon the
covenants and conditions in this lease contained, and shall continue to be such
tenant until thirty (30) days after either party hereto serves upon the other
written notice of intention to terminate such monthly tenancy. Should such
termination occur on any day other than the last day of any rental month, any
unearned prepaid rental shall, immediately following surrender of the demised
premises by Lessee, be refunded to him.
15. UTILITIES. All heat, water, electric current, gas, garbage, or special
fees, metering charges, security fees, or utility charges of any nature used on
the leased premises shall be paid for by Lessee.
16. SIGNS. Unless otherwise agreed in this lease, Lessee shall not affix
or attach any signs on the premises without consent in writing from Lessor,
except that Lessee may use the monument sign in front of the building.
17. IMPROVEMENTS TO BE MADE, AND DELIVERY OF PREMISES. If Lessor is to
make any improvements prior to Lessee's occupancy, a separate Schedule "A" shall
be attached and initialed by each part setting out the agreed improvements; in
such event, Lessor shall proceed diligently to made such improvements and Lessee
acknowledges that the premises shall be acceptable when such improvements are
made. If no Schedule "A" is attached, Lessee shall be deemed to have accepted
the premises in their existing condition.
18. UPKEEP OF PREMISES. Lessor shall, at its own cost and expense,
maintain in good repair the roof, foundations and exterior walls (not including
doors, windows and floors); however Lessor shall not be obligated to make any
repairs of those portions of the premises that it is obligated to maintain
unless it shall be notified in writing by lessee, and Lessor shall then have a
reasonable period of time to make such repairs; provided, however that Lessee
and not Lessor shall be responsible for making any such repairs occasioned by
the acts of Lessee, its employees, or invitees. Lessor shall not be liable for
any damage or loss occasioned by Lessor's failure to repair portions of the
premises which it had covenanted to maintain unless it shall have failed to
repair the defect within a reasonable time following written demand of Lessee to
make the repair.
Lessee shall at its own expense keep and maintain in good repair the
entire leased premises, other than those portions for which Lessor shall be
responsible as set out above, including interior walls, floors, ceilings, ducts,
utilities, air conditioning, heating, lighting, plate glass, plumbing, and
electric wiring, and also including any parking, landscaped or other area
exclusively used by Lessee. Upon receiving notice of any defect that is the
responsibility of Lessee to maintain, Lessee agrees to proceed diligently to
make repairs. Lessee shall be responsible for all lawn care and landscape
maintenance.
19. FIRE CLAUSE. In case the said premises shall be so damaged by fire or
other cause as to be rendered untenantable, Lessor shall have thirty (30) days
from date of said casualty to determine the extent of repairs to be done and the
time required to perform them. If the damage is such that repairs can be
completed within ninety (90) days from commencement of said repairs, Lessor
agrees to make such repairs promptly and to allow Lessee an abatement in rent
for such time as the building remains untenantable. Lessor shall commence
repairs within thirty (30) days from date of said casualty. If necessary repairs
cannot be made within ninety (90) days from the date of commencement of such
repairs, this lease shall terminate as of the date the premises were rendered
untenantable. In the event of partial loss, the rent shall be abated by a
portion equal to the area rendered unfit for use against the total area. Should
less than 180 days remain before the expiration of the term of this lease and
repairs cannot be completed within 90 day; from the date of casualty, then
Lessor shall have the right to terminate this lease.
2
<PAGE>
20. WAIVER OF SUBROGATION. Lessor and Lessee agree, provided that such
agreement does not invalidate or prejudice any policy of insurance, that, in the
event the leased premises or the fixtures, leasehold improvements, furniture,
equipment, or merchandise therein, are damaged or destroyed by fire or other
casualty which is covered by insurance of either the Lessor or the Lessee, the
rights of either party, if any, against the other, or against the employees,
agents, or licensees of any party with respect to such damage or destruction and
with respect to any loss resulting therefrom, including the interruption of the
business of any party, are hereby waived to the extent of the coverage of said
insurance. Lessor and Lessee agree further that all policies of fire, extended
coverage, business interruption, all risk or other insurance covering the leased
premises, or the contents, fixtures, equipment and improvements thereon, shall,
if obtainable, contain a clause or endorsement providing in substance that the
insurance shall not be prejudiced by virtue of this waiver. Any additional
premiums on account thereof shall be paid by the party benefited.
21. CONDEMNATION. In the event of Lessor's receipt of notice of a
condemning authority's intention to take by eminent domain a substantial part of
the property on which the leased premises are situated, either party may at any
time thereafter, by notice in writing effective on the date of taking or six
months after the date of service of the notice, whichever shall be earlier,
terminate this lease. In the event of termination of this lease, Lessee shall
have the right to remove all of his property and contents but shall have no
right to any part of the condemnation settlement or award, except for reasonable
moving expenses if specifically set aside for tenant relocation by the
condemning authority.
22. REAL ESTATE TAXES. Lessee shall pay as additional rent any real estate
taxes or any special assessments imposed by reason of improvements made to the
leased premises by or for the benefit of Lessee. Lessee shall also pay as
additional rent 100% of the real estate taxes and special assessments imposed
upon the entire premises of which the leased premises are a part. Lessee agrees
that if during the term of this lease a capital levy or other tax be levied,
assessed or imposed on the rents received by Lessor from the rents reserved
herein or any part thereof then Lessee will pay same when due; except, however,
should said tax upon rents be substituted partially or wholly for real estate
taxes, then Lessee shall only pay that portion which is in excess of the real
estate taxes for the leased premises. Payment under this clause shall be due
within ten (10) days of delivery of notice thereof to Lessee.
23. INSURANCE. Lessee shall pay as additional rent 100% of Lessor's
insurance premium for the building in which the leased premises are located.
Lessee agrees to promptly comply with and execute all rules, orders and
regulations of the Fire Underwriters Association for the prevention of fires, at
Lessee's own cost and expense. Lessee agrees to pay as additional rent the
amount of insurance premiums for the entire premises, promptly when due. Payment
under this clause shall be due within ten (10) days of delivery of notice
thereof to Lessee.
24. DEFAULT BY THE LESSEE. In the event Lessee fails to pay the rent as
herein stipulated, or fails to comply with any of the terms and conditions of
this lease, then Lessor may continue the lease and recover damages for such
failure, or unless Lessee corrects or remedies any such failure or default
within thirty (30) days or such other time limitation as may be specifically
provided for elsewhere in this lease, after Lessor has mailed written notice of
same to Lessee, except that only ten (10) days notice shall be required with
respect to failure to pay rent, then Lessor may elect to declare this lease
forfeited and terminated and at the end in all respects, and may, thereupon
enter and take possession of said premises for said breach and rerent the same
to such Lessee as in the discretion of Lessor may be deemed suitable and proper.
Should, through no fault of Lessee, the default be unable to be cured within
said thirty (30) day period, Lessee shall have an additional reasonable time in
which to cure said default. Should Lessor declare this lease terminated and
forfeited as aforesaid, then Lessee agrees to surrender peaceful possession of
same, and Lessor may re-enter with or without legal process.
25. LESSOR'S RIGHT OF ENTRY. Lessor, and its agents or other
representatives, shall have the right to enter into and upon the leased premises
or any part thereof at all reasonable hours for the purpose of examining the
same or making repairs or alterations which may be necessary for the safety and
preservation thereof. Lessee agrees at any time within three (3) calendar months
before the expiration of this lease to allow Lessor to enter upon the premises
and to affix upon any suitable part thereof a notice for reletting same, and
that Lessee will not remove same and will permit all persons authorized by
Lessor to view said premises at reasonable times.
26. DAMAGES AND ACCIDENTS. Lessee agrees to hold harmless and indemnify
Lessor from and against any liability or loss, including counsel fees incurred
in good faith by the Lessor, arising out of any cause associated with Lessee's
business or use of the premises. In addition, Lessee agrees to provide public
liability insurance naming Lessor as additional insured to protect Lessor from
risks customarily covered by such insurance, in amounts not less than $500,000
per person and $500,000 per accident, and $100,000 for damage to property.
Lessee also shall carry contents coverage on its contents with a waiver of
subrogation clause as to Lessor.
27. NON-WAIVER. Failure of Lessor to declare any default immediately upon
occurrence thereof or delay in taking any action in connection therewith shall
not waive such default, but Lessor shall have the right to declare any such
default at any time; no waiver of any default shall alter Lessee's obligations
under the lease, with respect to any other existing or subsequent default.
3
<PAGE>
28. BANKRUPTCY OR INSOLVENCY OF LESSEE. In the event of the filing of any
petition for bankruptcy or receivership relating to the Lessee, unless dismissed
in twenty-one (21) days, or in the event of any assignment of Lessee's assets
for the benefit of creditors, then Lessor shall have the right on thirty (30)
days notice to terminate this lease irrespective of whether rental payments
shall then be in default.
29. ATTORNEY'S FEES AND INTEREST. In the event it becomes necessary for
Lessor to employ an attorney to enforce collection of the rents agreed to be
paid, or to enforce compliance with any of the covenants and agreements herein
contained, Lessee shall be liable for reasonable attorney's fees, costs and
expenses incurred by Lessor, and in addition, shall be liable for interest at
ten percent (10%) per annum on the sum determined to be due by reason of breach
of this lease, such interest to run from the date of breach of the lease.
30. QUIET POSSESSION. In consideration of the covenants and agreements
herewith contained, Lessor agrees to warrant and defend Lessee in the quiet and
peaceful posession of the said premises during the term of this lease.
31. ENTIRETY OF UNDERSTANDING IN WRITTEN LEASE. It is agreed that the
entire understanding between the parties is set out in the lease and any riders
which are hereto annexed, that this lease supersedes and voids all prior
proposals, letters and agreements, oral or written, and that no modification or
alteration of the lease shall be effective unless evidenced by an instrument in
writing signed by both parties. The law of the state where the lease premises
are situated shall apply.
32. COMMISSION. This lease has been negotiated through the agency of RCM
Realty, Inc., Agent for Lessor, and in consideration of the services rendered to
Lessor by said Agent, Lessor, its successors or assigns, agrees to pay said
Agent, its successors or assigns a leasing commission of four percent (4%) on
all rentals due under this lease, renewals, holdovers, or extensions of it. Said
leasing commission is to be deducted from the monthly rents as collected by
Lessor. Should Lessee purchase the demised property during the term of this
lease, renewal, extension, or holdover occupancy, Agent shall be entitled to a
sales commission of six percent (6%) of the sales price, to be paid by the
Lessor at the time of closing.
33. SECURITY DEPOSIT. Lessee has paid to Lessor, upon signing this Lease,
a sum (the deposit) equal to one (1) month's minimum rental as security for
Lessee's performance of all obligations hereunder. The deposit may be held by
Lessor in such a manner as it shall elect and Lessor shall be entitled to any
interest which accrues on the deposit. In the event of a default by Lessee,
Lessor may, at its option, apply all or any part of the deposit to cure the
default, and thereupon Lessee shall immediately redeposit with Lessor the amount
so applied in order that Lessor will always have the full deposit on hand during
the term of this Lease. Upon the termination of this Lease, provided that Lessee
is not in default hereunder, Lessor shall refund to Lessee any of the remaining
balance of the deposit subject to final adjustments for payment of any rental
required by this Lease. If the Premises are sold, Lessor shall have the right to
transfer the deposit to the new owner, and upon the new owner's express
assumption of the obligations for the deposit required by this Lease. Lessor
shall thereupon be released from all liability for such deposit, and Lessee
thereafter shall look only to the new owner for such deposit. The terms shall
apply to every transfer of the deposit.
34. OPTION TO RENEW. Provided Lessee is not in default, Lessee shall have
one (1) option to renew this Lease for a three (3) year period. Lessee must
provide 180 day advanced written notice of its desire to exercise option. All
terms and conditions of the existing Lease shall remain in place during the
option term. Minimum rental shall be increased as provided in Paragraph 5(b)
herein.
LESSEE: LESSOR:
COLORSMART, INC. MICHAEL N. RYAN & LYNDA K. RYAN
By: /s/ [ILLEGIBLE] By: /s/ Michael N. Ryan
------------------ -------------------
Title: President By: /s/ Lynda K. Ryan
---------------- -------------------
4
<PAGE>
Exhibit 10.06
MEMORANDUM OF AGREEMENT OF LEASE
made and entered into between
CONSTANTIA COURT YARD (PTY) LTD
REG NO. 98/23232/07
(hereinafter called "the Landlord") of the First Part
herein represented by
DAVID PETER BUNCE
(duly authorised hereto)
COLOUR SMART.COM.SA
REG NO:
herein represented by
REGINALD BURROWS
(hereinafter called "the Tenant") of the Second Part
The Landlord hereby lets to the Tenant who hereby hires the premises described
in Section 3 of the Schedule annexed hereto on the terms and conditions as set
out in the said Schedule and General Conditions annexed hereto.
REF:
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE
- --------------------------------------------------------------------------------
1. PROPERTY : ERF 9417 CONSTANTIA, CAPE TOWN
2. NAME OF LANDLORD : CONSTANTIA COURT YARD
(PTY) LTD
2.1 NAME OF TENANT : COLOUR SMART.COM.SA
Represented by Reginald Burrows
2.2 ADDRESS OF BUILDING : CONSTANTIA COURT YARD,
MAIN ROAD, CONSTANTIA
3. DESCRIPTION OF PREMISES : Shop 2 Portion of ground Floor, being the
address of the tenant as per annexure "A"
(diagram of premises). The rentable area in
terms of the S.A.P.O.A. standard of
measurement is equal to approximately 87
square metres.
4. LEASE PERIOD : 3 YEARS
4.1 Commencement date : 1 OCTOBER 1999
4.2 Possession date : 1 SEPTEMBER 1999
4.3 Termination date : 30 SEPTEMBER 2002
4.4 Option to Renew : 2 YEARS
<PAGE>
5. RENTAL OF THE PREMISES
5.1 RENTAL
Monthly rental for Lease Period excluding vat calculated at R185.00 per
square meter for the first period being 1 October 1999 to 30 September
2000 thereafter escalating at 11% per annum, namely:
NET VAT GROSS
--- --- -----
From 1 October 1999 to 30 September 2000 = R16 095.00 R2 253.30 R18 348.30
From 1 October 2000 to 30 September 2001 = R17 865.45 R2 501.16 R20 366.61
From 1 October 2001 to 30 September 2002 = R19 830.65 R2 776.29 R22 606.94
5.2 OPERATING COSTS
Monthly operating costs for Lease Period calculated at R 15.00 per
square meter for the first period being 1 October 1999 to 30 September
2000 thereafter escalating at 11% per annum, namely:
NET VAT GROSS
--- --- -----
From 1 October 1999 to 30 September 2000 = R1 305.00 R182.70 R1 487.70
From 1 October 2000 to 30 September 2001 = R1 448.55 R202.80 R1 651.35
From 1 October 2001 to 30 September 2002 = R1 607.89 R225.10 R1 832.99
6. PARKING RENTAL : Includes 1 open parking bay.
7. RATES
Tenant's proportionate share of = 2.83%
assessment rates and taxes in terms
of clause 9 of the Lease annexured hereto.
8. ELECTRICITY
Tenant's Portion of electricity in
terms of clause 10 of the Lease = Submeter
annexured hereto
9. SOLE PERMITTED USAGE OF PREMISES : Photostating and enlarging,
Colour & ordingary copying
10. DOMICILIUM CITANDI ET EXECUTANDI OF LANDLORD
: 46 Main Road, Bergvliet,
7945
<PAGE>
11. DOMICILIUM CITANDI ET EXECUTANDI OF TENANT
: Shop 2 Constantia Courtyard
Constantia
12. DEPOSIT / BANK GUARANTEE : The Tenant will supply an irrevocable
bank guarantee equivalent to R19
836.00 which guarantee shall remain in
full force and effect to cover any
claims of the Landlord based on a
cause of action arising in terms of
the Lease arising during the period of
the lease, which guarantee shall be in
the form of the draft annexed hereto
marked "B" or in such other form as
may be approved in writing by the
Landlord
13. TURNOVER RENTAL : NIL
14. THE FOLLOWING ANNEXURES FORM PART OF THIS LEASE:
Annexure "A" : Floor Plan.
Annexure "B" : Irrevocable Bank Guarantee.
Annexure "C" : Resolution of Directors.
Annexure "D" : Option to Renew.
Annexure "E" : Deed of Suretyship
Annexure "I" : Retail - Marketing Fund
Annexure "J" : Standard Specification of Finishes
<PAGE>
THUS DONE AND SIGNED AT ON THIS THE DAY OF 19
For and on behalf of
AS WITNESSES:
1. ................................ ..............................
duly authorised hereto
.............................................
Full Name
....................................................
Full Name and Designation of Authorised Signatory
2. .............................................
..........................................
Identity Number of Authorised Signatory
............................................
Full Name
THUS DONE AND SIGNED AT ON THIS THE DAY OF 19
For and on behalf of
AS WITNESSES:
1. ................................ ..............................
duly authorised hereto
.............................................
Full Name
....................................................
Full Name and Designation of Authorised Signatory
2. .............................................
Full Name
..........................................
Identity Number of Authorised Signatory
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
ANNEXURE "B"
- --------------------------------------------------------------------------------
IRREVOCABLE BANK GUARANTEE
- --------------------------------------------------------------------------------
The Manager
Constantia Court Yard (Pty) Ltd
46 Main Road
Bergvliet
7945
Dear Sir
AGREEMENT OF LEASE ("THE LEASE") ENTERED INTO BETWEEN
.....................................................
Letter of Guarantee No. ..............
We the undersigned, .............. and ............... representing
................. (hereinafter referred to as the "Bank") Reg No. ..............
in our capacities as .............. and ............... respectively and duly
authorised thereto, do hereby bind the said Bank as surety and co-principal
debtors in solidium to .............................. (the creditor) for the due
fulfilment by ................................. (the debtor) for the due and
proper fulfilment of all the obligations of, and for the punctual payment of all
sums which are now and may hereafter become due by the debtor to the creditor
howsoever arising in terms of the lease entered into (or about to be entered
into) by the creditor and the debtor in respect of the premises. I/We agree that
the guarantee shall extend to cover any failure to fulfil the terms of the Lease
whether brought about by the action of the debtor or any other person or by
insolvency/liquidation of the debtor.
This guarantee shall not bind the Bank to do anything other than the payment of
money and shall be limited to a maximum of R......................
(........................................)
This guarantee shall be a continuing covering security. We renounce the benefits
of the legal exception of excussion and division and agree that our liability
hereunder shall not be reduced or in anyway affected by the release or
alteration by the creditor or by any reason by concessions, extensions of time
or any other arrangements made with the debtor.
This guarantee is neither negotiable nor transferable and is restricted to the
payments of money only. Our liability under this Guarantee will expire on the
.............................. (three months after lease expiry date).
Notwithstanding anything to the contrary herein contained our obligation shall
be construed as principal and not as accessory to that of the principal debtor
and shall not be delayed or discharged by the fact that a dispute exists between
the principal debtor and the beneficiary herein.
SIGNED AT .................... THIS .... DAY OF ............. 19 ....
For and on behalf of ................................................
As witnesses:
............................ ...........................
<PAGE>
2
ANNEXURE "C1"
- --------------------------------------------------------------------------------
CERTIFIED COPY OF A RESOLUTION OF DIRECTORS
- --------------------------------------------------------------------------------
OF :
PASSED IN :
- --------------------------------------------------------------------------------
IT WAS RESOLVED THAT
a Director of the Company, be and is hereby authorised to enter into and sign a
lease binding the Company (as Tenant) to CONSTANTIA COURT YARD (PTY) LTD (as
Landlord) in respect of premises at Erf 9417, Constantia Main Road upon such
terms and conditions as set out in the Agreement laid before the meeting and
approved.
THE AFOREGOING IS CERTIFIED TO BE A TRUE COPY.
.................. ...................
SECRETARY/DIRECTOR PRINT FULL NAME AND
DESIGNATION
As witnesses:
.................. ...................
<PAGE>
4
ANNEXURE "D"
- --------------------------------------------------------------------------------
OPTION TO RENEW
- --------------------------------------------------------------------------------
RENEWAL OF LEASE
The Tenant shall have the right upon giving the Landlord not less than six (6)
calendar month's written notice prior to the lease expiry date to renew this
lease for a further period as stated in Section 4.4 of the Schedule commencing
immediately after the lease expiry date on the Landlord's then prevailing
standard terms and conditions of lease save that the rental payable during such
renewal period is to be agreed upon in writing by the Landlord and the Tenant no
later than three (3) months prior to the expiry date this Lease. Should the
Landlord and the Tenant be unable to reach agreement in writing on the rental
for the renewal period at least three (3) months prior to the expiry date, the
lease shall terminate on the lease expiry date.
<PAGE>
8
Signed at ..................... on this ........ day of ................ 19.....
AS WITNESSES:
1. ...........................
2. ........................... ...........................
<PAGE>
14
ANNEXURE "I"
- --------------------------------------------------------------------------------
RETAIL: MARKETING FUND
- --------------------------------------------------------------------------------
1 If the Landlord establishes a Marketing Fund ("the Fund") and/or Tenants'
Association ("the Association") for for the tenants of the centre the
Tenant shall:
1.1 for the period of the Lease, including any extensions thereof,
automatically be a member of the Fund and/or Association and conform
with the articles of association, rules, constitution and/or by-laws
of the Fund and/or Association, as the case may be; and
1.2 whilst a member of the Fund and/or Association pay to the Landlord,
monthly in advance, a fee of five per cent (5%) of gross monthly
rental in terms of clause 5 of the schedule.
2 The Landlord or its nominee will administer the Fund and/or Association
and any funds held therein at its discretion, with due consultation with
the Tenants of the building from time to time, in order to pursue the
objects of the Fund and/or Association set out below.
3 The object of the Association shall be to encourage its members to deal
fairly and courteously with their customers, to sell their merchandise or
services at fair prices, to follow ethical business practices and to
promote a harmonious relationship between Tenants and the Landlord.
4 The object of the Fund shall be to assist and promote the business of the
Tenants by sales promotions and centre-wide advertising, to regulate
advertising in and periodic decoration of the mall in the centre and to
promote security in the centre and the safety of the Tenants.
5 Membership of the Fund and/or Association shall be limited to tenants of
premises in the centre and the Landlord or its nominee.
<PAGE>
[ILLEGIBLE]
1.0 SHOPFRONTS
1.1 Shopfronts Hardwood Timber glazed from outside
1.2 Glazing Clear safety glass, thickness to National Building
Regulations
1.3 Locks Two four lever mortice locksets for each door
1.4 Entrances 1600mm double doors for shops over 100m(2)
Others 1000mm wide single door on floor springs.
2.0 FLOORS
2.1 Floor Base Screed to match existing
2.2 Floor Finish Belgotex foam backed carpet
Alternative R60.00/m(2) floor allowance
2.3 Skirting 75mm bullnosed pine skirting / enamel paint finish
3.0 WALLS
3.1 Plastered One coat to brick walls
3.2 Drywall Galvanised steel stud / Rhinoboard clad
Drywall partition
3.3 Paint Two coats internal quality PVA (white)
4.0 CEILINGS
4.1 Internal ceiling Lay in tile 1200 x 600 mineral fibre ceiling panels -
white finish
4.2 Ceiling Height 2700m high (minimum)
4.3 Ceiling Void Minimum of 300mm
5.0 AIR-CONDITIONING
5.1 Consul or split units as per Mechanical Engineers
6.0 BASINS
6.1 Sink 1200mm stainless steel single bowl kitchen sink unit on
white "Melex" sink unit
6.2 Water Cold water supply only.
7.0 ELECTRICITY
7.1 Lighting Lighting to be 1200x600 recessed flourescent fittings to
give 350 lux intensity, all switched at Lessee's
distribution board.
7.2 Power Points Wall power points allocated at one 15 amp switched
socket per 25m(2) of leased area subject to a minimum of
2 points per shop.
7.3 Distribution Distribution Board in each shop to have space for time
Board switch by Lessee.
7.4 Telephone One telephone point to General Post Office requirements
will be provided in the front of the shops
8.0 FIRE FIGHTING
8.1 Reels As per department requirements
8.2 Extinguishers To be provided by Lessee as per department requirements.
<PAGE>
9.0 GENERAL
9.1 Tenants to advise timeously of any changes required to the above.
9.2 Position of plugs, sink, telephone point, doors etc to be advised by
tenant
9.3 This Schedule to be used as a guide and the specifics of the
abovementioned items to be read off the relative schedules.
<PAGE>
Page 1
- --------------------------------------------------------------------------------
INDEX TO GENERAL CONDITIONS OF LEASE
- --------------------------------------------------------------------------------
CLAUSE CONTENTS PAGE
18 ADVERTISING SIGNS 08
02 AGREEMENT OF LEASE 03
44 ALIENS 17
19 AIR CONDITIONERS AND BLINDS 08
15 ALTERATIONS 07
09 ASSESSMENT RATES AND TAXES 05
14 BLOCKAGE OF PIPES 07
35 BREACH 13
21 BUILDING SECURITY 10
11 COMMON AREAS, JOINING FACILITIES & ACCESS TO THE BUILDING 05
41 COMPANY OR CLOSE CORPORATION TO BE FORMED 16
40 CONDITIONS OF USE OF PARKING AREA 15
46 COSTS 17
01 DEFINITIONS 02
34 DESTRUCTION 13
10 ELECTRICITY 05
16 FIXTURES AND FITTINGS 08
30 FUTURE TENANTS 12
45 GENERAL 17
26 GLASS, WINDOW PANELS AND SHOP FRONTS 11
42 HOLDING OVER 16
31 HOUSE RULES AND REGULATIONS 12
17 INDICATOR SIGN BOARDS 08
25 INVALIDATION OF INSURANCE 11
36 JURISDICTION 14
27 LANDLORDS LIABILITIES AND TENANTS WAIVERS 11
43 LANDLORD'S HYPOTHEC 17
29 LANDLORDS RIGHT OF ENTRY 12
32 LANDLORD'S RIGHT TO ADD TO BUILDINGS 12
03 LEASE PERIOD 03
24 LICENCES AND MUNICIPAL REGULATIONS 10
28 MAINTAIN EXTERIOR 11
12 MAINTAIN INTERIOR 06
23 NON-REMISSION OF RENT DURING BUILDING 10
37 NOTICE AND DOMICILIA 14
05 NOTIFICATION OF DEFECTS 04
22 NO WITHHOLDING PAYMENTS 10
39 NUISANCE 15
08 PARTNERSHIP 05
13 REFUSE 07
04 RENTAL AND DEPOSIT 03
47 RENTAL DEBIT AUTHORISATION 17
38 SALE OF PREMISES OR CHANGE OF NAME 15
20 SUB-LETTING AND SALE OF SHARES 09
07 SURETY 04
06 USAGE 04
33 VACATION OF PREMISES 12
48 VALUE ADDED TAX (VAT) 17
INITIAL HERE
<PAGE>
Page 2
- --------------------------------------------------------------------------------
GENERAL CONDITIONS OF LEASE
- --------------------------------------------------------------------------------
1 DEFINITIONS
In these General Conditions of Lease and in the Schedule, unless the
context clearly otherwise indicates:
1.1 "Schedule" means the Schedule attached to the Lease;
1.2 "the lease" means the agreement of lease entered into between the
parties in terms of this document;
1.3 "the premises" means the premises, including the parking areas, let
in terms of this lease and as described in Section 3 of the
Schedule;
1.4 "the budding" means the building of which the premises form a
portion;
1.5 "the property" means the property upon which the building is
situated;
1.6 "the commencement date" means the date upon which this lease
commences as specified in clause 4 of the schedule:
1.7 "the possession date" means the date upon which the keys to the
premises are delivered to the tenant;
1.8 "the expiry date" means the date upon which this lease expires as
specified in clause 4 of the schedule;
1.9 "the common area" means at any time during the currency of this
Lease, those parts of the building not actually let and not intended
to be let by the Landlord or its duly authorised representatives,
including but not necessarily limited to foyers, malls, arcades,
passages, parking areas, entrances, exits, loading docks, ramps,
landscape areas, interior and exterior stairways, toilets, and all
other amenities provided by the Landlord for general use in common
by the tenants and their servants, employees, customers and invitees
in or about the building or the property;
1.10 "pro-rata share" means the ratio, which the rentable floor area of
the leased premises bears to the total rentable floor area of the
building. In order to derive the aforesaid ratio, the rentable floor
areas of the leased premises and of the building respectively shall
be determined by using the SAPOA Method of Measuring Floor Areas in
Commercial Buildings;
1.11 "operating costs" will mean reasonable costs incurred by the
Landlord in respect of maintaining and running the building and/or
property for which the Tenant is not otherwise liable in terms of
this Lease, including (but not limited to):
* fees, levies and/or charges payable to the local or any other
responsible authorities (excluding only assessment rates and
taxes);
* cleaning expenses - for common areas only
* security expenses;
* the lift service including maintenance, repairs and
replacements;
* refuse and sewerage rates and charges;
* insurance premiums (including political riot insurance);
* electricity consumed in common area;
* airconditioning repairs and maintenance costs;
* the cost of water used in or at the building for any purposes;
* building amenity cost, including towel and other toilet
services and the costs of maintaining indoor and outdoor
gardens, plants and grounds and fire fighting equipment,
drains and sewerage pipes and plumbing works;
* management and administration expenses and fees;
1.12 "monthly rental" means the total of all amounts referred to in
sub-paragraph 4.2 of this lease;
1.13 Words importing any one gender shall include the other two and words
importing the singular shall include the plural and vice versa;
1.14 The headings to paragraphs are used for reference only and are not
terms of the lease.
INITIAL HERE
<PAGE>
Page 3
AGREEMENT OF LEASE
The Landlord hereby leases the premises to the Tenant, which hires the
premises from the Landlord on the terms set out in this Agreement
incorporating the Schedule and Annexures annexed hereto.
Each and every term of this agreement, including terms contained in the
Schedule and Annexures hereto, shall be material terms of this Lease and
shall not be severable from the remainder of the agreement.
3 LEASE PERIOD
3.1 The lease shall be for the lease period stipulated in Section 4 of
the Schedule and shall (unless terminated earlier in terms of the
lease), expire on the expiry date stipulated in Section 4 of the
Schedule.
3.2 If the Landlord is unable to give the Tenant possession and/or
occupation of the premises on the Commencement Date as stipulated in
the Schedule by reason of the premises being incomplete, or in a
state of disrepair, or by reason of any existing Tenant not having
vacated the premises, or for any other reason whatsoever, the Tenant
shall have no claim for damages or right of cancellation and shall
accept occupation on such later date on which the premises are
available. In the event of such a delay the Commencement Date shall
be the date on which the premises shall become available for
occupation and the lease period and expiry date shall be extended by
the period of the delay;
3.3 Notwithstanding the abovementioned provisions, and subject to the
provisions of 3.5 below, the Lease shall only come into force when
signed by the Tenant and the Landlord, until which time the Tenant
shall have no right of occupation whatsoever and shall have no claim
to the existence of a tenancy as a result of:
3.3.1 negotiations having been conducted and/or concluded;
3.3.2 this Lease having been drafted, and signed by the Tenant only;
3.3.3 the acceptance by the Landlord and/or its agents and/or
employees of payment of a deposit or of rental or the giving
of possession of the premises to the Tenant.
3.4 Signature of this Lease by the Tenant shall constitute an offer by
the Tenant to Lease the premises on the terms set out herein, which
offer shall be irrevocable unless and until declined in writing by
the Landlord. The failure of the Landlord to sign the Lease shall
not be deemed to indicate that the Landlord has declined to accept
the Tenant's offer aforesaid.
3.5 Notwithstanding the provisions of 3.3 above, should the Tenant
already have taken possession of the premises and the Landlord
thereafter declines to sign the Lease, the Tenant shall nevertheless
be bound by the terms of this Lease save that the Tenant's
occupation of the premises shall be deemed to be a monthly tenancy
terminable on ONE (1) month's written notice given by either party
to the other.
4 RENTAL AND DEPOSIT
4.1 The Tenant shall, simultaneous with its signature of this lease,
furnish the bank guarantee/deposit specified in section 12 of the
Schedule to the Landlord. The Landlord shall have the right to apply
the whole or portion of such bank guarantee/deposit towards payment
of the rent, water and electricity charges, key replacements,
damages, repairs, renovations and any other liability for which the
Tenant is responsible in terms of this lease. If any portion of the
bank guarantee/deposit is so applied, the Tenant shall, on written
demand by the Landlord, reinstate the bank guarantee/deposit to its
original amount. The Tenant shall, if required by the Landlord, be
obliged to top up the bank guarantee/deposit on each anniversary of
the commencement date so as to ensure that it always remains
equivalent to at least the monthly rental for the premises, or the
original amount, whichever is the greater. The bank
guarantee/deposit, or the balance thereof as the case maybe, shall
be refunded by the Landlord to the Tenant:
4.1.1 after the Tenant has vacated the leased premises; and
4.1.2 after all the tenant's obligations to the Landlord in terms
hereof have been fully discharged; and
4.1.3 free of interest.
4.2 The monthly rental payable by the Tenant to the Landlord for the
premises shall be the aggregate of the amounts as specified in
clause 5.1 and 5.2 of the Schedule and subject to the escalation(s)
as specified in the Schedule.
4.3 In addition to and separate from the monthly rental, the Tenant
shall pay to the Landlord a monthly contribution towards the
operating costs of the building in an amount as specified in Clause
5.2 of the Schedule, and subject to the escalation(s) as specified
in the Schedule.
4.4 The monthly rental as set out in 4.2 and the operating costs set out
in 4.3 shall be paid by the Tenant to the Landlord monthly in
advance on or before the first day of each and every calendar month,
commencing from the occupation date or the commencement date,
whichever occurs first. The monthly rental and operating costs
shall, in respect of any period during the currency of this lease
which is less than a full calendar month, will be reduced
proportionately with
INITIAL HERE
<PAGE>
Page 4
regard to the length of the period concerned in relation to a full
month.
4.5 All amounts payable by the Tenant to the Landlord in terms of the
agreement shall be paid free of deduction and set-off and with the
addition of bank commission at the place specified in the schedule.
Unless otherwise agreed by the Landlord in writing, the payment of
such amounts shall be effected through an automatic electronic fund
transfer system, the requirements of which are detailed in the
Rental Debit Authorisation Form, being Annexure "F" to this Lease.
Notwithstanding the aforegoing, the Landlord may at its sole and
absolute discretion direct the Tenant to pay such amounts in cash at
such place as the Landlord may direct.
4.6 In addition to the monthly rental and operating costs set out above,
the Tenant shall pay such additional amounts as may be specified in
the Schedule and in this Lease.
5 NOTIFICATION OF DEFECTS
5.1 The Tenant shall notify the Landlord in writing within thirty (30)
days after the commencement date, or occupation date, whichever is
the earlier, of any defects in the premises. If it has not notified
the Landlord as aforesaid, it shall be deemed to have acknowledged
that the premises were received in good order and condition.
Notwithstanding the aforegoing, the Landlord shall not be obliged to
effect any repairs and/or maintenance in respect of the defects
listed by the Tenant, unless such defects relate to the Landlords
obligations in terms of 28 below, and the Tenant accepts the
premises "voetstoots".
5.2 The Tenant shall have no claim against the landlord of any nature
whatsoever, including but not limited to an enrichment claim, should
the area of the premises be smaller than the area referred to in
clause 3 of the schedule.
6 USAGE
6.1 The Tenant shall use the premises solely for the purpose described
in Section 9 of the Schedule and for no other purpose whatsoever
without the Landlord's prior written consent. The Tenant
acknowledges that it shall not have any exclusive right to any
particular type of business being conducted in the building.
6.2 The Tenant shall not conduct on the premises any "auction", "fire",
"going out of business", "closing down", "bankruptcy" or similar
sales.
6.3 The Tenant shall not exceed the floor loading capacity of the
premises or the building and the Tenant shall be responsible for any
and shall make good any and all damage to the premises and/or the
building caused by exceeding the floor loading capacity.
6.4 The Landlord does not warrant that the premises are suitable for the
purposes of the Tenant, or that the Tenant will be granted any
license or consent in respect of its business.
6.5 In the event that the premises are retail premises, the Landlord
shall be entitled (after consultation with the Tenants in the
building/property and in the event of the majority of the Tenants so
agreeing), to introduce extended shopping hours at the centre eg.
Late night shopping, trading on Saturday afternoons, Sundays and
public holidays. Any alteration in the said core trading/business
hours shall be effective on not less than 2 (two) calendar month's
notice.
7. SURETY
The Tenant shall procure that the person/s (if any) stipulated in Section
13 of the Schedule sign and throughout the period of this Lease, including
any extensions thereof, remain bound by a written Deed of Suretyship in
the form set out in Annexure "F" to this Lease. The Tenant shall ensure
that such written Deed of Suretyship duly signed as aforesaid is delivered
to the Landlord before the commencement date or occupation date, whichever
is the earlier. Should any such Suretyship not be furnished to the
Landlord within the required period as provided, or should any surety
named in Section 14 of the Schedule be declared insolvent or for any
reason become released from his obligations in terms of this suretyship,
the Tenant shall be deemed to be in breach of this Lease unless the Tenant
furnishes such other security for its obligations under this Lease to the
satisfaction of and within the time stipulated by the Landlord. The
Landlord may in its discretion waive or compromise its rights in respect
of any suretyship of one or more of the sureties named in the Schedule
without affecting its rights in respect of the remaining sureties.
INITIAL HERE
<PAGE>
Page 5
8. PARTNERSHIP
If the Tenant is a partnership then by their signature hereto each partner
shall be liable jointly and severally both in his capacity as a partner
and in his personal capacity for all the obligations of the partnership as
the Tenant. The composition of the partnership as set out in this Lease
will not be altered for the duration of this agreement except with the
Landlord's prior written consent. If the composition of a partnership is
altered without such consent, the partners whose names appear in this
Lease will remain jointly and severally liable in terms of this Lease as
if the partnership had not been dissolved. Any person purporting to
represent a partnership by signing this Lease warrants by his signature
that he is authorised to bind the other partners to all provisions of this
Lease. The above provisions apply, mutatis mutandis, in the case of a
joint tenancy.
9 ASSESSMENT RATES AND TAXES
Commencing as from the occupation date or commencement date, which ever is
the earlier, the Tenant shall pay to the Landlord the following further
amounts on the first day of every month during the currency of this
agreement.
9.1 the tenant's pro-rata share of such assessment rates as are payable
by the Landlord on the property. The monthly amounts so payable by
the Tenant is specified in section 7 of the schedule;
9.2 the tenant's pro-rata share of any other charges or imposts payable
by the Landlord which are not or which may hereafter become payable
by the Landlord to any government, regional, local or other lawful
authority in respect of the property or the building;
9.3 the tenant's pro-rata share of value added tax or any other form of
tax, charge or levy imposed by the State or any regional, local or
other competent authority on the rental or any other amount payable
by the Tenant to the Landlord in terms hereof; provided that if it
shall be or shall become unlawful for the Landlord to recover any
portion of such tax, charge or levy by way of a refund, the Tenant
shall pay to the Landlord, as an additional charge an amount equal
to the tenants pro-rata share of any such tax, charge or levy.
10 ELECTRICITY
10.1 The Tenant shall be liable for the payment to the Landlord of a
monthly amount in respect of the consumption of electric current
including electric power, which amount will be equal to the
aggregate of the following two amounts which will be calculated at
the standard commercial rate per electricity unit from time to time
and will include any increase from time to time:
10.1.1 The amount of electricity used in the premises as indicated
by the reading of the sub-meter, which the Landlord will be
entitled to install to measure the units of electric current
including electric power consumed on or in respect of the
premises. The reading of that meter will be accepted as
correct by the parties unless proved by the Tenant to be
wrong.
10.2 The Tenant shall pay each and every monthly amount due by the Tenant
in terms of paragraph 10.1 or 10.2, as the case may be, within seven
(7) days of the date on which a monthly electricity account, which
may form part of the rental statement, is rendered to the Tenant by
the Landlord specifying the amount due by the Tenant for
electricity. Should the Tenant fail to pay the electricity account
by due date, then without prejudice to any other rights it may have,
the Landlord shall be entitled to terminate the supply of
electricity current to the premises and the Landlord shall not be
liable for any consequent damages or losses howsoever arising or of
any nature whatsoever sustained by the Tenant, as a result thereof
notwithstanding that the Landlord or its agents or employees may
have acted negligently.
10.3 The Tenant shall not alter, interfere with or overload the
electrical, lighting or heating installations in the premises;
10.4 The Tenant shall notify the Landlord should the electrical current
to the premises cease or become defective or be interrupted.
10.5 If any dispute arises as to the amount of the Tenant's liability for
any electricity charges, the onus of proof shall be on the Tenant.
10.6 The readings on the meter referred to in this clause 10 shall be
carried out by an independent recognised meter reading agency
appointed by the Landlord from time to time during the currency of
this Lease.
11 COMMON AREAS, JOINING FACILITIES AND ACCESS TO TILE BUILDING
11.1 The Tenant shall have the right of reasonable use, having regard to
the rights of other tenants, of the common areas, service roads,
loading facilities, side walks and yard, toilets and other
conveniences and facilities provided by the Landlord on the property
and in the building. The Tenant undertakes that its employees and
its agents and/or invitees will use such spaces, toilets,
conveniences and facilities as may be allocated from time to time in
respect of the Tenant
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and its employees, agents and/or invitees generally or in respect of
particular categories of those employees.
11.2 The Tenant shall be entitled to the use of the lifts, if any,
provided that all goods and parcels shall be transported in the
goods lift, if any, and shall be brought into the building by the
service entrances, if any, of the building. No goods, packing cases,
furniture or safes shall be taken into the lifts or left in the
passage and on the landing of such building or the surroundings
thereof without the Landlord's prior written consent.
11.3 The Landlord shall have the right in terms of clause 31 from time to
time to make and from time to time to vary, amend or add to
equitable rules and regulations governing the relationship between
tenants of the building in regard to:
11.3.1 the common area;
11.3.2 any joint facilities which may exist in the building; and
11.3.3 generally the use of joint, common or open areas within and
outside the building;
and the Tenant undertakes to observe the said rules and regulations
from time to time in force as if the same were terms and conditions
of this Lease and to ensure the observance thereof by the Tenant's
employees, officers, invitees, agents and/or visitors.
11.4 The Landlord shall not be responsible to the Tenant for the
non-observance or violation of the terms of any Lease which may be
enforced from time to time between the Landlord and any other Tenant
of the building or the non-observance or violation of any rules or
regulations by any such Tenant, nor shall the Tenant have any right
to require of the Landlord that it enforce any such terms, rules or
regulations.
11.5 The Landlord shall be entitled to relocate, from time to time at its
sole and absolute discretion, the parking areas and the common areas
in the property or building or extensions thereof.
11.6 The Landlord shall have the right to cause the removal of any
persons from the common areas or to deny the use of the common areas
by persons.
11.7 The Tenant shall have access to the premises or the building, and
the use of lifts and any other common facilities in the building
during normal business hours. Should the Tenant require access to
the premises outside normal business hours, the Tenant shall obtain
the Landlord's consent and the Landlord shall, having regard to its
security services and the other provisions of this Lease, be
entitled to make its consent conditional upon any terms and
conditions which the Landlord in its sole and absolute discretion
may deem necessary for the proper administration and/or security of
the premises or of the building.
12 MAINTAIN INTERIOR
12.1 The Tenant shall at its own cost, keep and maintain the premises in
a clean, sanitary and good condition. Without derogating from the
generality of the aforegoing, the Tenant shall:
12.1.1 replace or repair all fixtures and fittings, appliances,
doors, door handles, locks, keys, entrances and windows in or
serving the premises and on the expiration or earlier
termination of this agreement shall deliver the premises to
the Landlord in the same good order and condition as existed
at the commencement date;
12.1.2 replace when necessary all fluorescent tubes and incandescent
bulbs, starters, water ballast's, washers, taps, cisterns,
toilet bowls and basins in the leased premises and shall be
responsible at its own cost to maintain all light fittings in
the premises in proper order and clean condition;
12.1.3 except for normal figuring purposes, not drive or permit to
be driven into the walls or ceiling of the premises or the
building any nails, screws or other instruments, nor do or
permit anything to be done that may damage the walls or
ceilings or any other portion of the premises or the
building;
12.1.4 maintain in good order and condition any floor covering
and/or carpeting which may be supplied by the Landlord in the
premises, and shall, on expiration or earlier termination of
this agreement, deliver such floor covering and/or carpeting
to the Landlord in the same good order and condition as
existed at the commencement date, fair wear and tear alone
accepted. It is specifically recorded that, for the purpose
of this clause "fair wear and tear" shall not apply to usage
of the floor covering and/or carpets other than for
pedestrian traffic and shall not release the Tenant of its
obligation to clean the floor covering and/or carpets at
regular intervals.
12.1.5 at the expiration or earlier termination of this agreement,
and in the event only that the Tenant shall have failed to
restore the premises to the Landlord in the same good order
and condition as they were at the commencement of this
lease, fair wear and tear excepted, pay to the Landlord, on
demand, the reasonable cost of restoring the premises to the
same good order and condition in which it was at the
commencement date. Without derogating from the generality of
the aforegoing, the cost of restoring the leased premises
shall include the cost of redecoration and the cost of steam
cleaning and carpeting in the premises.
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12.2 The Tenant shall make good and repair at its own costs any damages
or breakage's and shall, in the event of it failing to replace,
repair or make good any broken, damaged or missing articles or to
repair or maintain any items as required in terms of this Lease,
permit the Landlord, without prejudice and in addition to the
Landlord's other rights, to carry out such work without liability on
the part of the Landlord to the Tenant for any loss or damage that
the Tenant may sustain or suffer as a result of such work. The
Tenant shall pay to the Landlord, within SEVEN (7) days of written
demand for payment the costs of such work together with interest at
the maximum rate permissible by law from the date of payment for the
work by the Landlord to date of payment by the Tenant. Without
detracting from the generality of the above, the Tenant shall repair
any damage caused to the premises inclusive of the doors, windows,
ceiling (s), floors and walls of the premises which may be
occasioned by any cause including forcible entry or exit and
malicious damage.
12.3 Without derogating from the generality of 12.1 above, the Tenant
shall maintain and keep clean the inside surfaces of the windows and
of the doors of the premises as no such service shall be supplied by
the Landlord.
13 REFUSE
13.1 The Tenant shall for the purposes of collecting and disposing of its
refuse provide and use at its expense such bins and other containers
as may from time to time be specified by the local authority and/or
the Landlord.
13.2 All bins and containers referred to in 13.1 above shall be
maintained in good order and condition and kept neat and tidy by the
Tenant throughout the period of this Lease. The Tenant shall ensure
that the refuse does not remain or accumulate on or outside the
premises but shall be prepared for collection in the manner and at
the times and places specified by the local authority and/or the
Landlord. The failure by the Tenant to comply with the above shall
permit the Landlord, without prejudice and in addition to the
Landlord's other rights, to carry out preparation and removal of
refuse without liability on the part of the Landlord to the Tenant
for any loss or damage that the Tenant may sustain or suffer as a
result thereof On completion of such preparation and removal, the
Tenant shall pay to the Landlord, within SEVEN (7) days of written
demand for payment the costs of such work together with interest at
the maximum rate permissible by law from the date of payment for the
work by the Landlord to date of payment by the Tenant.
13.3 The Tenant shall be responsible for the replacement cost of all/any
bins or containers used by or in connection with the premises, which
may be stolen, lost or unlawfully removed.
13.4 The Tenant shall if so directed by the Landlord, use such compactor
service and /or incinerator service as may be provided, for the
disposal of refuse, and the Landlord shall be entitled to charge the
Tenant or fair and reasonable amount for use of such compactor
service and/or incinerator service. The charge shall be payable by
the Tenant monthly in advance on the first day of each and every
month together with the total monthly rental.
14 BLOCKAGE OF PIPES
14.1 The Tenant shall use its best endeavours to prevent any blockage of
sewerage or water pipes or drains in or connected with the premises.
14.2 The Tenant shall remove at its cost any obstruction or blockage in
any sewerage, water pipes or drains serving the premises exclusively
and where necessary repair the sewerage pipe or drain concerned.
14.3 The failure by the Tenant to comply with the above shall permit the
Landlord, without prejudice and in addition to the Landlord's other
rights, to carry out the removal of the obstruction or blockage
and/or necessary repair without liability on the part of the
Landlord to the Tenant for any loss or damage that the Tenant may
sustain or suffer as a result of such work. On completion of such
removal of obstruction or blockage and/or repair, the Tenant shall
pay to the Landlord, within SEVEN (7) days of written demand for
payment the costs of such work together with interest at the maximum
rate permissible by law from the date of payment for the work by the
Landlord to date of payment by the Tenant.
14.4 The Tenant shall be responsible for the consequences, of any nature
whatsoever, of the disposal of waste water from the premises by the
Tenant. Without limiting the generality of the aforegoing, the
Tenant shall be liable to pay any fine and/or effluent levy in
respect of such disposal of waste water which may be imposed by the
relevant local authority.
15 ALTERATIONS
15.1 The Tenant shall not make any structural alterations and/or
additions to the premises.
15.2 The Tenant shall not make any alterations or additions and/or
improvements (for convenience hereafter collectively referred to in
this clause as "the alterations") of a non-structural nature
whatsoever to the premises or the building without the Landlord's
prior written consent. The Landlord shall be entitled, if it
consents to the alterations, to require that the work is carried out
on behalf of the Tenant by a contractor nominated by the Landlord on
fair and reasonable conditions stipulated by the Landlord and the
Landlord shall also have the right to nominate any professional
consultants necessary to supervise the work at the Tenant's expense.
The Tenant shall obtain any required approval from the Local
Authority before the commencement of any works. If any alterations
are made by the Tenant it shall, on
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the expiry of the Lease or the expiry of any renewal or extension
thereof, remove and reinstate the premises to the condition they
were in before additions and alterations were effected, unless the
Landlord otherwise directs or agrees in writing, in which latter
case the alterations shall become the Landlord's property. The
Tenant shall under no circumstances have any claim for compensation
for any such alterations, whether or not they are removed and the
premises reinstated.
16 FIXTURES AND FITTINGS
16.1 The Tenant may from time to time install any fixtures, fittings,
partitions and equipment (hereafter referred to for convenience as
'the fixtures and fittings') in the premises for the purpose of
carrying on the Tenants business after obtaining the Landlord's
prior written consent thereto, (which consent shall not be
unreasonably withheld).
16.2 The Tenant may from time to time, and shall, prior to the
termination of this lease, remove the fixtures and fittings
installed in terms of 16.1 provided that the Tenant shall, at its
own cost, repair any damage caused by the installation and/or
removal of the fixtures and fittings. If the Tenant does not remove
any fixtures and fittings on vacating the premises, these will
become the property of the Landlord without prejudice to the
Landlord's right to recover the reasonable cost of reinstating the
premises as a result of the Tenant's failure to do so, and the
Tenant shall not at any time or under any circumstances have any
claim of any nature whatsoever against the Landlord in respect of
any fixtures and fittings not removed on or before the termination
of this Lease, whatever the reason may be.
16.3 All the Tenant's fixtures and fittings shall be installed at the
Tenants expense, and shall be executed in accordance with drawings
and specifications approved by the Landlord and in compliance with
any requirements of the Local Authority. The work shall be done by
contractors and sub-contractors nominated or approved by the
Landlord, which contractor and sub-contractors shall comply with
such reasonable rules and regulations as to safety, administration
and coordination as the Landlord may stipulate. The Tenant shall
keep and maintain at its own costs all the fixtures and fittings in
good order and condition and the Tenant shall be liable to pay to
the Landlord any additional local authority rates and taxes and/or
insurance premiums levied or charged as a result of the installation
of the said fixtures and fittings.
17 INDICATOR SIGN BOARDS
The Tenant shall be entitled to have its name placed on the Indicator Sign
Board, if any, at the main entrance and on its respective floor at its own
expense. The design of such sign will be in conformity with the standard
specification as laid down by the Landlord in respect of the building in
force on the commencement date.
18 ADVERTISING SIGNS
18.1 The Tenant shall not be entitled to affix, paint, erect, install or
display any advertising or other signs (including neon signs) on the
windows, doors, exterior or roof or any other part of the leased
premises or building, without the Landlord's prior written consent
in conjunction with the CPOA. When applying for such consent the
Tenant shall submit to the Landlord in duplicate plans drawn to
scale of each sign or advertisement together with all relevant
information relating thereto including, inter alia, details of the
size and depth of the letters to be used, the materials to be used,
and the method of manufacture, illumination and attachment to, or
suspension from, the leased premises or the building. The Landlord
shall have the right to refuse such consent should the Landlord deem
in its sole discretion that any aspect of the sign or advertisement
is not in keeping with the Landlord's signage requirements or with
the general signage or aesthetics of the building. In the event of
such consent being granted, the Tenant:
18.1.1 shall keep and maintain any such signs in good, clean and
proper working order and condition to comply with the
requirements of any competent authority pertaining to such
signs. Should the Tenant fail to do so the Landlord shall be
entitled, after giving the Tenant seven (7) days written
notice, to attend to the signs in such manner as the Landlord
deems necessary and to recover the costs of so doing from the
Tenant on demand;
18.1.2 hereby indemnifies the Landlord against claims of whatsoever
nature made against the Landlord as a result of the
installation, erection or operation of such signs.
18.2 The Tenant shall, by not later than the expiry or earlier
termination of this agreement, remove all signs affixed, painted,
placed, displayed, erected or installed by it and make good at its
own cost any damage caused as a result of such removal. Should the
Tenant fail to so remove all signs or make good such damage, the
Landlord shall be entitled to do so and recover the costs thereof
from the Tenant on demand.
18.3 The Tenant shall not affix any posters, placards or notices on the
external windows, doors or walls of the premises or the building,
without the Landlord's in conjunction with the CPOA prior written
consent.
19 AIRCONDITIONERS AND BLINDS
19.1 The Tenant shall not install any blind, airconditioner or like
device on or adjacent to any window of the premises unless
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the manner of installation thereof has been approved in writing by
the Landlord. The Tenant shall not change or interfere with the
electrical or air-conditioning installation in the premises without
the prior written consent of the Landlord.
19.2 In the event of the premises being air-conditioned by means of an
air-conditioning plant controlled by the Landlord, the Landlord may
from time to time establish, and the Tenant will conform to, the
reasonable rules and regulations relating to the switching on and
off of the air-conditioning plant as the Landlord shall advise the
Tenant in writing of the same and any amendments thereto from time
to time.
19.3 The Tenant shall be responsible during the currency of this Lease
for the maintenance, replacement, service and repair charges in
respect of all airconditioning units and/or parts thereof, including
controls or diffusers, which are located on, or which form part of,
the premises. The Landlord shall further have the right to enter
into a contract for the maintenance of the airconditioning units
and/or parts thereof, the reasonable cost of which will be pro rata
for the Tenant's account, and which may, at the Landlord's
discretion, be added to the operating costs payable by the Tenant to
the Landlord.
19.4 The failure by the Tenant to comply with the above shall permit the
Landlord, without prejudice and in addition to the Landlord's other
rights, to carry out maintenance, replacement, service and repairs
of the air conditioning units without liability on the part of the
Landlord to the Tenant for any loss or damage that the Tenant may
sustain or suffer as a result
thereof. On completion of such maintenance, replacement, service and
repairs, the Tenant shall pay to the Landlord, within SEVEN (7) days
of written demand for payment the costs of such work together with
interest at the maximum rate permissible by law from the date of
payment for the work by the Landlord to date of payment by the
Tenant
19.5 Should the Landlord install during the currency of this Lease by
agreement with the Tenant any or further airconditioning units
within the premises, all maintenance replacement, service and repair
charges for these units will be for the Tenant's account.
19.6 The Tenant shall remove any blind, airconditioner or like device
affixed in terms of 19.1 at the expiration or earlier termination of
the Lease and reinstate the relevant part of the premises to the
same good order and condition as it was at the commencement date.
Should the Tenant have failed to do so, the Landlord may attend to
this work at the Tenant's expense.
20 SUB-LETTING AND SALE OF SHARES
20.1 The Tenant shall not be entitled to sublet the whole or any part of
the premises, save as follows:
20.1.1 the Tenant shall apply to the Landlord in writing for its
consent to the subletting of the premises or part thereof
giving, in regard to the proposed sublease, the name of the
subtenant, the guarantor/s, if any, of the sub-Tenant's
obligations, the proposed date of commencement (which shall
not be later than 60 (sixty) days from the date on which the
Landlord receives the Tenant's application), the duration of
the proposed sublease, the exact premises and the rental and
any other considerations payable thereunder;
20.1.2 The Landlord shall not unreasonably withhold its consent to
the sub-letting of the premises but reserves to itself
completely the right to approve any proposed sub-Tenant and
shall not be obliged to furnish any reasons for withholding
such approval. The Landlord may make its consent conditional
upon whatever conditions it may deem necessary for the
protection of its interests and in which case:
20.1.2.1 the Tenant may on receipt of written confirmation by
the Landlord sublet the premises or part thereof as
the case may be in accordance with the written
application submitted to the Landlord in terms of
20.1.1 hereof and to any further conditions which
the Landlord may have stipulated as referred to
above. In the event of a sub-lease being permitted
in terms of this Clause, the Tenant will be deemed
to have ceded all its rights against the sub-tenant
in terms of that sub-lease to the landlord as
collateral security for the obligations of the
Tenant in terms of this Lease;
20.1.2.2 The Tenant shall be obliged to account and to pay
over on demand to the Landlord, any profit made
arising out of any sub-lease entered into in respect
of the premises;
or alternatively -
20.1.3 The Landlord may give the Tenant written notice of its
intention to enter into a direct written lease with the
proposed sublessee, in which event on the commencement date
of the new written lease entered into between the Landlord
and the proposed sublessee this lease shall be cancelled and
be of no further force and effect. This cancellation shall,
however, in no way detract from the Landlord's right to
recover from the Tenant any amounts which have arisen in
terms of this lease and which are still outstanding at the
date of such cancellation or to enforce any obligations
arising before the cancellation
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20.2 The Tenant shall not, without the Landlord's prior written consent,
cede, assign, transfer, alienate, or otherwise dispose of its rights
and/or obligations under this lease or pledge or hypothecate this
lease.
20.3 Notwithstanding the provisions stipulated in terms of 20.1 hereof
should the Tenant request the Landlord's consent to cede and/or
assign or sub-let, the Landlord, at its option, may treat this
request as an offer by the Tenant to the Landlord to terminate this
lease on 3 (three) calendar month's notice commencing from the first
of the month following that in which the request to cede and/or
assign or to sub-let is made, and the Landlord shall have a period
of 30 (thirty) days (during which the offer shall be irrevocable) in
which to accept the offer.
20.4 If the Tenant is an unlisted company or a close corporation or a
trust, no shares or membership interest therein, as the case may be,
shall be transferred from its shareholders or members, nor may any
shares or membership interest be allotted to any person other than
existing shareholders or members, nor may there be any change in the
trustees or beneficiaries of a trust, without the Landlord's prior
written consent, save in the case of a transfer of shares or
membership interest which will leave control of the Tenant with the
original shareholder or member, or of a transfer of shares or
membership interest to a deceased shareholder or members heirs, or
trustees, as the case may be. Any transfer or allotment of shares or
of members interest, or change of trustees or beneficiaries in the
case of a trust, effected without such consent shall constitute a
fundamental breach of the terms of this lease by the Tenant,
entitling but not obliging the Landlord to cancel this lease.
20.5 Without in any way derogating from the Landlord's rights in terms of
20.3 hereof, should a turnover rental be payable under this lease
the Landlord shall be entitled instead of consenting to a
sub-letting of the premises or assignment of the lease, to cancel
the lease with effect from the date of the proposed sub-letting or
assignment.
20.6 The Tenant shall not give up occupation or possession of the
premises or any portion thereof to any person whether as licensee,
agent, occupier, custodian or otherwise, without the Landlord's
prior written consent.
21 BUILDING SECURITY
21.1 Security of and control of access to the premises shall be the
responsibility of the Tenant.
21.2 The Tenant shall join and be and remain a member of good standing of
a Building Security Association, if any, that may be promoted or
approved by the Landlord and having as its members the Tenants of
the Building, the object of which shall be the promotion of the
security of the Building and the safety of the Tenants thereof. The
Tenant shall pay to the Association all such reasonable membership
fees, subscriptions, contributions and levies as the Association
shall from time to time by its rules lawfully require, which amounts
shall be covered in the operating costs set out in clause 5.2 of the
Schedule. The Tenant shall throughout the period of the Lease
conform and comply with the Articles of Association, constitution
and rules and/or by-laws issued by the Association from time to
time. The Landlord does not bind itself by these presents to promote
any such Association during the currency of this lease.
22 NO WITHHOLDING PAYMENTS
The Tenant shall not be entitled for any reason whatsoever to withhold,
delay, set off or deduct from any amounts due to the Landlord in terms of
the Lease.
23 NON-REMISSION OF RENT DURING BUILDING
The Tenant shall not be entitled to claim a remission or reduction of rent
or cancellation of the Lease by reason of alterations or additions to the
building being carried out by the Landlord from time to time, provided
that the Landlord shall use its best endeavours to ensure that as little
inconvenience as is reasonably possible is caused to the Tenant.
24 LICENCES AND MUNICIPAL REGULATIONS
24.1 The Tenant shall be liable for obtaining all necessary licenses and
permits in respect of the Tenant's business in the premises.
24.2 The Tenant shall conform to all laws, ordinances, proclamations,
regulations and conditions of title relating to the property or to
tenants or occupiers of the property and the building in which the
premises are situated or affecting the conduct of the Tenant's
business in the premises.
24.3 The Landlord shall not be obliged to effect any repairs and/or
alterations and/or additions to the premises or the building or the
property in order to comply with the requirements of the
Municipality and/or other competent authorities in connection with
the conduct of the Tenant's business on the premises.
24.4 The Landlord does not warrant or represent that the premises are fit
for any specific purpose or that any licence in respect of the
premises or the conduct of the Tenant's business therein will be
granted or renewed.
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25 INVALIDATION OF INSURANCE
25.1 The Tenant shall not do or omit to do anything or keep in or on the
premises anything or allow to be done or kept in or on the premises
which in terms of any fire insurance policy held from time to dine
by the Landlord in respect of the premises and/or the building may
not be done or kept therein, or which may render any policy void or
voidable and the Tenant shall comply in all respects with the terms
of any such policy, provided that if any such premium payable in
respect of any such policy is increased:
25.1.1 by reason of the nature or scope of the business which the
Tenant carries on in the premises in terms of the lease; or
25.1.2 as a result of the Tenant not complying with the aforesaid
provisions;
then without prejudice to any other rights which the Landlord may
have as a result of that breach, the Tenant shall on written demand
refund to the Landlord the amount of that additional premium.
25.2 The Tenant shall be obliged at its cost to take out and keep in
force during this Lease, a public liability insurance policy with
such insurance company as may be approved in writing by the Landlord
(which approval shall not be unreasonably withheld) for such amount
as will provide indemnity in respect of all claims which may
foreseeably be made against the Tenant and/or the Landlord arising
out of the Tenant's business in the premises, including but not
necessarily limited to any claims arising as described in 27 below.
The Tenant shall, if so required by the Landlord, exhibit to the
Landlord from time to time proof of payment of the premiums that
fall due.
26 GLASS, WINDOW PANELS AND SHOP FRONTS
The Tenant shall be responsible for any glass, both internal and external,
and mirrors, window panels and shopfronts in or on the premises and shall
be obliged at its expense to replace any such glass, mirrors, window
panels or shopfronts as may be damaged however and by whomsoever such
damages shall be caused. Without prejudice to and without absolving it
from its aforesaid obligations, the Tenant shall, except for any period
during which the Landlord may elect to insure the plate glass and
shopfronts itself, insure plate glass, window panels and shopfronts
against damage with an insurer nominated by the Landlord and maintain the
insurance in force throughout its occupation of the premises. The Tenant
shall on demand by the Landlord cede the policy of insurance to the
Landlord as security for its obligations hereunder. The Tenant shall if so
required by the Landlord exhibit to the Landlord from time to time proof
of payment of the premiums that fall due. If the Tenant fails to pay any
premiums the Landlord shall be entitled without prejudice to its rights
under this lease to pay the premium and to recover it from the Tenant. If
the Landlord elects to insure the plate glass, window panels and
shopfronts for any period, the Tenant shall pay to the Landlord on demand
so much of each reasonable premium paid by the Landlord as is attributable
to the insurance of the plate glass, window panels and shopfronts in or on
the premises.
27 LANDLORD'S LIABILITIES AND TENANT'S WAIVERS
27.1 The Tenant hereby indemnifies the Landlord and holds the Landlord
harmless from all claims by third parties in connection with loss of
life, bodily or personal injury or property damage arising from or
out of any occurrence in, upon at or from the occupancy or use by
the Tenant of the said premises or any part thereof or occasioned
wholly or in part by any act or omission of the Tenant, its officer,
agents, contractors, employees, sub-tenants, customers or guests.
27.2 The Tenant shall not have any right, remedy or claim of any nature
whatsoever and howsoever arising against the Landlord for any loss,
damage (whether general, special or consequential) expenses or
injury of any nature whatsoever or howsoever arising which may be
suffered by the Tenant, directly or indirectly, irrespective of
whether or not such loss, damage, expense or injury shall have been
caused through or as a result of the negligence (gross or otherwise)
of the Landlord or any person for whose acts or omissions the
Landlord is vicariously liable in law. Without derogating from the
generality of the aforegoing, the Landlord shall have no liability
to the Tenant in respect of any such loss, damage, expense or injury
which may be suffered by the Tenant by reason of any latent or
patent defects in the premises or in the building or in the
property, or from any fire in the premises or in the building, or
any theft from the premises or the building, or by reason of the
premises or the building or part thereof being in or falling into a
defective condition or state of disrepair, or as a result of any
particular repair not being effected by the Landlord either
timeously or at all, or arising out of vis major or causus
fortuitus, or arising out of any act of omission of any Tenant of
the building or a change of the building's facade, appearance or any
other feature thereof, or arising in any manner whatsoever out of
the use of the premises or of the building by any person.
28 MAINTAIN EXTERIOR
The Landlord shall keep and maintain the exterior structure, window's and
roof of the building and the common area in good condition. The Tenant
shall not be entitled to any remission of rental, compensation or damage
by reason of the earning out of any maintenance and/or repair work by the
Landlord in order to comply with its obligations in terms of this clause.
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29 LANDLORD'S RIGHT OF ENTRY
The Landlord may at all reasonable times either through its
representatives, employees or workmen or through its agents or
contractors:
29.1 have reasonable access to the premises for the purpose of inspecting
or repairing the premises or any part of the building and/or
equipment or installations located therein or for any other purpose
associated therewith;
29.2 repair or add to the premises;
29.3 alter the premises when required to do so by any lawful Authority;
29.4 suspend the operation of the lift serving the premises for service
and/or repair or any other similar purpose provided;
provided that the Landlord shall use its best reasonable endeavours
to exercise its rights in terms hereof with the least possible
inconvenience to the Tenant.
30 FUTURE TENANTS
30.1 The Landlord may display in or on or near the premises 'To Let'
notices during the six (6) months immediately preceding the expiry
of the Lease, and a 'For Sale' notice at any time during the period
of the Lease.
30.2 The Landlord may at all reasonable times during the period of this
Lease show any prospective Tenants or buyers the interior of the
premises.
30.3 The Landlord may during the period of the Lease display on the
premises any notice which may be required by the Landlord or any of
the Landlord's tenants or prospective tenants in connection with any
application for a licence for any business to be carried out on the
premises.
31 HOUSE RULES AND REGULATIONS
The Landlord shall be entitled and is hereby empowered at its sole
discretion from time to time to prescribe rules and regulations to
facilitate the management, administration and appearance of the building
for the general benefit of tenants and other persons lawfully using the
building. The Tenant shall abide by these rules and regulations in force
from time to time. The Landlord shall notify the Tenant of the rules and
regulations and of any amendments from time to time provided always that
such rules and regulations may not detract from or vary the rights of the
Tenant in terms of this Lease.
32 LANDLORD'S RIGHT TO ADD TO BUILDINGS
32.1 The Landlord shall be entitled to at all times during the lease
period to complete or add to the buildings on the property (other
than the premises) and to effect any repairs, alterations,
improvements and additions (including new buildings whether or not
linked) to the buildings and for such purpose to erect scaffolding,
hoardings and building equipment in, at, near or in front of the
premises and also such devices as may be required by law or which
the Landlord's Architects may certify to be reasonably necessary for
the protection of any person against injury arising out of the
building operations in such manner as may be reasonably necessary
for the purposes of any of the works aforesaid. The Landlord shall
further be entitled to all such rights of access to any portion of
the premises as may be reasonably necessary for the purposes
aforesaid. The Landlord shall further be entitled to lead pipes and
other services through the premises should it be necessary to link
such pipes or other services with any other premise provided that in
doing so the Landlord does not unreasonably interfere with the
Tenant's beneficial occupation of the premises. In exercising its
above rights the Landlord shall use its best endeavours to cause as
little interference as possible with the Tenant's beneficial
occupation of the premises.
32.2 The provisions of clause 32.1 above shall apply irrespectively as to
whether any of the work referred to therein is carried on by the
Landlord or by its servants or agents or by any contractor appointed
by the Landlord.
32.3 The Tenant shall not be entitled to any remission of rent,
compensation or damages by reason of the exercise by the Landlord of
its rights under this clause. Furthermore the Tenant shall not have
any claims of any nature whatsoever and howsoever arising against
the Landlord or against it's servants or agents, or any contractor
arising out of the exercise by the Landlord of any of its rights
referred to in clause 32 above (nor shall the Tenant have the right
to cancel this Lease).
33 VACATION OF PREMISES
At the expiry of this Lease the Tenant shall on vacating the premises,
forthwith deliver all keys and/or security devices to the Landlord or its
agents.
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34 DESTRUCTION
34.1 Should the premises and/or the building be destroyed or damaged to
an extent which prevents the Tenant from having beneficial
occupation of the premises, then:
34.1.1 the Tenant shall have no claim of any nature whatever against
the Landlord as a result thereof;
34.1.2 the Landlord shall be entitled within thirty (30) days after
such destruction or damage to advise the Tenant in writing
that it intends to reinstate the building and/or the premises
as the case may be;
34.1.3 should the Landlord not, within the aforesaid period, notify
the Tenant of its intention to reinstate the building and/or
the premises as the case may be, then the Landlord shall be
deemed to have elected to cancel the Lease.
34.2 Should the Landlord elect (or be deemed to have elected) to cancel
the Lease, then the Tenant shall have no claim whatever against the
Landlord as a result of that cancellation.
34.3 Should the Landlord elect to reconstruct the building and/or the
premises as the case may be, then:
34.3.1 the Lease shall not be cancelled and the Landlord shall at
its cost reinstate the building/premises substantially to its
previous state as quickly as is possible in the
circumstances;
34.3.2 the Tenant shall not be liable for any further rent for as
long as it is deprived of beneficial occupation of the
premises;
34.4 Should the building and/or the premises be damaged to a lesser
extent that which prevents the Tenant from having beneficial
occupation of the premises, then:
34.4.1 the Lease shall not be cancelled;
34.4.2 the rental payable by the Tenant shall be reduced pro rata
to the extent (if any) by which the Tenant is deprived of
beneficial occupation of the premises;
34.4.3 the Landlord shall at its own cost repair the building
and/or the premises as the case may be as quickly as possible
in the circumstances;
34.4.4 the Tenant shall have no claim of any nature whatsoever
against the Landlord as a result of the said destruction or
damage howsoever arising.
34.4.5 Should a dispute arise between the Landlord and the Tenant in
respect of the amount of rental payable by the Tenant in terms of
clause 34.5.2 the then the amount of rental to be paid by the
Tenant shall be determined by an independent expert to be appointed
by agreement between the Landlord and the Tenant, and/or failing
such agreement, the expert shall be appointed at the request of
either party by the President for the time being of the South
African Institute of Valuers, or his nominee. The decision of such
appointed expert shall be final and binding on both parties.
35 BREACH
35.1 Should the Tenant:
35.1.1 fail to pay any rental and/or any other amount due by the
Tenant in terms of the Lease on due date;
35.1.2 commit any other breach of any terms of the Lease and
fail to remedy that breach within period of FIVE (5) days
after the receipt of notice to that effect by the Tenant; or
35.1.3 repeatedly breach any of the terms of the Lease in such
manner as to justify the Landlord in holding that the
Tenant's conduct is inconsistent with the intention or
ability of the Tenant to comply with its obligations in terms
of the Lease;
35.1.4 commit an act of insolvency;
then and in any such event, the Landlord shall be entitled, but not
obliged, without prejudice to its rights to damages or to its right
to eject the Tenant from the premises or to any other claim of any
nature whatsoever that the Landlord may have against the Tenant as a
result thereof:
35.1.4.1 to cancel this Lease; or
35.1.4.2 in the case of 35.1.2 to remedy such breach and
immediately recover the total of the fair and
reasonable cost incurred by the Landlord in so doing
from the Tenant.
35.2 Should the Landlord institute action against the Tenant or refer the
matter to it's attorneys for collection pursuant to a breach by the
Tenant of the Lease, then without prejudice to any other rights
which the Landlord may have, the Landlord shall be entitled to
recover from the Tenant all legal costs incurred by it including all
fees, charges, tracing fees and collection commission as the
Landlord is obliged to pay to its attorneys, as between attorney and
own client. All amounts payable in terms of this sub-paragraph are
payable by the Tenant to the Landlord within THREE (3) days
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of written demand.
35.3 Should the Landlord cancel the Lease and the Tenant dispute the
Landlord's rights to do so and remain in occupation of the premises
pending the determination of that dispute, then:
35.3.1 the Tenant shall continue to pay, on due date all amounts due
by the Tenant in terms of the Lease;
35.3.2 the Landlord shall be entitled to recover and accept those
payments and the acceptance thereof shall not in any manner
whatsoever affect the Landlord's claim to cancellation of the
Lease or of any other nature whatsoever.
35.4 Should a dispute between the Landlord and the Tenant be determined
in favour of the Landlord then the payments made to the Landlord in
terms of 35.3 shall be regarded as damages paid by the Tenant on
account of the loss sustained by the Landlord as a result of the
holding over by the Tenant of the premises. Should the loss
sustained by the Landlord be found to be less than the payments made
to the Landlord in terms of 37.3 then the Landlord will refund to
the Tenant the amount by which the said repayments exceed the
damages within 14 days after such damages have been determined.
35.5 Without prejudice to all or any of the Landlord's rights granted
hereunder, should the Tenant fail to pay the monthly rental or any
other sum(s) which may become due by the Tenant to the Landlord on
due date, then in any such event, the Tenant shall pay the Landlord
interest on any amount outstanding in terms of this lease at 2% (two
percentum) per month, from due date of payment to the date of actual
payment.
35.6 A certificate signed by a director, company secretary, credit
manager or internal accountant of the Landlord or the Landlord's
agent shall be prima facie proof of the amount of any indebtedness
owing by the Tenant to the Landlord at any time and also the fact
that payment of the whole, or, as the case may be, any portion of
that amount is due and payable to the Landlord.
35.7 In the event of the Landlord's banker levying any charges against
the account of the Landlord arising from nonpayment of a cheque
tendered in payment of rental or any other amount due by the Tenant
in terms of this lease, or should the Tenant's debit order be
rejected, or should any charges be levied by the Landlord's banker
against the account of the Landlord for any other reason whatsoever
relating to the Tenant's conduct, then the said charges shall be for
the account of the Tenant and debited to the Tenant's rental
account. In addition to the above, the Tenant shall be liable to the
Landlord for a R50.00 administration fee in respect of each and
every non-payment of a cheque and/or debit order, which fee will be
debited to the Tenant's rental account.
35.8 In the event that the Tenant fails to provide the documentation
and/or annexures required in terms of the Lease timeously, or fails
to keep same valid and of full force and effect, and or fails to
sign the Lease timeously, then in any such event, (hereafter
referred to as "an omission") the Landlord shall, without prejudice
to any of its rights in terms of this Lease, be entitled to charge
the Tenant a penalty of FIVE HUNDRED RAND (R500.00) per month for
each omission until such time as the omission is rectified by the
Tenant.
36 JURISDICTION
The interpretation and enforcement of this lease shall at all times be
governed by South African law. The Tenant consents that the Landlord may,
at its option, institute any legal proceedings arising out of this
agreement in the Magistrates Court in which jurisdiction the premises are
located, alternatively in the Magistrate's Court having jurisdiction over
the Tenant or surety's person, notwithstanding that the subject matter or
amount of the claim or cause of action would otherwise be beyond the
jurisdiction of the Magistrate's Court.
37 NOTICE AND DOMICILIA
37.1 The parties hereby choose domicilia citandi et executandi for all
purposes under the Lease at their respective addresses set forth in
Section 10 and Section 11 of the Schedule.
37.2 Any notice to any party shall be addressed to it at its domicilium
aforesaid and either sent by pre-paid registered post or delivered
by hand. In the case of any notice:
37.2.1 sent by pre-paid registered post, it shall be deemed to have
been received, unless the contrary is proved, on the third
business day after posting;
37.2.2 delivered by hand, it shall be deemed to have been received
unless the contrary is proved, on the date of delivery,
provided such date is a business day or otherwise on the next
following business day.
37.3 Any party shall be entitled, by notice in writing to the other, to
change its domicilium to any other address within the Republic of
South Africa, provided that the change shall only become effective
fourteen (14) days after delivery of the notice in question.
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37.4 For the purposes hereof 'business day' means any day other than a
Saturday, Sunday or Public Holiday.
37.5 Any domicilium citandi et executandi address chosen by any party in
terms of this agreement must be a physical address and not a post
office box or poste restante. In the event that the Tenant fails to
choose a physical address, or any address, as its domicilium citandi
et executandi, the address of the premises will be deemed to be the
Tenant's domicilium citandi et executandi.
38 SALE OF PREMISES OR CHANGE OF NAME
38.1 The Landlord shall be entitled at any time during the currency of
this lease and in its sole and absolute discretion to change the
name of the building in which the premises is situated;
38.2 The sale or other alienation howsoever arising by the Landlord of
the premises or any part thereof prior to the termination date shall
not affect the lease, nor shall it entitle the Tenant to resile from
the lease or to cancel the lease nor shall the Tenant be entitled to
claim damages from the Landlord as a result of the aforesaid sale or
change of name.
39 NUISANCE
The Tenant shall not do or cause or permit to be done in or about the
premises anything, which may be or cause a nuisance or disturbance to
other occupants of the building of neighbouring premises.
40 CONDITIONS OF USE OF PARKING AREAS
40.1 The Tenant shall not be entitled to any exclusive parking bays in
the parking area and undertakes to accept the parking bays allocated
to it by the Landlord from time to time. The Tenant will pay for the
cost of any signage required in respect of such allocated bays.
40.2 The Tenant shall only be entitled to use the parking area for the
purpose of parking motor cars.
40.3 The Tenant shall not do nor suffer to be done anything which may
constitute a nuisance or which may disturb the beneficial use of any
other user of the parking area.
40.4 The Tenant shall not permit any motor car, which is parked in the
parking area to be washed, refuelled, oiled or repaired in the
parking area.
40.5 The Tenant and/or agents or invitees enters, uses and leaves the
parking area entirely at his own risk;
40.6 The Tenant shall have no claim of whatsoever nature against the
Landlord or any of its agents for any loss or damage arising
directly or indirectly from the use of the parking area and
including but without being limited to:
40.6.1 loss or damage suffered as a result of the theft, loss
destruction of damage of motor vehicles or any part or
accessory thereof or any articles left therein;
40.6.2 loss or damage resulting from personal injury sustained by
the Tenant.
for the purposes of this clause 40.6, loss or damage shall include
direct use of the Tenant, its servants, agents or invitees of the
parking area.
40.7 The Tenant indemnifies the Landlord, its servants or agents against:
40.7.1 loss or damage resulting from any claim, demand or action of
whatsoever nature which may be brought or made by any person
against any one of them;
40.7.2 all costs of any nature whatsoever (including any attorney
and own client costs) incurred by any one of them;
arising from the direct or indirect use of the Tenant, its servants,
agents or invitees of the parking area.
For the purposes of this clause 40.7, loss or damage shall include
direct of indirect special or consequential damage or any loss of
profits of any nature whatever.
40.8 The Tenant may only park vehicles, which are in running order and
are in use. No broken-down or partially dismantled vehicles may be
parked in the parking areas.
40.9 The Tenant shall not sub-let the designated parking area nor permit
anyone else to occupy the same, nor cede or assign any of its rights
or obligations under the parking provisions of this Lease.
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40.10 The Landlord shall:
40.11.1 have the right from time to time to establish, modify and
enforce reasonable rules and regulations with respect to all
common area, facilities and parking areas mentioned in this
Lease.
40.11.2 have the right to construct, maintain and operate lighting
facilities on all the said parking areas and improvements,
to police the same and take security measures in regard
thereto, from time to time to change any parking area, level
location and arrangements of parking areas and other
facilities herein referred to, to restrict parking areas, to
close temporarily any portion of the parking areas or
facilities, to discourage non-Tenant parking, and to do and
perform such other acts in and to the said areas and
improvements as the Landlord considers will operate and
maintain the common facilities referred to above for the
benefit of all Tenants.
41 COMPANY OR CLOSE CORPORATION TO BE FORMED
If this lease is entered into by a person/s acting as Agent/s or trustee/s
on behalf of a company or close Corporation or trust not yet formed then:
41.1 The agent or trustee in his personal capacity hereby jointly and
severally warrant/s to the Landlord that the company or close
corporation or trust about to be formed will, within sixty (60) days
from the date of signature of the lease by such agent or trustee;
41.1.1 be duly formed and/or incorporated; and
41.1.2 duly adopt, ratify and conform without modification this
agreement lawfully binding; and
41.1.3 take all other steps necessary to render this agreement
lawfully binding on it; and
41.1.4 deliver to the Landlord a true copy of its memorandum and
articles of association, or association agreement or trust
deed as the case may be together with a true copy of the
resolution referred to in 41.1.2 duly certified by the
chairman of the meeting.
41.2 The agent or trustee binds himself irrevocably to the Landlord that,
failing compliance with the provisions of 41.1 hereof, he shall
personally be bound by all the obligations and entitled to all the
rights of the Tenant in terms and arising out of this agreement of
lease jointly and severally if there be more than one trustee.
41.3 In the event of proper compliance with the provisions of 41.1
hereof, the trustee or agent binds himself irrevocably to sign a
deed of suretyship as required in terms of clause 7 above,
guaranteeing performance by the Tenant of it's obligations to the
Landlord in terms of the Lease.
41.4 In the event of non-compliance for the provision of 41.1 hereof, the
trustee or agent will be personally bound by all obligations and be
entitled to all the rights of the Tenant in terms of the lease.
41.5 In the event that there is more than one trustee or agent, the
obligations and rights of such trustees or agents in terms of this
clause 41 will be joint and several.
42 HOLDING OVER
42.1 If the Tenant should after expiration or earlier termination of this
Lease, remain in occupation of the Leased premises, then:
42.1.1 the monthly rental payable by the Tenant shall immediately
and without notice increase by 11% (eleven percent) from the
date of expiration or termination, as the case may be;
42.1.2 the operating costs payable by the Tenant shall immediately
and without notice increase by 11% (eleven percent) from the
date of expiration or termination, as the case may be;
42.1.3 the other terms and conditions of this Lease shall mutatis
mutandis remain applicable to the Tenant, save that the
Lease shall be deemed to have been entered into for a month
at a time only;
42.1.4 the Tenant shall continue to pay the increased rental and
all other amounts due to the Landlord in terms of this lease
on due date;
42.1.5 the Landlord shall be entitled to recover and accept the
payments referred to in 42.1.1 and 42.1.2:
42.1.6 the recovery and acceptance by the Landlord of the payments,
referred to in 42.1.3, shall be without prejudice to and
shall not in any manner affect the Landlord's rights.
42.2 Payments made to the Landlord in terms of clause 42.1 above shall be
regarded as amounts paid by the Tenant on account of loss and/or
damage sustained by the Landlord as a result of the holding over by
the Tenant of the premises.
42.3 Unless otherwise stated by the Landlord or its agents, acceptance of
any rental or payment shall in no way whatever
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prejudice or operate as a waiver, rescission or abandonment of any
termination or right of termination.
43 LANDLORDS HYPOTHEC
While this lease is in force, all furniture, fittings and fixtures,
equipment, stock and movables brought onto the premises, whether the
property of the Tenant or not, shall be subject to the Landlord's hypothec
and shall serve as partial or full security for the proper compliance by
the Tenant with all its obligations in terms of this lease. The Tenant may
not pledge or otherwise encumber the assets mentioned above or dispose of
or remove them from the premises except in the ordinary course of
business.
44 ALIENS
In the event of the Tenant being an alien as defined in the Alien's Act,
he warrants that he is in possession of a permit issued in terms of the
said Act, which qualifies him to lease the premises. A certified copy of
such permit will be supplied by the Tenant to the Landlord prior to the
conclusion of this lease.
45 GENERAL
45.1 No variation of the lease shall be of force or effect unless it is
in writing and is signed by both the Landlord and the Tenant.
45.2 This lease contains all the terms and conditions of the agreement
between the Landlord and the Tenant. The parties acknowledge that
there are no understandings, representations or terms between the
Landlord and the Tenant in regard to the letting of the premises
other than those set out herein.
45.3 No act of relaxation on the part of the Landlord in regard to the
carrying out of any of the Tenant's obligations in terms of this
lease shall prejudice or be deemed to be a waiver of any of the
Landlord's rights in terms hereof.
45.4 If any amount(s) which the Tenant is obliged to pay the Landlord
over and above the rental provided for in this Lease represents a
recovery by the Landlord of certain monies paid or payable by it to
the supplier of the service or item in respect of which payment is
due to the Landlord by the Tenant in terms of this Lease which in
terms of any law presently in force or hereafter in force may only
be recovered by the supplier of such service or item and not by the
Landlord then all monies covered by this clause shall be regarded as
additional and/or increased rental and shall be treated as such by
the Landlord at its discretion as and when the occasion may require
it to ensure that the Landlord remains lawfully entitled to obtain
payment from the Tenant of all monies which the Tenant has
undertaken to pay the Landlord under and in terms of this Lease.
46 COSTS
The costs of and incidental to the negotiation and preparation of this
agreement, together with all stamp duty payable thereon or in connection
with any renewal or extension thereof shall be borne by the Tenant and
paid upon demand.
47 RENTAL DEBIT AUTHORISATION
47.1 The Tenant shall, within seven (7) days of the commencement or
occupation date of the lease, whichever occurs first, complete and
lodge with the Landlord a Rental Debit Authorisation in the form of
Annexure "F" hereto, duly signed by the Tenant or its duly
authorised representative.
47.2 The Tenant shall furthermore furnish the Landlord with an updated
Rental Debit Authorisation in substantially the same form as and
when required as a result of increases from time to time in the
monthly rental and/or other amounts due by the Tenant to the
Landlord in terms of this lease.
48 VALUE ADDED TAX (VAT)
The Tenant agrees to pay all VAT in terms of the VAT Act (No. 89 of 1991)
(as amended from time to time) or other taxes leviable from time to time
in law, in respect of and together with any amounts payable by the Tenant
in terms of this Agreement of Lease. Should the rate at which VAT is
leviable alter during the subsistence of this Lease or any renewal
thereof, such alteration shall be applied to the basic rental, operating
costs and any other relevant charge.
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Exhibit 10.07
LEASE AGREEMENT
This Lease Agreement, made and entered into by and between ROLLINS
ASSOCIATES hereinafter referred to as "Landlord," and Professional Displays,
Inc., a Tennessee Corporation hereinafter referred to as "Tenant";
WITNESSETH:
Landlord hereby leases to Tenant, and Tenant hereby takes from Landlord
the following described premises: Approximately 5,000 square feet at 1425 Elm
Hill Pike (Building C) together with all rights, privileges, easements, and
appurtenances belonging to or in any way pertaining to the said premises and
together with the building and other improvements situated upon said demised
premises.
TO HAVE AND TO HOLD the same for a term of Five (5) years, commencing on
April 1, 1993 and ending on March 31, 1998, upon the following covenants, terms
and conditions:
1. RENT AMOUNT - Tenant agrees to pay to the Agent named below for the
account of Landlord rent for said premises at the rate of Twenty four thousand
dollars ($24,000.00) per annum, payable in monthly installments of Two thousand
dollars & no/100 ($2,000.00) per month. One such monthly installment shall be
due and payable on or before the first day of each succeeding calendar month
during the term thereof. Rent for any fractional month at the beginning or end
of the lease shall be prorated.
All rents are due and payable at the first of the month. Any rents
received after the 10th of the month will be subject to a 10 % late charge.
2. BUILDING CONDITION - Tenant acknowledges that it has fully inspected
the demised premises, and on the basis of such inspection, Tenant hereby accepts
the demised premises, and the buildings and improvements situated thereon, as
suitable for the purposes for which the same are leased, in their present
condition, with such changes therein as may be caused by reasonable
deterioration between the date hereof and the commencement date of this Lease;
provided that in the event any presently installed plumbing, plumbing fixtures,
electrical wiring, or air conditioning and heating equipment are not in good
working condition on the commencement date of this lease, Landlord agrees to
repair promptly any such defects of which Tenant delivers written notice to
Landlord within thirty days after the commencement date of this lease.
3. USE OF PREMISES - The demised premises shall be used and occupied only
for the purpose of: Storage, sale and display of display products and related
type business. Tenant shall at its own cost and expense obtain any and all
licenses and permits necessary for such use. Tenant covenants and agrees with
the landlord that the premises shall be used and occupied in a careful and
proper manner, that no nuisance, trade or customer which is unlawful or known in
insurance as extra or especially hazardous shall be permitted
therein. That no waste or trash shall be permitted to accumulate inside or
outside the premises. If the tenant must accumulate waste or trash for short
periods of time inside or outside the building area then it must be contained in
the proper containers and receptacles and properly disposed of at the tenant's
expense.
4. GOVERNMENTAL REQUIREMENTS - Tenant shall comply with all governmental
laws, ordinances and regulations applicable to the use of the demised premises,
and shall promptly comply with all governmental orders and directives for the
correction,
1
<PAGE>
prevention, and abatement of nuisances in or upon, or connected with the demised
premises, all at Tenant's sole expense. If governmental laws or regulations
require changes or modification to the premises such changes shall be made at
the tenant's expense.
5. REAL ESTATE TAXES - Landlord agrees to pay before they become
delinquent all taxes (both general and special), assessments, or governmental
charges lawfully levied or assessed against the above described premises or any
part thereof; provided, however, Landlord may, at its sole cost and expense
dispute and contest the same, and in such case, such disputed item need not be
paid until finally adjudged to be valid.
(a) Tenant agrees to pay any increase in taxes (above the present taxes)
during the life of this lease, whether said increase is caused by increased
assessment or a raise in rates, said increase to be computed after the current
calendar year.
6. REPAIRS BY LANDLORD - Landlord shall at all times at its sole cost and
expense keep the roof, foundation, outside pavements, and exterior walls
(excluding all windows and doors) of the building situated on the demised
premises in good repair and condition, except for reasonable wear and tear, and
except that Tenant shall repair any damage caused by Tenant's negligence or
default hereunder. In the event that the building situated upon the demised
premises should become in need of repairs required to be made by Landlord
hereunder, Tenant shall give immediate written notice thereof to Landlord, and
Landlord shall proceed promptly to make such repairs.
7. REPAIRS BY TENANT - Tenant shall throughout the demised term take good
care of the building and other improvements located upon the demised premises,
and keep them free from waste or nuisance of any kind. Tenant shall keep the
building and other improvements located on the demised premises in good
condition and make all necessary repairs, except those expressly required to be
made by Landlord, in Paragraph 6. Tenant's repairs include, but are not limited
to repairs (including any necessary replacements) to all glass, any special
store front, windows, doors, heating system, plumbing work, sprinkler systems,
pipes and fixtures, air conditioning equipment and cooling tower, and the
interior of the building generally. Tenant shall not be obligated to repair any
damage caused by fire, tornado or other casualty. Landlord agrees to afford to
Tenant the benefit of any guaranties or warranties of third parties which may be
applicable to air conditioning equipment and other machinery and equipment
installed by Landlord in the demised premises. At the end or other termination
of this Lease, Tenant shall deliver up the leased premises with all improvements
located thereon, except as provided in Paragraph 8 hereof, in good repair and
condition, reasonable wear and tear and damage by fire, tornado, or other
casualty only excepted. Should Tenant not make the above mentioned repairs and
upkeep to the building and grounds, then Landlord may, at his option, make such
repair and upkeep and the Tenant agrees to reimburse the Landlord for his cost
of such repair and upkeep.
8. MODIFICATIONS BY TENANT - Tenant shall not create any
openings in the roof or exterior walls, nor shall Tenant make any substantial
alterations, additions, or improvements to the demised premises without the
prior written consent of Landlord. Tenant may, without the consent of Landlord,
but at its own cost and expense and in a good workmanlike manner make such minor
alterations, additions, or improvements or erect, remove, or alter such
partitions, or erect such shelves, bins, machinery, air conditioning equipment,
and trade fixtures as it may deem advisable, without altering the basic
character of the building or improvements, and in each case complying with all
applicable
2
<PAGE>
governmental laws, ordinances, regulations, and other requirements. At the
termination of this Lease, Tenant shall, if Landlord so elects, remove all
alterations, additions, improvements, and partitions erected by Tenant and
restore the premises to their original condition, otherwise such improvements
shall be delivered up to Landlord with the premises. All shelves, bins,
machinery, air conditioning equipment, and trade fixtures installed by Tenant
may be removed by Tenant at the termination of this Lease if Tenant so elects,
and shall be so removed if required by Landlord. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the building and other
improvements situated on the demised premises.
9. SIGNS - Tenant shall not place any signs or other objects upon the roof
of the building or paint or otherwise deface the exterior walls of the building,
except with the prior written approval of Landlord. Tenant shall have the right
to erect such other signs as it may desire subject to any applicable
governmental laws, ordinances, regulations, and other requirements. Tenant shall
remove all signs at the termination of this Lease. Such installations and
removals shall be made in such manner as to avoid injury, defacement, or
overloading of the building and other improvements.
10. INSURANCE - Tenant will not permit the demised premises to be used for
any purpose which would render the insurance thereon void or the insurance risk
more hazardous.
11. ACCESS BY LANDLORD -Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the demised premises at any time, for
the purpose of ascertaining the condition of the demised premises or in order to
make such repairs or maintenance as may be required to be made by Landlord or
required to be made by the Tenant that the Tenant has failed to make under the
terms of this lease. During the 90 days before the expiration of this Lease, the
landlord may at reasonable times and on reasonable notice to the Tenant show the
leased premises to prospective tenants.
12. UTILITIES - Tenant shall pay all utility connection charges and
deposits, if any, and all charges incurred for any utility services used on the
demised premises, and shall furnish all electric light bulbs and tubes.
13. ASSIGNMENT - Tenant shall not assign this Lease or sublet the whole or
any part of the demised premises, without the prior written consent of Landlord.
Any such assignment or subletting shall be subject to all of the terms and
provisions of this lease agreement, including the provisions of Paragraph 3
relating to the use of the demised premises. Notwithstanding any such assignment
or subletting, Tenant shall at all times remain fully responsible and liable for
the payment of the rent herein specified and for compliance with all of its
other obligations under the terms, provisions and covenants of this Lease. If an
"event of default," as hereinafter defined should occur while the demised
premises or any part thereof are then assigned or sublet, Landlord, in addition
to any other remedies herein provided by law, may at its option collect directly
from such assignee or subtenant all rents becoming due to Tenant under such
assignment
or sublease and apply such rent against any sums due to it by Tenant hereunder.
No direct collection by Landlord from any such assignee or subtenant shall
release Tenant from the further performance of its obligations hereunder.
Consent to one assignment or subletting will not be deemed a consent to any
other. The transfer of the majority of the voting stock of the Tenant if the
Tenant is a Corporation, the transfer of a majority of the partnership interest
in the Tenant if the Tenant is a partnership, and any transfer by operation of
law will be deemed "assignments" requiring the Landlord's consent.
3
<PAGE>
14. DESTRUCTION - A. If the building situated upon the demised premises
should be damaged or destroyed by fire, tornado, or other casualty, Tenant shall
give immediate notice thereof to Landlord.
B. If the building situated upon the demised premises should be totally
destroyed by fire, tornado, or other casualty, or if it should be so damaged
that rebuilding or repairs cannot be completed within one hundred twenty (120)
days after the date upon which Landlord is notified by Tenant of such damage,
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective with the date of such damage.
C. If the building situated upon the demised premises should be damaged by
fire, tornado, or other casualty but not to such extent that rebuilding or
repairs cannot be completed within sixty (60) days after the date upon which
Landlord is notified by Tenant of such damage, this Lease shall not terminate,
but Landlord shall at its sole cost and expense proceed with reasonable
diligence to rebuild and repair such building to substantially the condition in
which it existed prior to such damage. If the demised premises are untenantable
in whole or in part following such damage, the rent payable hereunder during the
period in which they are untenantable shall be adjusted to such extent as may be
fair and reasonable under all of the circumstances. In the event that Landlord
should fail to complete such repairs and rebuilding within sixty (60) days after
the date upon which Landlord is notified by Tenant of such damage, Tenant may at
its option terminate this Lease by delivering written notice of termination to
Landlord, whereupon all rights and obligations hereunder shall cease and
determine.
D. Any insurance which may be carried by Landlord or Tenant against loss
or damage to the building and other improvements situated on the demised
premises shall be for the sole benefit of the party carrying such insurance and
under its sole control.
15. ENVIRONMENTAL COMPLIANCE/USE - Tenant warrants that its use and
occupancy of the property shall not include the use, emission, disposal,
treatment, storage or placement of any toxic, hazardous, or other
environmentally hazardous substance, as such substances are defined by any
governmental entity having jurisdiction thereover and shall be in strict
compliance with all applicable environmental laws, regulations, statutes,
ordinances, whether state, federal or local, pertaining to (a) pollution or
protection or the environment, including natural resources, (b) exposure of
persons to toxic or hazardous wastes, substances or constituents or other
products, raw materials, chemicals or other substances, (c) protection of the
public health or welfare from the effects of wastes, emissions, discharges or
releases or chemical substances or (d) regulation of chemical substances,
including, without limitation, their transportation, handling, storage and
disposal. Tenant shall indemnify and hold harmless Landlord against and from any
and all claims, liabilities, expenses and losses incurred by the Landlord,
except as a result of Landlord's negligence, as a result of any environmental
clean-up costs, fines or other losses, costs and expenses levied against the
property or Landlord by any local, state, or federal
governmental entity or agency or other entity with environmental enforcement
authority caused by Tenant's use and/or possession of the property.
16. INDEMNIFICATION - Landlord shall not be liable to Tenant or Tenant's
customers, employees, agents, or visitors, or to any other person whomsoever,
for any injury to person or damage to property on or about the demised premises,
caused by the negligence or misconduct of Tenant, its agents, servants,
employees, or invitees, or caused by the building and
4
<PAGE>
improvements located on the premises becoming out of repair, or caused by
leakage of gas, oil, water or steam or by electricity emanating from the
premises, or caused by the action of any pest such as insects, rodents, birds or
due to any other cause whatsoever, and Tenant agrees to indemnify Landlord and
hold it harmless from any loss, expense, or claims arising out of any such
damage or injury.
17. CONDEMNATION - A. If the whole or any substantial part of the demised
premises should be taken for any public or quasi-public use under any
governmental law, ordinance or regulation or by right of eminent domain or
should be sold to the condemning authority under threat of condemnation, this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective when the physical taking of said premises shall occur.
B. If less than a substantial part of the demised premises shall be taken
for any public or quasi-public use under any governmental law, ordinance, or
regulation, or by right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, this Lease shall not terminate, but
Landlord shall at its sole expense restore and reconstruct the buildings and
other improvements situated upon the demised premises to the extent necessary to
make the same reasonably tenantable. The rent payable hereunder during the
unexpired portion of this Lease shall be adjusted to such extent as may be fair
and reasonable under all of the circumstances.
C. All damages awarded for such taking shall belong to and be the property
of the Landlord, whether such damage shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the property herein
leased, provided, however, that the tenant shall be entitled to any awards made
to the Tenant for its property or trade fixtures installed by the Tenant, or any
award for moving made by reason of such condemnation.
18. HOLDOVER - Should Tenant, or any of its successors in interest,
holdover the leased premises, or any part thereof, after the expiration of the
term of this Lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy from month to month only at a monthly
rental equal to the rent paid for the last month of the term of this Lease plus
twenty percent (20%) of such amount.
19. DEFAULT BY TENANT -. The following events shall be deemed to be events
of default by Tenant under this Lease:
(1) Tenant shall fail to pay any installment of the rent hereby reserved
and such failure shall continue for a period of thirty (30) days.
(2) Tenant shall fail to comply with any term, provision, or covenant of
this Lease, other than the payment of rent, and shall not cure such failure
within thirty (30) days after written notice thereof to Tenant.
(3) Tenant shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
(4) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
(5) A receiver or trustee shall be appointed for all or substantially all
of the assets of Tenant.
5
<PAGE>
(6) Tenant shall desert or vacate any substantial portion of the premises.
Upon the occurrence of any of such events of default, Landlord shall have the
option to pursue any one or more of the following remedies without any notice or
demand whatsoever:
A. Terminate this Lease, in which event Tenant shall immediately surrender
the premises to Landlord, and if Tenant fails so to do, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the leased premises and expel or remove
Tenant and any other person who may be occupying said premises or any part
thereof, by force if necessary, without being liable for prosecution or any
claim of damages therefor; and Tenant agrees to pay to Landlord on demand the
amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the premises on satisfactory
terms or otherwise.
B. Enter upon and take possession of the leased premises and expel or
remove Tenant and any other person who may be occupying said premises or any
part thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor, and relet the premises and receive the rent
therefor; and Tenant agrees to pay to Landlord on demand any deficiency that may
arise by reason of such reletting.
C. Enter upon the leased premises by force if necessary without being
liable for prosecution of any claim for damages therefor, and do whatever Tenant
is obligated to do under the terms of this Lease, and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to the Tenant from
such action, whether caused by the negligence of Landlord or otherwise.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. Failure by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to constitute
a waiver of such default, or of any other violation or breach of any of the
terms, provisions and covenants herein contained. The acceptance of rent by the
Landlord shall not be deemed a waiver of the Tenant's breach of any obligation
hereunder (other than the failure to pay the rent accepted) or of the Landlord's
right to terminate this lease because of such breach. The waiver of the breach
of a covenant or condition by the Landlord shall not constitute a waiver of any
other breach regardless of knowledge thereof.
20. COLLECTION COST - If, on account of any breach or default by Tenant in
Tenant's obligations under the terms and conditions of this Lease, it shall
become necessary for Landlord to employ an attorney to enforce or defend any of
Landlord's
rights or remedies hereunder, Tenant agrees to pay any reasonable attorney's
fees incurred by Landlord in such connection.
21. MORTGAGES ON PROPERTY - Landlord covenants, warrants and represents
that it has full right and power to execute and perform this Lease and to grant
the estate demised herein and that Tenant, on payment of the rent herein
reserved and performing the covenants and agreements herein contained, shall
peaceably and quietly have, hold and enjoy the demised premises during the full
term of this Lease and any extension or renewal
6
<PAGE>
hereof; however, that Tenant accepts this Lease subject and subordinate to any
recorded mortgage, deed of trust, or other lien presently existing upon the
demised premises. Landlord is hereby irrevocably vested with full power and
authority to subordinate Tenant's interest hereunder to any mortgage, deed of
trust, or other lien hereafter placed on the demised premises, and Tenant agrees
upon demand to execute such further instruments subordinating this Lease as
Landlord may request, provided such further subordination shall be upon the
express condition that this Lease shall be recognized by the mortgagee and that
the rights of Tenant shall remain in full force and effect during the term of
this Lease so long as Tenant shall continue to perform all of the covenants and
conditions of this Lease.
22. REAL ESTATE COMMISSION - Landlord agrees to pay to C. B. Commercial a
lease commission of 4% cash out and any renewals, sales or extensions thereof.
The said agency may divide any commission payable hereunder with other licensed
real estate brokers or salesmen, including any cooperating agent named below,
but notwithstanding any such agreement for division of commissions, Landlord
shall be fully protected in paying all commissions payable hereunder solely to
the agent of C. B. Commercial. The provisions of this Paragraph 21 shall be
binding upon Landlord and Landlord's successors in interest and personal
representatives, and shall inure to the benefit of C. B. Commercial agent and
said agent's successors in interest and personal representatives.
23. NOTICE AND PAYMENTS - Each provision of this instrument or of any
applicable governmental laws, ordinances, regulations and other requirements
with reference to the sending, mailing, or delivery of any notice or with
reference to the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to the Principal Agent for the account of Landlord in
Davidson County, Tennessee, at the address of the Principal Agent hereinbelow
set forth or at such other address in Davidson County, Tennessee, as the
Principal Agent may specify from time to time by written notice delivered in
accordance herewith. If there is no Principal Agent then all rents shall be
payable without demand at the address of the Landlord.
B. Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered whether actually received or not when deposited
in the United States mail, postage prepaid, registered mail, return receipt
requested, addressed to the parties hereto at the respective addresses set out
opposite their names below, or at such other address as they have theretofore
specified by written notice delivered in accordance herewith.
24. AGENCY - The terms, provisions and covenants and conditions contained
in this Lease, shall apply to, inure to the benefit of, and be binding upon the
parties hereto and their respective successors in interest and legal
representatives except as otherwise herein expressly provided. All rights,
powers, privileges, immunities and duties of Landlord under this
Lease, including but not limited to any notices or permitted to be delivered by
Landlord to Tenant hereunder, may, at Landlord's option be exercised or
performed by Landlord's agent or attorney.
25. SPECIAL PROVISIONS:
A. Lessee shall have two five year options to extend this lease at $20,000.00
per annum plus the increase of CPl or 15 % whichever is the lesser amount from
date of original lease until option date.
B. Landlord shall perform certain work and renovations to be detailed on
attached exhibit A.
7
<PAGE>
EXECUTED the 25 day of February, 1993.
ATTEST:
LANDLORD: Rollins Associates
- -------------------------------- ------------------------------
/s/ David L. Robbins
------------------------------
By
Partner
------------------------------
Title
ATTEST:
TENANT: Professional Displays, Inc.
- -------------------------------- ------------------------------
GUARANTEE: /s/ Kelly McNamee
This lease is guaranteed ------------------------------
by Don McNamee, For the first* By
/s/ Donovan McNamee Secretary/Treasurer
- -------------------------------- ------------------------------
Title 02/25/93
AGENTS
C.B. Commercial Real Estates
Group, Inc.
- -------------------------------- ------------------------------
Cooperating Agent Principle Agent
/s/ Don Kent
- ------------------------------ ------------------------------
By By
* 24 Months of the base lease term.
<PAGE>
ADDENDUM TO "LEASE AGREEMENT"
This is an Addendum to the Industrial Real Estate Lease dated February 25, 1993,
by and between Professional Displays, Inc. as Tenant and Rollins Associates as
Landlord ("Lessor") concerning the property known as 1425 Elm Hill Pike, as more
specifically described in the Contract.
The term "Lease, Lease Agreement, or Industrial Real Estate Lease," shall be
deemed to refer to the same document.
All other terms set forth in the Lease Agreement including those pertaining to
the payment of real estate brokerage commissions are hereby approved by the
undersigned with the following modifications:
1) Right of first refusal: If during the first year of the base term during
this Lease Agreement, which expires on March 31, 1998, Landlord shall
receive an offer to lease 1423 Elm Hill Pike "building B" which offer
Landlord is willing to accept, or if Landlord wishes to enter into an
agreement for the lease of said building, Landlord shall give Tenant
written notice, setting forth the name of the proposed other tenant,
proposed lease rate, and the general terms and conditions of the proposed
lease. Within 10 days following the delivery of mailing of said notice
pursuant to the terms of this Addendum to Lease Agreement, Tenant shall
have the right to lease the 5,000 square foot 1423 Elm Hill Pike "building
B" at the base rate of $4.00 per square foot "standard industrial gross"
in an "as is" warehouse condition without further landlords interior
improvements. Such obligation to lease on the part of Tenant shall cover a
minimum lease term of four years from the date of exercise from the
Tenant's right of first refusal to lease. Said right of first refusal
should be exercised by Tenant's delivering or mailing such a notice of
acceptance to owner by completing an amendment to this existing lease
prior to the expiration of 30 days from the date of Landlord's delivery of
written notice to Tenant. If Tenant shall not elect to lease the
additional space within the said time 10 day frame and in accordance with
the terms set forth in Landlord's notice to Tenant, Tenant forfeits its
right of first refusal. This right of first refusal shall be effective
upon the date signed and shall continue for the first year of the base
lease term.
2) Real Estate Commission: In the event of an expansion OR exercise of the
right of first refusal, Landlord agrees to pay to CB Commercial Real
Estate Group, Inc. a lease commission of four percent (4%) cashout on any
renewals, sales, extensions, or expansions thereof.
3) Advance Notice To Landlord Required To Exercise Options. In the event that
Tenant elects to exercise the options to extend the Lease identified in
Paragraph 25a, Tenant shall give Landlord a minimum of 180 days advance
written notice prior to the expiration of the base lease term, and/or the
first 5 year option period that it intends to exercise its option to
extend the lease term for an additional five (5) year period. Landlord
Agrees to give Tenant a written reminder notice of its option notice
requirement during the first month of the fifth year of the base lease
term.
Except as expressly set forth in this Addendum, the Lease Agreement shall remain
in full force and effect.
Tenant: Professional Displays, Inc. Landlord: Rollins Associates
-------------------------------- ----------------------------
By: /s/ Kelly McNamee By: /s/ D.M. Rollins
------------------------------------ ----------------------------------
Title: Secretary/Treasurer Title: Partner
--------------------------------- -------------------------------
Date: March 10, 1993 Date: 3-17-93
---------------------------------- --------------------------------
<PAGE>
ADDENDUM NUMBER TWO TO LEASE AGREEMENT
This as an Addendum to the Industrial Real Estate Lease Agreement dated February
25, 1993, by and between Professional Displays, Inc. as Tenant and Rollins
Associates as Landlord ("Lessor") concerning the property known as 1425 Elm Hill
Pike, as more specifically described in the Contract.
The term "Lease, Lease Agreement, or Industrial Real Estate Lease", shall be
deemed to refer to the same document.
All other terms set forth in the Lease Agreement and Addendum including those
pertaining to the payment of real estate brokerage commissions are hereby
approved by the undersigned with the following modifications:
(1) Lessee and Lessor hereby agree to amend the Lease Agreement to expand the
demised Premises to include the adjacent +/- 5,000 square foot building
known as 1423 Elm Hill Pike, effective March 1, 1994, through March 31,
1998. at the additional rate of twenty thousand dollars ($20,000) per
annum payable in monthly installments of $1,677.00 dollars ($4.00) per
square foot per month.
(2) Prior to February 28, 1994, Landlord shall bring the building into
tenantable condition to conform with building codes regulations of the
Metropolitan Government of Nashville Davidson County Department of Codes
Administration. Landlord shall clean up debris in the 1423 building and
see that all equipment and systems are in good working order/condition at
commencement of the lease, including; electrical, plumbing, heating, air
conditioning, and ventilation. Landlord shall replace missing acoustic
ceiling tiles, install fiberglass batt insulation in the soffit and eave
areas of the building, and install one restroom.
(3) All other terms and conditions of this tease for 1423 Elm Hill Pike,
including Tenants two- five year options to extend the term of this lease
shall be Identical to those found in the original Lease Agreement for the
1425 Elm Hill Pike Building.
Accept as expressly set forth in this Addendum, the Lease Agreement shall remain
in full force and effect.
Tenant: Kelly McNamee Landlord: Rollins Associates
-------------------------------- ----------------------------
By: By: /s/ D.M. Rollins
------------------------------------ ----------------------------------
Title: Office Manager Title: Partner
--------------------------------- -------------------------------
Date: 01-28-94 Date: 1-28-94
---------------------------------- --------------------------------
<PAGE>
DISCLOSURE STATEMENT
PROPERTY NAME: Elm Hill Commerce Park
ADDRESS: 1425 Elm Hill Pike " Bldg. C"
MAP & PARCEL: 37210
CB Commercial Real Estate Group, a division of CB Commercial Real Estate
Group, Inc. makes the following disclosures in accordance with TREC Rule
1260-2-.35 "Agency Disclosure":
I. In the above transaction, CB Commercial represents:
|_| (a) the Lessee exclusively
|X| (b) the Lessor exclusively
|_| (c) the Lessee and Lessor jointly and such dual agency is
expressly consented to by the parties by their execution
hereof.
II. In the above transaction, CB Commercial shall receive its
compensation from:
|_| (a) the Lessee exclusively
|X| (b) the Lessor exclusively
|_| (c) both the Lessee and Lessor and such payment is expressly
consented to by the parties by their execution hereof.
The parties named below acknowledge, agree with, and consent to the
representation and compensation source disclosed above.
Lessor: Rollins Associates Lessee:
-------------------------------- ------------------------------
By: /s/ David Rollins By: /s/ Kelly McNamee
---------------------------------- ----------------------------------
Title: Partner Title: Secretary/Treasurer
------------------------------- -------------------------------
Date: 2-25-93 Date: February 25, 1993
-------------------------------- --------------------------------
Presented to the Lessee, prior to the acceptance of the offer to purchase/lease:
Date: Feb 24, 1993
Presented to the Lessor, prior to the preparation of the offer to
purchase/lease:
Date: Feb 24, 1993
CB Commercial Real Estate Group, Inc.
/s/ Don Kent
-------------------------------------------
424 Church Street, Suite 1500
Nashville, Tennessee 37219
(615) 248-3500
<PAGE>
1425 ELM HILL PIKE ROLLINS ASSOCIATES
199 POLK AVENUE, NASHVILLE, TENNESSEE
EXHIBIT A
[GRAPHIC]
<PAGE>
ADDENDUM
THIS ADDENDUM dated this 1st day of April, 1998 is hereby made a part of a
certain Lease Agreement dated February 25, 1993, (the "Lease") by and between
Display Arts ("Tenant") and RDR, Limited Partnership ("Landlord").
AGREEMENT
Landlord and Tenant acknowledge and agree that:
The first five year lease option period, stipulated in the lease agreement for
1425 Elm Hill Pike, dated February 25, 1993, and the lease addendum for 1423 Elm
Hill Pike, dated January 28, 1994 is exercised by Tenant extending the term from
April 1, 1998 to March 31, 2003;
Rent due on the first of each month shall be $3,740.67 per month;
Landlord shall perform the following items by or before May 31, 1998:
1. Seal and Stripe Parking Lot
2. Clean Building (pressure wash)
3. Clean gutters
4. Repair exterior plywood panels and repaint
5. Trim landscaping around building
6. Eliminate odor from closet where water heater is located
7. Reattach HVAC return air vents in 1423 Elm Hill
8. Add ventilation fan in 1423 Elm Hill
9. Replace lamps for soffit lights 1425 Elm Hill Pike
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date first written above,
LANDLORD: TENANT:
RDR LIMITED PARTNERSHIP DISPLAY ARTS, INC.
By /s/ D. L. Rollins By /s/ Donovan McNamee 4-4-98
----------------------------------- -----------------------------------
Date Date
Title Manager Title CEO
-------------------------------- --------------------------------
<PAGE>
RDR, Limited Partnership
Real Estate Development
199 POLK AVENUE P.0. o BOX 491 NASHVILLE, TENNESSEE 37202 o (615) 255-9874
April 8, 1998
Mr. Don McNamee
Display Arts
1425 Elm Hill Pike
Nashville, Tennessee 37210
Dear Mr. McNamee:
RDR, Limited Partnership ("RDR") is in receipt of the executed lease addendum
dated April 4, 1997.
Your changes to the lease addendum have been noted (i.e. rate changed from
$4,107.82 per month to $3,740.67 per month). Since the rate of $4,107.82 was
necessary to cover Landlord's expense to replace the existing air conditioning
units in 1423 Elm Hill Pike, the reduction in rent will necessitate the
elimination of this item from Landlord's requirements. All other items will be
completed by May 31, weather permitting.
Sincerely,
RDR, Limited Partnership
/s/ Don Rollins
Don Rollins
cc: David Rollins
Don Kent - CB Commercial
<PAGE>
Exhibit 10.08
AGREEMENT FOR
ASSUMPTION OF OBLIGATIONS UNDER LEASE
THIS AGREEMENT is executed effective October 23, 1998 by Display Arts
Inc., a Tennessee corporation ("Display Arts") and Donovan J. McNamee, Jr., a
resident of Davidson County, Tennessee.
R E C I T A L S:
WHEREAS, on October 23, 1998, McNamee, who is an officer and shareholder
of Display Arts, entered into that certain lease agreement (the "Lease"), a copy
of which is attached hereto as Exhibit A, to lease for the benefit of Display
Arts space situated at 1207 Faydur Ct., Nashville, Tennessee (the "Premises");
and
WHEREAS, Display Arts desires to utilize the Premises in its business
operations.
NOW, THEREFORE, the parties agree that in consideration of permitting
Display Arts use of the Premises during the entire term of the Lease, Display
Arts hereby agrees to fully perform in a timely manner each and every obligation
of McNamee under the Lease for the entire term of the Lease. Display Arts
further agrees to hold McNamee harmless and indemnify him from and against any
and all damages, costs and expenses, including attorneys' fees, in connection
with the Lease.
WITNESS the due execution of this Agreement by the parties hereto as of
the date first set forth above.
Display Arts Inc.
/s/ D. Jefferson Herring By: /s/ Pamela M. McNamee
- ------------------------------------- -------------------------------------
Witness Pamela M. McNamee
President
/s/ D. Jefferson Herring
- ------------------------------------- /s/ Donovan McNamee, Jr.
Witness -------------------------------------
Donovan J. McNamee, Jr.
<PAGE>
Exhibit 10.09
LEASE AGREEMENT
THIS AGREEMENT, made and entered into this first day of January, 1999
between the Raymond G. Guay Revocable Trust its successors and/or assigns,
herein after called the LESSOR and Display Arts, hereinafter called the LESSEE.
WITNESSETH
PREMISES: LESSOR does hereby lease to the LESSEE the premises (hereinafter
called "PREMISES") known as "Suite 10016 Emory Place", consisting of
approximately 3,700 square feet on the First (1st) floor, of the Office Building
(hereinafter called "BUILDING") being located at 16 Emory Place, situated at
Knox County in the City of Knoxville, Tennessee, to be occupied and used by the
said LESSEE as a commercial use, and for no other purposes described in
paragraph No. 6, with the right to use the halls in said building for purposes
of ingress and egress, and to use the water closets and apparatus in said
building in accordance with the purposes for which they are constructed, and not
otherwise.
The parties hereto further covenant and agree as follows:
1. A. TERM: This lease is for the term Five (5) years, beginning on the
first day of January, 1999 and ending on the last day of December, 2004. The
LESSEE, by this agreement, has the option to renew said Lease for three (3)
consecutive five (5) year terms but the rental rate shall be re-negotiated each
time, taking into consideration any increase in Consumer Price Index. However,
the increase shall not be less than eight percent nor greater than sixteen
percent.
B. RENTAL: LESSEE shall and hereby agrees to pay to LESSOR at LESSOR'S
office or at such place as LESSOR may from time to time designate in writing an
annual rental rate of $22,200 per annum. Such rental to be at the rate of $6.00
per square foot for the first floor, in equal monthly installments of $1,850.00
per month, to be paid without demand, on the first day of each month, in
advance. In the event the term of this Lease commences on a day other than the
first day of a calendar month, then the base monthly rental for the fractional
month of the term hereof shall be proportionately reduced.
C. SECURITY DEPOSIT: LESSEE has paid a security deposit in the amount of
$1,850.00 (one month's rent) which is hereby acknowledged by the LESSOR. If at
end of initial term or any renewal term this lease expires the security deposit
will be returned to the LESSEE provided that the LESSEE is in compliance with
all conditions of this lease.
2. ASSIGNMENT AND SUB-LETTING: LESSEE shall not assign this lease, nor
sub-let said leased PREMISES, or any part thereof, without first obtaining on
each occasion the consent of the LESSOR, whose consent shall not be unreasonably
withheld; nor use said PREMISES, nor permit the same to be used for any purpose
whatsoever, except as above provided.
3. ALTERATIONS: Any alterations, additions, or improvements other than
those provided to be furnished by LESSOR in the BUILDING standards shall be made
at the sole expense of the LESSEE. The LESSEE agrees that alterations,
additions, or improvements to the PREMISES will not be made without the written
consent of the LESSOR which consent shall not be unreasonably
Raymond C. Guay Revocable Trust
1998 Lease Agreement
05/14/98 1:50 PM
<PAGE>
LEASE, cont.
with-held and that all alterations, additions or improvements of a permanent
nature made by or for the LESSEE, including, but without limitation to, any and
all built in subdividing partitions, walls, or railings of whatever type,
material or height, but excepting movable furniture trade fixtures, appliances
and sound equipment put in use at the expense of the LESSEE shall, when made, be
the property of the LESSOR and shall remain upon and be surrendered with the
PREMISES as a part thereof at the expiration or earlier termination of this
lease. The LESSOR, however, reserves the right to require the LESSEE to remove
any paneling, decorations, partitions, wall, railings, floor covering, booths,
or office fixtures installed by the LESSEE, by giving not less than thirty (30)
days notice of such election to the LESSEE upon termination of lease.
4. LESSEE'S CARE: LESSEE shall be responsible for janitorial services. The
PREMISES shall be cleaned on a regular basis to include vacuuming and dusting
office areas at least one time per week. LESSEE shall maintain the interior of
the suite in as good condition as when he first occupied the suite, ordinary
wear and tear expected. LESSEE shall be responsible for any damages to the
PREMISES caused by him, his equipment or his invitees. Damages shall be reported
immediately to LESSOR and shall be repaired under the direction of the LESSOR at
LESSEE'S expense.
5. RIGHT OF ENTRY: The agrees that the LESSOR, its agent, janitors, and
servants shall have the right to enter the PREMISES at any time (a) to examine
the PREMISES; (b) to make alterations and repairs to the PREMISES or to the
BUILDING (including the right, during the progress of such alterations or
repairs, to keep and store within the PREMISES all necessary materials, tools
and equipment) as long as such material, tools and equipment are not obstructing
or interfering with LESSEE'S use of the premises; (c) for purpose which the
LESSOR may deem necessary for the operation and maintenance of the BUILDING, and
that no such entry shall render the LESSOR liable to any claim or cause or
action for loss of or damage to property of the LESSEE, by reason thereof, nor
in any manner affect the obligations and covenants of this lease, unless such
damage is caused by the negligence of the LESSOR, its agents, or employees.
6. USES AND OCCUPANCY: LESSEE agrees to comply with all laws, ordinances,
or regulations applicable to the leased PREMISES that no unlawful use of the
PREMISES will be made, that no sign, name legend, notice or advertisement of any
kind will be fixed, printed, painted or displayed on any part of the BUILDING
except that the logo, name, and business or profession of the LESSEE may be
painted with appropriate lettering approved by the LESSOR on the doors or
windows to the space leased by the LESSEE. Upon the termination of the lease or
any renewal or extension thereof mutually agreed upon by both parties, LESSEE
agrees to vacate and surrender possession of the demised PREMISES to the LESSOR
in as good condition as the PREMISES were at the commencement of this lease,
ordinary wear and tear, loss by fire or other casualty excepted.
7. INSURANCE AND MAINTENANCE: LESSEE covenants and agrees to maintain the
leased PREMISES in a safe and non-negligent manner and agrees to indemnify and
save harmless the LESSOR and LESSOR'S agent from any and all fines, judgments,
suits, claims, demands, and actions of any kind against LESSOR by reason of any
breach of this lease or violation or nonperformance of any laws, regulations, or
ordinances by the LESSEE. LESSEE shall protect, indemnify and hold harmless the
LESSOR and LESSOR'S agent against all claims by third persons for injuries,
whether to person or property, occurring in the leased PREMISES, unless caused
by negligence of LESSOR. LESSEE agrees to purchase and maintain insurance in a
reputable company
___________ 1998 Lease Agreement Page 2
Building
<PAGE>
LEASE, cont.
during the period of this lease providing protection to the LESSOR, LESSOR'S
agent, and the undersigned LESSEE in the amounts and against the liabilities as
follows:
1. Public liability in the limits of $300,000 for one person and
$300,000 for one accident for injuries sustained by members of
the public arising from the LESSEE'S occupancy or use of the
PREMISES.
2. Property damage in the limit of $100,000 for damage to
property of others arising out of the LESSEE'S occupancy or
use of the PREMISES. Such insurance is to cover also the
contractual liability of LESSEE under this section of the
lease.
3. The LESSOR and LESSEE agree to carry fire and extended
coverage insurance on their respective property and interest
in the demised PREMISES and mutually release each other from
any claims for losses or damage which may be covered by the
Standard Tennessee Form of Fire and Extended Coverage
Insurance. Original policies or certificate of insurance will
be filed with the agent for the LESSOR, ten (10) days prior to
expiration of policies. Renewal certificates or binders will
be delivered to LESSOR'S agent.
8. DEFAULT: In the event the LESSEE shall not pay the rent within ten (10)
days after receiving written notice of such nonpayment from LESSOR, or shall
violate or fail to perform any of the covenants, agreements or conditions of
this lease, or shall abandon the PREMISES or leave them vacant, or discontinue
using PREMISES for purpose provided herein, or shall violate (or fail to comply
with) any laws, ordinances or regulations applicable to the use and occupancy of
the leased PREMISES, the LESSOR shall have the right, and its option,
immediately binding upon LESSEE; and LESSOR, by itself or its agents may
re-enter said PREMISES by summary proceedings by force, or otherwise, take
possession thereof, and remove all persons and property therefrom, and LESSEE
shall not thereby be released from the rent past due, or future due within terms
of this contract, or from the payment of damages for the breach of this leases
by LESSEE, which damages including reasonable attorney's fee, LESSOR shall have
the right to recover. If LESSOR shall rightfully seek to obtain possession of
leased PREMISES, and shall be obstructed therein by LESSEE, his agents or
assigns, and suit shall result in which suit LESSOR is successful, LESSEE shall
pay to the LESSOR a reasonable attorney's fee and costs incurred by LESSOR in
prosecuting said suit. LESSOR shall have a lien upon all fixtures and other
property of LESSEE found in said PREMISES to secure the payment of rentals,
damages, attorney's fees and costs due LESSOR by LESSEE.
9. ELECTRICITY AND WATER: LESSOR shall supply at his cost electric current
for lighting fixtures installed in the leased PREMISES, corridors, toilets and
restrooms; provided, however, the LESSOR shall not be responsible for any
surges, fluctuations or power failure. LESSOR shall furnish a reasonable amount
of hot and cold running water for tenant stated use and purpose, into the
lavatories and cold water to the toilets in or the leased PREMISES and shall
keep all plumbing in repair. It is specifically agreed that LESSOR undertakes to
furnish only a reasonable amount of electric current and water for Tenant stated
use and purposes and LESSOR reserves the right to install meters and to make
extra rental charges for any consumption which it reasonably deems to be
excessive or wasteful for tenant stated use and purpose.
___________ 1998 Lease Agreement Page 3
Building
<PAGE>
LEASE, cont.
10. HEATING AND AIR CONDITIONING: LESSOR shall maintain and operate the
heating and air conditioning system for all parts of the BUILDING, except
storage space; the heating and air conditioning system shall be operated and
maintained during normal hours for which LESSEE'S use and purpose requires. The
LESSEE shall operate the efficiency thermostats per instructions. The LESSOR
shall not be liable for any failure of such services not due to the gross
negligence of the LESSOR.
11. A. OBJECTIONABLE CONDUCT: If the LESSOR shall reasonably deem the
LESSEE or occupants or visitors extremely objectionable, LESSOR may give the
LESSEE thirty (30) days notice to correct or negotiate the objection, otherwise
the intention to end the term of this agreement, and thereupon, at the end of
the said thirty (30) days, the term under this agreement shall expire as fully
and completely as if that day were the day herein definitely fixed for the
expiration of the term, and the LESSEE will then quit and surrender the leased
PREMISES to the LESSOR.
B. QUIET POSSESSION: LESSOR covenants that LESSEE, upon performing
and observing the covenants to be observed and performed by LESSEE under this
lease, shall peaceably hold, occupy, and enjoy the PREMISES for the use and
purpose as described herein during the term or any renewal term (if exercised)
of this lease without interference by LESSOR or by any other person claiming by,
through, or under LESSOR, its successors or assigns.
12. TAKING POSSESSION: LESSEE'S act of taking possession shall be
conclusive evidence against LESSEE that the PREMISES were in good order and
satisfactory condition to LESSEE.
13. WAIVER: No waiver by LESSOR at any time of any forfeiture for the
breach of covenant by LESSEE shall impair the right of LESSOR to rely upon such
forfeiture for any subsequent breach, and acceptance by the LESSOR of a portion
or all of rent past due shall not constitute a waiver of the forfeiture or of
the breach of any covenant or condition, or of any damages due LESSOR by LESSEE.
No waiver of any of the provisions of this lease shall be binding upon LESSOR
unless in writing, signed by LESSOR or its authorized agent.
14. OCCUPANCY AFTER TERMINATION: Should LESSEE occupy said PREMISES after
the termination of this lease, or after a forfeiture has been declared by
LESSOR, such occupancy shall in no event constitute a renewal of this lease or
be from year to year, but shall be a month to month tenancy at the will of
LESSOR only, and shall be subject to and in accordance with the terms of this
lease.
15. CONDEMNATION: In the event that all or a portion of the premises shall
be condemned for public use, under the right of eminent domain so that the
LESSEE'S use is obstructed, then in such event LESSEE may terminate this lease
effective as of the date of taking by giving LESSOR written notice not less than
thirty (30) days after such date. In the event that LESSEE does not elect to
terminate this lease, the rent shall abate upon a fair and equitable basis
according to the portion of the premises taken. No award for any total or
partial taking shall be apportioned except that amounts awarded directly to
LESSEE in a separate award for relocation expenses shall be the property of
LESSEE.
___________ 1998 Lease Agreement Page 4
Building
<PAGE>
LEASE, cont.
16. CONDITIONAL LIMITATIONS:
1. If, before or during the term of this lease or any renewal or
extension thereof, the LESSEE shall be adjudged a bankrupt, or
of any proceeding under the federal bankruptcy laws shall be
filed by or against the LESSEE, then such occurrence shall be
deemed a breach of this lease, and, upon the happening of such
event, this lease shall, ipso facto, terminate, and the LESSEE
shall be liable for all damages sustained by LESSOR as
provided by law.
2. If, before or during the term of this lease or any renewal
thereof (a) the LESSEE shall make an assignment for the
benefit of creditors or (b) a receiver shall be appointed for
the property of the LESSEE by order of a court competent
jurisdiction by reason of the insolvency or alleged insolvency
of the LESSEE, or (c) any department of the state of federal
government, or any officer thereof authorized by order of
court, shall take possession of the business or property of
the LESSEE by reason of the insolvency or alleged insolvency
of the LESSEE, or (d) should execution issue on any judgment
and be levied against its interest in said PREMISES under the
lease, then upon the happening of any such event, at the
option of the LESSOR, this lease may be terminated by the
LESSOR by written notice to that effect to the LESSEE, and the
LESSOR shall, in addition to any other remedies provided by
law in case of default by the LESSEE, be entitled to the
damages as provided by law.
17. OPERATING COST: By reason of the continuing threat of inflation as
reflected in the Consumer Price Index (CPI), published by the United States
government, the parties agree that the annual rental provided for herein may be
increased at time of renewal by reason of direct operating costs of the
BUILDING. The increase shall be divided by the total number of square feet in
the entire BUILDING and the result applied as an increase of the per square foot
rental of the leased PREMISES. Direct operating costs include utilities, taxes,
contracted labor, insurance, materials, supplies, garbage fee, service charges
and all other maintenance costs. The base period for the determination of
increase in operating costs shall be the calendar year in which the LESSEE takes
possession under this lease, and providing the LESSEE is a new LESSEE to the
PREMISES. The base period for present LESSEES on the PREMISES, who relocate
within the PREMISES, will remain the same. However, in no event shall the annual
rent for any year of this lease be increased beyond the increase in annual CPI
for the preceding calendar year, irrespective of whether the LESSOR'S actual
operating costs have increased at a higher rate than the CPI.
18. BUILDING RULES AND REGULATIONS: The LESSEE has read the rules and
regulations hereto annexed and made a part hereof and hereby agrees to abide by
and conform to the same and to such further rules and regulations as the LESSOR
may from time to time make or adopt for the care, protection and benefit of the
BUILDING or the general comfort, welfare and safety of its occupants.
19. NOTICES: All notices or communications which this instrument requires
or permits to be given shall be in writing and shall be mailed or delivered to
the respective addresses set forth below and to such address as may be
designated in writing by either party.
___________ 1998 Lease Agreement Page 5
Building
<PAGE>
LEASE, cont.
20. MISCELLANEOUS: This lease contains the entire contract between the
parties and may be amended only by written agreement signed by LESSOR or LESSEE.
This lease shall inure to the benefit of and shall be binding upon LESSOR,
LESSEE, and their respective heirs, legatees, legal representatives, successors
and assigns, subject to all the terms, conditions and contingencies set forth.
This lease shall be governed b the laws of the State of Tennessee. If any
provision of this lease be invalid or enforceable by any court of competent
jurisdiction, such holding shall not operate to invalidate any other provision
hereof.
___________ 1998 Lease Agreement Page 6
Building
<PAGE>
LEASE, cont.
LEASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
BY /s/ [ILLEGIBLE] BY /s/ Raymond G. Guay
--------------------------------- -------------------------------------
LESSEE LESSOR
DISPLAY ARTS INC. RAYMOND G. GUAY REVOCABLE TRUST
--------------------------------- -------------------------------------
STATE OF TENNESSEE
COUNTY OF_________
Personally appeared before me, the undersigned Notary Public in and for
said County and State, the within named Affiant, ______________________________,
with whom I am personally acquainted and who acknowledged that
______________________________ executed within Affidavit for the purposes
therein contained.
Witness my hand and official seal at office in __________________ County,
Tennessee, this day of _________________, 19__.
________________________________________
Notary Public
My Commission Expires:_______________________________
STATE OF TENNESSEE
COUNTY OF_________
Personally appeared before me, the undersigned Notary Public in and for
said County and State, the within named Affiant, ______________________________,
with whom I am personally acquainted and who acknowledged that
______________________________ executed within Affidavit for the purposes
therein contained.
Witness my hand and official seal at office in __________________ County,
Tennessee, this day of _________________, 19__.
________________________________________
Notary Public
My Commission Expires:_______________________________
___________ 1998 Lease Agreement Page 7
Building
<PAGE>
LEASE, cont.
RULES AND REGULATIONS
1) The entrances, corridors, passages and stairways shall be under the
exclusive control of the LESSOR and shall not be obstructed, or used by
the LESSEE for any other purpose than ingress and egress to and from the
leased PREMISES.
2) The LESSEE shall not install or operate, any engine, boiler machinery of
any kind, except machinery incident to operation of doctor's or dentist's
office, nor carry on any mechanical business in said PREMISES, nor place
any explosive therein, nor use any kerosene or oils, or burning fluids, in
said PREMISES without first obtaining the written consent of the LESSOR.
3) If the LESSEE desires telephonic or telegraphic or electronic connections,
the LESSOR will direct the electricians as to where and how the wires are
to be introduced, and without such written directions no boring or cutting
for wires will be permitted.
4) Subject to LESSEE'S stated use and purpose stated in paragraph No. 6 of
this lease, the leased PREMISES shall not be used for the purpose of
lodging or sleeping rooms (Except for occasional youth education
activities as scheduled and announced to LESSOR one (1) week in advance.),
nor in any way to damage the reputation of the BUILDING; and the LESSEE
shall not disturb, nor permit the disturbances of, other tenants, by any
unseemly noises, nor by any interference whatsoever; and nothing shall be
placed or permitted upon the outside window sills, or thrown from the
windows of the BUILDING.
5) LESSOR agrees that LESSEE shall be responsible for providing its own
cleaning personnel. LESSEE shall not be required to employ employees of
the building for such purposes.
6) The LESSOR shall have the right to exclude or eject from the BUILDING
animals of every kind, birds, bicycles and all canvassers and other
persons who conduct themselves in such a manner as to be, in the
reasonable judgment of the LESSOR, an annoyance to the LESSEES or a
detriment to the BUILDING.
7) No additional locks shall be placed upon any doors of said PREMISES,
without first obtaining the written consent of the LESSOR, and the LESSEE
will not permit any duplicate keys to be made (all necessary keys to be
furnished by the LESSOR), but if more than two keys for any door are
desired, the additional number shall be paid for by the LESSEE. Upon
termination of this lease, the LESSEE shall surrender all keys to said
PREMISES and of said BUILDING.
8) The LESSEE, before closing and leaving the said PREMISES at any time,
shall see that all doors are locked, extinguishing lights and turning off
all water outlets. LESSEE agrees to replace all glass broken by LESSEE,
his agents or employees during the tenancy in the BUILDING. LESSEE shall
not allow water to be wasted by tying or wedging back faucets or
otherwise.
9) The LESSOR shall have the right to designate the time when and method
whereby freight, furniture, safes, goods, merchandise and other articles
may be brought into, moved or taken from the PREMISES leased by the
LESSEE; and workmen designated or approved.
___________ 1998 Lease Agreement Page 8
Building
<PAGE>
LEASE, cont.
10) LESSEE will not install or cause to be installed special equipment such as
air conditioning units, telephone switchboards, ventilating systems or
other equipment except with consent of LESSOR, which said consent shall
not be unreasonably withheld, and in a manner specified by LESSOR. In any
event LESSEE will be responsible for restoring the PREMISES to its same
condition as the premises were at the commencement of this lease, ordinary
wear and tear, loss by fire or the causality excepted upon termination of
the lease, and upon the removal of the special equipment if such removal
is permitted by LESSOR.
11) The LESSOR shall have the right to prohibit the installation or operation
of vending machines of any kind in the leased PREMISES without written
consent of LESSOR.
12) The LESSEE will reimburse the LESSOR for the cost of repairing any damage
to the leased PREMISES or other parts of the BUILDING caused by the LESSEE
or the agents or employees of the LESSEE.
13) The LESSEE shall not install in the leased PREMISES any metal safes or
permit any concentration of excessive weight in any portion thereof
without first having obtained the written permission of the LESSOR.
14) The LESSOR reserves the right at all times to exclude loiterers, vendors,
solicitors and peddlers from the BUILDING, and to require registration,
satisfactory identification and credentials from all persons seeking
access to any part of the BUILDING outside of ordinary business hours. The
LESSOR will exercise its best judgment in the execution of such control
but shall not be held liable for the granting of refusal of such access.
15) LESSEE agrees to cooperate and abide by any emergency evacuation of the
BUILDING, if and when necessary.
16) Chair mats are required under all office chairs.
17) In the event rent is not paid within twenty (20) days after due date,
LESSEE agrees to pay a late charge of five per cent (5%) plus interest at
twelve (12%) per annum on the delinquent amount. LESSEE agrees to pay
twenty dollars ($20.00) for each dishonored bank check.
18) LESSOR reserves the right to make such rules and regulations as in its
judgment may be for the safety, care and cleanliness of the PREMISES and
for the preservation of good order therein, LESSEE agrees to abide by all
such rules and regulations herein above stated and any additional rules
and regulations which are adopted upon notice to the LESSEE.
___________ 1998 Lease Agreement Page 9
Building
<PAGE>
$5550 [ILLEGIBLE]
prepay till
3/1/99
6/16/98
FACT SHEET:
Premises: Suite 100 - First Floor entrance on Emory Place.
Address: 16 Emory Place, Knoxville, TN 37917.
Space: 3,700 sq. ft. Floor Plan as per Drawing 1, Existing Conditions.
Term: Lease for 5 years with option to renew for 3 consecutive 5 year
terms but rates will be renegotiated.
Rental: $22,200.00 per year which is: $6.00 per sq. ft. payable at $1850.00
per month.
o This rental will include normal amounts of Electricity, Water, Heating and
Air Conditioning, Building Taxes and Insurance.
o The above noted is for the rental of the space as-is (no furnishings
included). Any changes, remodeling, etc. shall be negotiated prior to
Lease. However, cost could be included in Lease.
o Purchase of existing telephone (Executone System) is also possible.
o Basement storage space also available, at $1.00 per sq.ft.
can Lease space to "Creative" professions
<PAGE>
Exhibit 10.10
Lease Agreement
THIS LEASE, dated as of the 23rd day of October, 1998, is executed by and
between the hereinafter defined Lessee and Lessor. In consideration of the
rental stated below and the mutual Covenants and agreements contained herein,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor the
Premises described herein.
1. FUNDAMENTAL LEASE PROVISIONS - The following shall be defined terms
throughout this Lease:
LESSEE: Steve Kress and Don McNamee Jr. d/b/a Graphic Transfer/Display Arts.
LESSOR: Enos Reed
PREMISES: The leased Premises identified and described as follows: Being a
25,273 Sq. Ft. building and land located at 1207 Faydur Court, Nashville,
Davidson County, Tennessee, further described as Parcel of that County's
Property Map
TERM: Original Term Five (5) years Commencing on November 1, 1998 and expiring
on October 31, 2003.
One (1) Renewal Option at Three (3) years.
RENTAL: Year 1 Annual rental of $88,455.50 paid in monthly installments of
$7,371.29.
Year 2, Annual rental of $88,455.50 paid in monthly installments of
$7,371.29.
Year 3, Annual rental of $88,455.50 paid in monthly installments of
$7,371.29.
Year 4, Annual rental of $88,455.50 paid in monthly installments of
$7,371.29.
Year 5, Annual rental of $88,455.50 paid in monthly installments of
$7,371.29.
500 Elmington Ave, #332 rental commences November 1, 1998 and is made Payable to
Mr. Enos Reed, Nashville, TN 37205.
PERMITTED USE: Storage, display, office, installation and construction of
displays and related general and lawful business.
LESSEE'S PERCENTAGE: 100 % of Lessor's total property of which the Premises is a
part
TAX BASE: Base Tax Amount $ 5,714.00 for the Base Tax Year 1998.
INSURANCE BASE: Base Insurance Amount $ 2,136.00.
COMMISSION PERCENTAGE: 4% SECURITY DEPOSIT: $ 7,371.29 held by Lessor
ESTIMATED COMMON AREA MAINTENANCE SHARE $NA per month.
<PAGE>
2. RENTAL PAYMENTS WITHOUT SET-OFF - Lessee agrees to pay to Lessor the above
stated rental with payments to be made monthly in advance as described above or
at such location and to such payee as Lessor shall designate. All payments are
due on the first day of each month, except that if the beginning and ending
months are not whole, then only the pro rata portion for that month shall be
paid for said month. If Lessee's rental payment in good funds is not received in
Lessor's office by the 7th day of each month, then such payment shall, at the
option of Lessor, bear a monthly late charge equal to 10% of such payment. Said
late charge shall be immediately due and payable with the rent on the first
succeeding rental payment date. The total rent due upon each due date shall be
paid in full to Lessor, and no set-off or counter claims may be deducted by
Lessee from the rentals due.
3. SECURITY DEPOSIT - Upon delivery of this Lease to Lessor, Lessee shall
deposit the above stated amount with Lessor as a security deposit for, at
Lessor's option, (1) application toward payment for repairs to the Premises not
due to normal wear and tear upon Lessor's determining the need for repairs,
during the lease Term, to restore the Premises after damage attributable to
Lessee's acts or failure to repair under the provisions of this Lease, or upon
expiration or early termination of this Lease, or, (2) for application toward
payment of any rental payments in default. If said deposit shall have been
applied as provided herein, Lessee shall, upon 10 days written notice from
Lessor, deposit sufficient money to restore the said fund to its original
amount. Any balance in said security deposit account shall be remitted to
Lessor's successor in title or to Lessee upon expiration or earlier termination
of this Lease. Said deposit account shall be a non-interest bearing account and
Lessor may, at its option, commingle such funds with its other assets.
4. ASSIGNMENT AND SUBLETTING - This Lease may not be assigned, and the Premises
may not be sublet, partially or fully, without prior written consent of Lessor,
which consent shall not be unreasonably withheld. Even in the event of permitted
assignment or subletting, Lessee shall remain fully responsible for compliance
with all terms of this Lease.
5. LIEN FOR PAYMENT OF RENT - Lessor shall have all of the rights provided for
protection of landlord's interest under the law of the State of Tennessee,
specifically including a lien for payment of rental. To enforce such lien,
Lessor may take and keep possession of all of Lessee's property and/or the
contents of the Premises and may advertise and sell such property at public
auction to satisfy said debt, and in bar of redemption, provided that notice be
posted on the Premises and written notice be sent by certified mail to Lessee
and any known creditors claiming any interest in such property at least ten (10)
days prior to sale date.
6. ACCEPTANCE OF PREMISES - Lessee acknowledges that Lessee has inspected and
accepts the Premises in their present condition. Lessor has made no warranties
with respect to the repair of the Premises or the suitability of the Premises
for Lessee's use and Lessee expressly waives any implied warranty of same.
Lessor shall have no obligation to modifications to the Premises unless a
separate section and or exhibit is attached hereto which details such
improvements.
7. ALTERATIONS - Lessee shall make no alterations, additions, replacements or
improvements to the Premises without the express written consent of Lessor. Any
alterations, additions, replacements and improvements made to or upon the
Premises during the term of this Lease shall immediately become the property of
Lessor and considered a part of the Premises. Lessee agrees that should it make
any alterations, additions, replacements or improvements to the Premises it will
not be acting as agent or servant of Lessor and that it will promptly pay the
cost or expense for same. Lessee shall not permit, create, or place any lien or
encumbrance of any kind on the Premises. Failure by Lessee to have any such lien
or encumbrance removed within 30 days following such filing shall constitute a
default hereunder.
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However; trade fixtures installed by Lessee solely for use in its business shall
remain the property of Lessee and may be removed at the expiration of this Lease
term, including any applicable renewal terms, provided this Lease shall not then
be in default, and provided the Premises be returned to Lessor in the condition
as provided in Paragraph 11 herein.
8. SIGNAGE - Lessee shall not be permitted to paint, place, erect or cause to be
painted, placed or erected signs on the front, back and side portions of the
building or on the grounds surrounding the Premises without first obtaining
written consent from Lessor. At or prior to the expiration of this Lease, or any
renewal hereof, Lessee shall remove any signs so painted, placed or erected, and
shall restore the walls and other portions of the Premises to which any of the
said signs were attached to their original condition, ordinary wear and tear
excepted.
9. USE OF PREMISES - Lessee shall use the Premises for the use stated in Section
1 hereof and for no other purposes. Lessee covenants and agrees that it will
observe and comply with all laws, orders, rules and regulations of any
governmental authority relating to the Premises, and will not permit same to be
used for illegal purposes. Outside storage including storage in trucks,
trailers, or other vehicles is prohibited without Lessor's prior written
consent.
Lessee shall not use or permit upon the Premises anything that will invalidate
any policy of insurance now or hereafter carried on the building of which the
Premises are a part or that will increase the rate of insurance on said
building. Lessee shall not use or permit upon said Premises anything that may be
dangerous to life or limb and shall not in any manner deface or injure the
building. Lessee shall not permit any objectionable noise or odor to escape or
be emitted from the Premises or do anything or permit anything to be done upon
the Premises which might tend to create a nuisance or tend to disturb any tenant
in said building or the occupants of neighboring properties.
Lessee shall prevent any "Hazardous Materials" to be brought upon or about the
Premises. As used herein, the term "Hazardous Materials" means any hazardous or
toxic substance, material or waste which is or becomes regulated by any federal,
state, or local governmental or quasi-governmental authority. If contamination
of the Premises by any Hazardous Materials occurs as a result of the activities
of Lessee or its invitees in, on or about the Premises, then Lessee shall
promptly take all actions to return the Premises to its condition prior to the
introduction of such Hazardous Materials and Lessee shall indemnify, protect,
defend and hold Lessor harmless against all claims, judgments, damages,
penalties, fines, costs, liabilities or losses which arise during or after the
term as a result of such breach and/or contamination. This indemnification,
includes but is not limited to costs incurred in connection with any
investigation of site conditions and any clean up, remedial, removal or
restoration work required by any governmental or quasi-governmental authority
because of any Hazardous Materials being present in the soil or ground water on
or under the Premises. The terms and provisions set forth herein shall survive
the expiration of the term of this Lease.
10. UPKEEP OF PREMISES - Lessor shall, at its own cost and expense, maintain in
good repair the roof, foundations and exterior walls (not including doors,
windows and floors); however, Lessor shall not be obligated to make any repairs
of those portions of the Premises that it is obligated to maintain unless it
shall be notified in writing by Lessee, and Lessor shall then have a reasonable
period of time to make such repairs; provided, however, that Lessee and not
Lessor shall be responsible for making any such repairs occasioned by the acts
of Lessee, its employees, or invitees. Lessor shall not be liable for any damage
or loss occasioned by Lessor's failure to repair portions of the Premises for
which Lessor is responsible unless it shall have failed to repair the defect
within a reasonable time following written demand by Lessee to make the repair.
Lessee shall, at its own expense and without notice from Lessor, keep and
maintain in good repair the entire Premises, other than those portions for which
Lessor shall be responsible as set out above, including interior walls, floors,
ceilings, ducts, utilities, air conditioning, heating, lighting, plate glass,
plumbing, sprinkler system,
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<PAGE>
and electric wiring, and also including the loading dock and any parking,
landscaped or other area exclusively used by Lessee. Upon receiving notice of
any defect that is the responsibility of Lessee to maintain, Lessee agrees to
proceed diligently to complete such repairs within a reasonable period of time.
Lessee shall keep the Premises and adjacent grounds, including loading docks,
parking lots, and rail sidings alongside of and in the vicinity of same in a
good, clean, and sanitary condition and appearance, free from dirt, filth,
waste, oiled rags or any flammable, dangerous or detrimental material, also from
noxious or objectionable odors. If same are not maintained in this manner,
Lessor may, upon giving ten (10) days written notice to Lessee during which time
Lessee fails to correct the matter of which Lessor complains, take the
corrective action, and the cost of same shall be born by Lessee, which Lessee
agrees to pay upon receipt of the bill for same from Lessor.
11. RETURN OF THE PREMISES - Upon termination of this Lease, by expiration of
term, or otherwise, Lessee shall deliver the Premises to Lessor in the same
condition as when possession was taken, ordinary wear and tear excepted. The
Premises shall be returned in good order and condition, cleared of all goods,
signs and debris, and broom clean. Lessee shall make good all damages to the
Premises (ordinary wear and tear excepted), and shall remain liable for holdover
rent until the Premises shall be returned in such order to Lessor.
12. HOLDOVER - Should Lessee hold over the term hereby created, and with the
consent of Lessor, Lessee shall become a tenant from month to month at 150% of
the monthly rental payable hereunder for the prior month, and otherwise upon the
covenants and conditions in this Lease contained, and shall continue to be such
tenant until thirty (30) days after either party hereto serves upon the other
written notice of intention to terminate such monthly tenancy. Should such
termination occur on any day other than the last day of any rental month, any
unearned prepaid rental shall, immediately following surrender of the Premises
by Lessee, be refunded to Lessee.
13. UTILITIES - All gas, water, sewer, electric current, garbage, or special
fees, metering charges, sprinkler fees or bonds, or utility charges of any
nature used on the Premises shall be paid for by Lessee.
14. TAX INCREASES - Lessee shall pay as additional rent any increase in real
estate taxes or any special assessments imposed by reason of improvements made
to the leased Premises by or for the benefit of Lessee. Lessee shall also pay as
additional rent Lessee's Percentage of the increase in real estate taxes and
special assessments over the Base Tax Amount which is the amount of such taxes
for the Base Tax Year imposed upon the entire tax parcel of which the Premises
are a part. Lessee agrees that if during the term of this Lease a capital levy
or other tax be levied, assessed or imposed on the rents received by Lessor from
the rents reserved herein or any part thereof then Lessee will pay same when
due; except, however, should said tax upon rents be substituted partially or
wholly for real estate taxes, then Lessee shall only pay Lessee's Percentage of
that portion which is in excess of the Base Tax Amount Payment under this clause
shall be due within ten (10) days of delivery of notice thereof to Lessee.
15. INSURANCE INCREASES - Lessee shall pay as additional rent Lessee's
Percentage of any increase in Lessor's insurance premium for the building in
which the Premises are located above the Base Insurance Amount which is that
premium in effect for the entire building of which the Premises are part as of
the date of this Lease, provided such increase is not due to the default or
negligence of Lessor or due to the building in which the Premises are located
being used by Lessor or another tenant for purposes which increase said premium.
Lessee agrees to promptly comply with and execute all rules, orders and
regulations of the applicable governmental authorities, at Lessee's own cost and
expense. Lessee agrees to pay as additional rent any increase in the amount of
insurance premiums for the
building in which the Premises are located, promptly when due, over and above
the premium now in force if such increase is caused by Lessee's use or occupancy
of the Premises. Payment under this clause shall be due within ten (10) days of
delivery of notice thereof to Lessee.
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<PAGE>
16. LIABILITY INSURANCE - Lessee shall hold Lessor harmless and Lessor shall not
be held responsible for and is hereby expressly relieved from any and all
liability by reason of any injury, loss (including attorney's fees incurred in
good faith by Lessor) or damage to any person or property in or about the
Premises, however caused. In addition, Lessee agrees to provide at its own
expense public liability insurance in form satisfactory to Lessor, with limits
of at least One Million Dollars ($1,000,000) each occurrence and general
aggregate for bodily injury and/or property damage. All such policies shall name
Lessor as Additional Insured and shall contain a provision that the same may not
be canceled or changed without giving Lessor at least thirty (30) days written
notice prior to any such change or expiration or cancellation of any such
policy. Lessee shall furnish to Lessor a Certificate of Insurance for each
insurance policy. Lessee agrees to provide the above coverages and guarantees
such coverage will not be less than those required by Lessor Lessee also shall
carry contents coverage on its contents with a waiver of subrogation clause as
to Lessor.
17. FIRE CLAUSE - In case the Premises shall be so damaged by fire or other
cause as to be rendered untenantable (as determined by Lessor), Lessor shall
have thirty (30) days from date of said casualty to determine the extent of
repairs to be done and the time required to perform them. If the damage is such
that repairs can be completed within ninety (90) days from commencement of said
repairs, Lessor agrees to make such repairs promptly and to allow Lessee an
abatement in rent for such time as the building remains untenantable. Lessor
shall commence repairs within sixty (60) days from date of said casualty. If
necessary repairs cannot be made within ninety (90) days from date of
commencement of such repairs, this Lease shall terminate as of the date the
Premises were rendered untenantable. In the event of partial loss, the rent
shall be abated by a portion equal to the area rendered unfit for use against
the total area.
18. WAIVER OF SUBROGATION - Lessor and Lessee agree, provided that such
agreement does not invalidate or prejudice any policy of insurance, that, in the
event the Premises or the fixtures, leasehold improvements, furniture,
equipment, or merchandise therein are damaged or destroyed by fire or other
casualty which is covered by insurance of either Lessor or Lessee, the rights of
either party, if any, against the other, or against the employees, agents or
licenses of any party with respect to such damage or destruction and with
respect to any loss resulting therefrom, including the interruption of the
business of any party, are hereby waived to the extent of the coverage of said
insurance. Lessor and Lessee agree further that all policies of fire, extended
coverage, business interruption, all risk or other insurance covering the
Premises, or the contents, fixtures, equipment and improvements thereon, shall,
if obtainable, contain a clause or endorsement providing in substance that the
insurance shall not be prejudiced by virtue of this waiver. Any additional
premiums on account thereof shall be paid by the party benefitted.
19. CONDEMNATION - In the event of Lessor's receipt of notice of a condemning
authority's intention to take by eminent domain a substantial part of the
property (as determined by Lessor) on which the Premises are situated, either
party may at any time thereafter, by notice in writing effective on the date of
taking or six months after the date of service of the notice, whichever shall be
earlier, terminate this Lease. In the event of termination of this Lease, Lessee
shall have the right to remove all of his property and contents but shall have
no right to any part of the condemnation settlement or award, except for
reasonable moving expenses if specifically set aside for tenant relocation by
the condemning authority.
20. LESSOR'S RIGHTS UPON DEFAULT - If the Premises shall be deserted or vacated
for more than seven (7) consecutive days (which in any event Lessee covenants
that the insurance herein provided shall be maintained in full force and effect)
or if bankruptcy or insolvency proceedings are commenced against or by Lessee in
any court, or if proceedings are commenced for the appointment of a Trustee or
Receiver of Lessee's property, or if there shall be a default in the payment of
rent or any part thereof, or other payment due hereunder, for more than ten (10)
days after written notice of such default is given by
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<PAGE>
Lessor to Lessee, or if there shall be default in the performance of any other
covenant, agreement or condition herein contained on the part of Lessee for more
than thirty (30) days after written notice by Lessor, this Lease shall thereupon
be terminated at Lessor's option, and Lessor shall have the right to re-enter or
repossess the Premises and dispossess and remove therefrom Lessee, or other
occupants thereof, and their effects, without being liable for any prosecution
therefor. In such case, Lessor may, at Lessor's option, relet the Premises or
any part thereof, as the agent of Lessee, and Lessee shall pay the difference
between the rent and other costs and charges herein reserved and agreed to be
paid by Lessee for the portion of the term remaining at the time of re-entry or
repossession and the amount, if any, received or to be received under such
reletting for such portion of the term. Should this Lease be placed in the hands
of an attorney for default or breach, or for the enforcement of any rights
herein reserved or stipulated, Lessee agrees to pay all costs incident thereto,
including reasonable attorneys' fees.
21. LESSOR'S RIGHT TO PERFORM - If Lessee shall default in the performance of
any covenant or condition of this Lease required to be performed by Lessee,
Lessor may, at his option, perform such covenant or condition for the account
and at the expense of Lessee. The amount of any expense so incurred shall be
deemed additional rent and may, at the option of Lessor, be added to any
subsequent installment of the monthly rent due and payable under this Lease, in
which event Lessor shall have the remedies for default in the payment thereof
provided by this Lease. The provisions of this paragraph shall survive the
termination of this Lease.
22. LESSOR'S RIGHT OF ENTRY - Lessor, and its agents or other representatives,
shall have the right to enter into and upon the Premises or any part thereof at
all reasonable hours for the purpose of inspecting the same or making repairs or
alterations which may be necessary for the safety and preservation thereof.
Lessee agrees, at any time within six (6) calendar months before the expiration
of this Lease, to allow Lessor to enter upon the Premises and to affix upon any
suitable part thereof a notice for reletting same, and that Lessee will not
remove same and will permit all persons authorized by Lessor to view Premises at
reasonable times.
23. NON-WAIVER - Failure of Lessor to declare and default immediately upon
occurrence thereof or delay in taking any action in connection therewith shall
not waive such default, but Lessor shall have the right to declare any such
default at any time; no waiver of any default shall alter Lessee's obligations
under this Lease, with respect to any other existing or subsequent default.
24. BANKRUPTCY OR INSOLVENCY OF LESSEE - In the event of the filing of any
petition for bankruptcy or receivership relating to Lessee, unless dismissed in
twenty-one (21) days, or in the event of any assignment of Lessee's assets for
the benefit of creditors, then Lessor shall have the right, on thirty (30) days
notice, to terminate this Lease irrespective of whether rental payments shall
then be in default.
25. ATTORNEY'S FEES AND INTEREST - In the event it becomes necessary for Lessor
to employ an attorney to enforce collection of the rents agreed to be paid, or
to enforce compliance with any of the covenants and agreements herein contained,
Lessee shall be liable for reasonable attorney's fees, costs and expenses
incurred by Lessor, and in addition, shall be liable for interest at ten percent
(10%) per annum on the rent and other amounts determined to be due by reason of
breach of this Lease. Such interest shall run from the date of breach of this
Lease.
26. QUIET POSSESSION - In consideration of the covenants and agreements herewith
contained, Lessor agrees to warrant and defend Lessee in the quiet and peaceful
possession of the Premises during the term of this Lease.
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27. TENANT'S CERTIFICATE - Upon the request of Lessor or any lender who holds or
will be conveyed a lien against the Premises demised herein, Lessee agrees to
furnish "estoppel certifications", in letter form, regarding the status of this
Lease, rent payments, defaults by either party, deposits or rental payments made
in advance, any claims for reimbursement by Lessee or Lessee's rights of set-off
against accruing rentals and whether Lessee is in occupancy of the Premises and
actively conducting its business therein.
28. SUBORDlNATlON NON DISTURBANCE AND ATTORNMENT - Upon request of the Lessor,
Lessee will subordinate its right hereunder to the lien of any first mortgage
hereafter in force against real estate of which the Premises are a part;
provided, however, that in such case the holder of such mortgage shall agree
that this Lease shall not be affected, nor shall Lessee's possession be
disturbed by foreclosure, so long as Lessee is not in default under the terms of
this Lease. In the event of such foreclosure, Lessee shall attorn to the
purchaser and recognize such purchaser as Lessor under this Lease.
29. ENTIRETY OF UNDERSTANDING IN WRITTEN LEASE - It is agreed that the entire
understanding between the parties is set out in this Lease and any riders which
are hereto annexed, that this Lease supersedes and voids all prior proposals,
letters and agreements, oral or written, and that no modification or alteration
of this Lease shall be effective unless evidenced by an instrument in writing
signed by both parties. The law of the state where the Premises are situated
shall apply.
30. COMMISSION - This Lease has been negotiated through the agency of Colliers,
Turley, Martin, Smith & Co, agent for Lessor, and in consideration of the
services rendered Lessor by said agent, and of Agents continued representation
of Lessor during the term hereof, Lessor, its successors or assigns, agrees to
pay said agent, its successors or assigns the Commission Percentage multiplied
times the rentals collected under this Lease, renewals, holdovers, expansions or
for any subsequent lease that may be entered into by Lessor with Lessee, or by
or with their respective heirs, successors or assigns, covering the Premises,
provided said agent, or its heirs or assigns, is ready, willing, and able to act
as agent for Lessor in connection with such renewal, holdover, expansion, or
subsequent lease. If Lessor sells the Premises, then Lessor shall require that
the purchaser assume the Lessor's obligation to pay Agent the commissions stated
herein. Should Lessor cancel this Lease for any reason other than the default of
Lessee hereunder, then Lessor shall pay to said agent the Commission Percentage
multiplied by the total rental owed over the remaining term of this Lease.
Should Lessee purchase the Premises during the term of this Lease, renewal,
extension, or holdover occupancy, Agent shall be entitled to a sales commission
equal to the Commission Percentage multiplied times the gross sales price, to be
paid by Lessor at the time of closing. Should the Premises be sold to someone
other than the tenant while rent is being collected hereunder, then Lessor will
require the purchaser to assume Lessor's obligations under this paragraph. It is
understood that Colliers Turley Martin Smith & Co is acting as Agent only in
bringing Lessor and Lessee together and makes no representation as to the
condition of the Premises and will in no case whatsoever be held liable to
either party for the performance of any term or covenant of this Agreement or
for any damages for non-performance thereof.
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31. SPECIAL PROVISIONS
IN WITNESS WHEREOF, the parties have hereunto executed this Lease as of the day
and year above written
LESSOR: /s/ Enos Reed
------------------------------
BY:
----------------------------------
Title
LESSEE: /s/ Steve Kress
------------------------------
Steve Kress
LESSEE: /s/ Don McNamee Jr.
------------------------------
Don McNamee Jr.
================================================================================
CONSULT YOUR ADVISORS - This document has been prepared for approval by your
attorney. No representation or recommendation is made by Colliers Turley Martin
Smith & Co as to the legal sufficiency or tax consequences of this document or
the transaction to which it relates. These are questions for your attorney or
accountant.
In any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other person,
with experience in evaluating the condition of the property, including the
possible presence of asbestos, hazardous materials and underground storage
tanks.
================================================================================
<PAGE>
Exhibit 10.11
AGREEMENT
Entered into between
COLORSMART.COM OR ITS NOMINEE
and
DIMITRI HARALAMBOUS
(Identity No. 5912035073080)
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TABLE OF CONTENTS
- -------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- -------------------------------------------------------------------------------
1 INTERPRETATION AND PRELIMINARY ........................ 2
2 APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES .......... 6
3 PERIOD OF EMPLOYMENT .................................. 6
4 EFFECT OF TERMINATION OF EMPLOYMENT ................... 7
5 SUSPENSION OF EMPLOYMENT .............................. 8
6 DUTIES OF EMPLOYEE .................................... 8
7 REMUNERATION .......................................... 10
8 INVENTIONS, DISCOVERIES AND COPYRIGHT ................. 10
9 LEAVE ................................................. 11
10 OUT OF POCKET EXPENSES ................................ 12
11 RESTRAINT OF TRADE .................................... 12
12 GENERAL ............................................... 17
13 DOMICILIUM CITANDI ET EXECUTANDI ...................... 18
14 RESIGNATION ........................................... 19
15 COSTS ................................................. 19
16 SMOKING POLICY ........................................ 19
17 SAFETY AND HEALTH ..................................... 20
18 COUNTERPARTS .......................................... 20
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<PAGE>
Page 2
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. words importing -
1.1.1. any one gender include the other two genders;
1.1.2. the singular include the plural and vice versa;
and
1.1.3. natural persons include created entities
(corporate or unincorporated) and the state and
vice versa;
1.2. the following terms shall have the meanings assigned to them
hereunder and cognate expressions shall have corresponding
meanings, namely -
1.2.1. "Act" means the Labour Relations Act, 1995;
1.2.2. "board" means the board of directors of the
company from time to time;
1.2.3. "competing services" means any services rendered
in competition with the prescribed services;
1.2.4. "company" means Colorsmart.Com Inc. A Nevada
corporation with limited liability incorporated in
terms of the laws of the USA with registered
office at 537 Mayatt Drive, Madison, Tennessee or
its nominee as appointed in terms of the agreement
of sale between Colorsmart.Com Incorporated and
Top Copy CC;
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Page 3
1.2.5. "employee" means Dimitri Haralambous an adult male
currently residing at Ta Meteora, Price Drive,
Constantia, Cape Town, Republic of South Africa;
1.2.6. "effective date" means 1 May 1999;
1.2.7. "prescribed areas" means each magisterial district
in the Western Cape;
1.2.8. "prescribed clients" means any person -
1.2.8.1. who is or was a client of the company at
the termination date or of Top Copy at
the effective date; or
1.2.8.2. who is or was a prospective client of
the company at the termination date or
of Top Copy at the effective date whom
the employee had approached to do
business with the company within the
period of 1 (one) year preceding the
termination date or whom the employee
had approached to do business with Top
Copy, within the period of one year
preceding the effective date; or
1.2.8.3. to whom prescribed services were
rendered by the company within the
period of 1 (one) year preceding the
termination date or by Top Copy within
the period of one year preceding the
effective date;
1.2.9. "prescribed services" means any services rendered
by the company or Top Copy in the ordinary course
of business;
1.2.10. "prescribed suppliers" means any person who -
1.2.10.1. is or was a supplier of prescribed
services to the company at the
termination date or to Top Copy at the
effective date; or
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<PAGE>
Page 4
1.2.10.2. was a prospective supplier of prescribed
services to the company at the
termination date or to Top Copy at the
effective date whom the employee had
approached to do business with the
company within the period of 1 (one)
year preceding the termination date or
with Top Copy within the period of one
year of the effective date;
1.2.10.3. supplied prescribed services to the
company within the period of 1 (one)
year preceding the termination date or
to Top Copy within the period of one
year preceding the effective date;
1.2.11. "termination date" means the date upon which the
employee's employment by the company ceases being,
1 September 2001 or is terminated for any reason
whatsoever, whichever occurs first;
1.2.12. "Top Copy" means the business of copying and
specialist printing and bureau digital printing
presently conducted by Top Copy CC, under the name
TOP COPY as sold in terms of an agreement of sale
between Colorsmart.com and Top Copy CC dated 20
May 1999.
1.3. any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date of
the last signature of this agreement;
1.4. any reference to an enactment is to that enactment as at the
date of signature hereof and as amended or re-enacted from
time to time;
1.5. if any provision in a definition is a substantive provision
conferring rights or imposing obligations on any party,
notwithstanding that it is only in the definition clause,
effect shall be given to it as if it were a substantive
provision in the body of the agreement;
1.6. when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on a
Saturday, Sunday or public holiday, in which case the
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last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.7. where figures are referred to in numerals and in words, if
there is any conflict between the two, the words shall
prevail;
1.8. expressions defined in this agreement shall bear the same
meanings in schedules or annexures to this agreement which
do not themselves contain their own definitions;
1.9. reference to day/s, month/s or year/s shall be construed as
Gregorian calendar day/s, month/s or year/s;
1.10. the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation elusdem generis) shall, if
any of the parties to this agreement is subject to the law
of any other jurisdiction, be construed as including any
equivalent or analogous proceedings under the law of such
defined jurisdiction;
1.11. where any term is defined within the context of any
particular clause in this agreement, the term so defined,
unless it is clear from the clause in question that the term
so defined has limited application to the relevant clause,
shall bear the meaning ascribed to it for all purposes in
terms of this agreement, notwithstanding that that term has
not been defined in this interpretation clause;
1.12. the expiration or termination of this agreement shall not
affect such of the provisions of this agreement as expressly
provide that they will operate after any such expiration or
termination or which of necessity must continue to have
effect after such expiration or termination, notwithstanding
that the clauses themselves do not expressly provide for
this;
1.13. the rule of construction that the contract shall be
interpreted against the party responsible for the drafting
or preparation of the agreement, shall not apply.
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2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES
2.1. The Company appoints the employee as the manager of the
Claremont Branch of Top Copy. The employee accepts such
appointments.
2.2. If the company decides to establish further branches, the
company shall offer the position of manager of the first two
subsequent branches established by the company, to the
employee. The terms of such appointment(s) to be agreed upon
by the parties within 14 (fourteen) days of the company
making the offer to the employee to manage the branch in
question. Notwithstanding the aforementioned it is agreed
that the minimum remuneration that shall be offered to the
employee in respect of such appointment(s) in addition to
the remuneration payable to terms of 7.1 shall be -
2.2.1 R7 500,00 (seven thousand five hundred rand)
payable at the end of the first month of
commencement of conducting business by the new
branch;
2.2.2. R7 500,00 (seven thousand five hundred rand)
payable at the end of the first month of
commencement of conducting business by the new
branch;
2.2.3. R10 000,00 (ten thousand rand) payable at the end
of the first month of commencement of conducting
business by the new branch;
2.2.4. the remuneration in respect of the remaining term
of appointment shall be agreed upon by the
parties, but shall not be less than R10 000,00
(ten thousand rand) for the remaining term of the
appointment.
3. PERIOD OF EMPLOYMENT
The employee's employment shall commence on 1 September 1999 until 1
September 2001 thereafter it shall be terminable on not less than 1
(one) calendar months' written notice given by the company or the
employee to the other, provided that:
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3.1. the company shall be entitled to terminate the employee's
employment summarily (or on such other basis as it considers
appropriate) if the employee:
3.1.1. is guilty of conduct justifying a summary
dismissal according to the common law; and/or
3.1.2. is guilty of conduct which is likely to bring
himself or the company into disrepute or is
convicted of an offence involving dishonesty;
and/or
3.1.3. commits a breach of any of the terms of this
agreement; and/or
3.1.4. becomes incapacitated, which shall mean that -
3.1.4.1. he is precluded in terms of any statute
from holding office as a director; or
3.1.4.2. he has suffered some illness or
disability which has precluded him from
providing his services hereunder for a
period in excess of 28 (twenty eight)
days in the determination of which
intermittent returns to work or service
which do not constitute a bona fide
resumption of duties shall be
disregarded;
Any termination in terms of this clause 3 will not be or
deemed to be unlawful, unfair or an unfair labour practice
as defined in the Act. To the extent that such termination
may otherwise have accorded the employee the right to seek
reinstatement by, or any other form of redress against the
company whether under the Act or otherwise, such right is
hereby waived by the employee.
4. EFFECT OF TERMINATION OF EMPLOYMENT
The termination of the employee's employment for any reason whatsoever
shall not affect the operation of any provisions of this agreement to
the extent to which they confer rights or impose obligations upon the
parties which are exerciseable or enforceable after the termination
date, and such provisions shall to that extent continue to be of full
force and effect. The termination of the employee's
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employment shall furthermore not prejudice any rights which have
accrued to the parties as at the termination date.
5. SUSPENSION OF EMPLOYMENT
If the company suspects that the employee is guilty of the conduct
referred to in clause 3.1 and/or clause 3.1.1, or any other conduct
which may, if proved, justify his dismissal, or has committed a breach
of any of the terms of this agreement, it may, pending a duly
constituted enquiry into the alleged conduct in question, but without
prejudice to its right of summary dismissal in terms of clause 3.1 and
without giving rise to any claim for damages or otherwise against it,
suspend the employee for a period not exceeding 30 days during which
the employee shall:
5.1. not be entitled to attend work at the premises of the
company;
5.2. be entitled to his normal salary.
6. DUTIES OF EMPLOYEE
The employee shall:
6.1. devote the whole of his time and attention during the
company's normal business hours, and such reasonable amount
of additional time as may be necessary on an unpaid basis,
having regard to the exigencies of the business of the
company, to the business and affairs of the company and
shall not, before the termination of this agreement or
during any period after such date in which he is employed by
the company, without the company's prior written consent,
whether as proprietor, partner, director, shareholder,
member, employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a trust
or otherwise, and whether for reward or not, directly or
indirectly be interested or engaged in or concerned with or
employed by any business, trade, undertaking or concern:
6.1.1. other than that of the company; or
6.1.2. which competes with any business carried on by the
company,
the undertakings in clauses 6.1.1 and 6.1.2 being separate,
provided that he shall not be deemed to have breached his
undertakings by reason of:
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6.1.3. his having bona fide financial interests in
businesses, trades, undertakings or concerns which
do not directly or indirectly compete with the
company which have been disclosed to the company
in writing and/or after disclosing his intention
to do so to the company in writing he accepting
appointment as a non-executive director of such
businesses, trades, undertakings or concerns and
devoting a reasonable amount of time to such
financial interests and directorships, provided
that no such interests of or activities by the
employee are prejudicial to or adversely affect
the performance of his duties hereunder; and/or
6.1.4. his holding shares in any company the shares of
which are listed on a recognised stock exchange if
the shares owned by him and the persons, companies
and trusts referred to in clause 11.3.4 do not in
the aggregate constitute more than 5% (five per
cent) of any class of the issued share capital of
such company; and/or
6.1.5. he being an officer of or holding shares in the
company;
6.2. obey the orders and directions of the board, any managing
director and any properly authorised officer or official of
the company, shall carry out such functions and duties as
are from time to time assigned to him and are consistent
with his status and use his utmost endeavours to protect and
promote the business and interests of the company and to
preserve its reputation and goodwill;
6.3. not, during the operation of this agreement or thereafter,
regardless of the reason for termination of his employment,
use for his own benefit or for the benefit of any other
person or divulge or communicate to any person or persons,
except to those of the officials of the company whose
province it is to know the same, any of the company's
secrets or nay other information which he may receive or
obtain in relation to the company's affairs or its customers
or to the working of any process or invention or to any
marketing technique which is carried on or used by the
company;
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6.4 be true and faithful to the company in all dealings and
transactions whatsoever relating to its business and
interests;
6.5. submit to the board or to any person nominated by it, such
information and reports as may be required of him in
connection with the performance of his duties and the
business of the company;
6.6. not, at any time during the operation of this agreement,
directly or indirectly, act in the manner referred to in
clause 11.3 and 11.4 or attempt to do so;
6.7 disclose to the board forthwith all acts and omissions known
to him of any other employee of the company which constitute
a breach of his or her obligations to the company from
whatsoever cause arising;
7. RENUMERATION
7.1. As remuneration for his services hereunder the company shall
pay the employee a salary at the rate of R15 000 (fifteen
thousand rand) per month which shall be payable on the last
business day of each month and which shall be subject to
review, but not reduction, by the company from time to time.
The package may be structured in such a manner as may
lawfully achieve the optimum fax efficiency for the benefit
of the employee.
7.2. The company shall pay the employee a performance-based bonus
at the end of each financial year in accordance with the
criteria to be agreed upon between the company and the
employee within a reasonable period after the commencement
of his employment and such bonus shall be based upon the
performance of Top Copy. Only as regards in his first
performance appraisal, the company guarantees the employee a
minimum performance bonus of R25 000,00 (twenty five
thousand rand) at the end of September, 2000.
8. INVENTIONS, DISCOVERIES AND COPYRIGHT
8.1. Any discovery or invention or secret process or improvement
in procedure made or discovered by the employee in the
course and scope of his employment by the company in
connection with or in any way affecting
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or relating to the business of the company or capable of
being used or adapted for use by the company or in
connection with its business shall be disclosed to the
company and shall belong to and be the absolute property of
the company.
8.2. The employee shall, if and when required by the company,
apply or join with the company at its expense in applying
for Letters Patent or other equivalent protection in the
Republic of South Africa or in any other part of the world
for such discovery, invention, process or improvement and
shall at the company's expense execute all instruments and
do all things necessary for vesting the said Letters Patent
or other equivalent protection in the name of the company as
sole beneficial owner or in the name of such other person as
the company may nominate.
8.3. Insofar as may be necessary the employee assigns to the
company the copyright in all present and future works
eligible for copyright, including, without limitation,
literary or artistic works or software programmes of which
he may be the author, which works were or are created,
complied, devised or brought into being during the course
and scope of his employment by the company. No consideration
shall be payable by the company to the employee in respect
of this assignment.
8.4. All reports, manuals, financial statements, budgets,
indices, research papers, letters or other similar documents
(the nature of which is not limited by the specific
reference to the aforegoing items) which are created,
compiled or devised or brought into being by the employee or
come into the employee's possession during the course and
scope of his employment by the company and all copies
thereof will be the property of the company and, upon the
termination date or earlier if required by the company, such
documents and all copies shall be returned to the company.
9. LEAVE
The employee shall be entitled to 28 (twenty-eight) days leave on full
pay in respect of each 12 (twelve) months' cycle of employment, to be
taken at such time or times as are convenient to the company. Leave
not taken when it is due otherwise than at the instance of the company
may not be accumulated.
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10. OUT OF POCKET EXPENSES
The company shall refund to the employee the out-of-pocket expenses
incurred by him on behalf of the company which are substantiated by
vouchers therefore and which have been approved by the board or are
incurred in accordance with the principles determined by it from time
to time.
11. RESTRAINT OF TRADE
11.1. It is agreed that in the course of his duties the employee:
11.1.1. has acquired and/or will acquire considerable
know-how in and will learn of the company's
techniques and/or business methods relating to the
provision of Copying on demand and Printing
Services and other related services;
11.1.2. will have access to names of clients and suppliers
with whom the company does business whether
embodied in written form or otherwise;
11.1.3. will have the opportunity of forging personal
links with clients and suppliers of the company;
and
11.1.4. generally will have the opportunity of learning
and acquiring the trade secrets, business
connections and other confidential information
appertaining to the company's business;
11.2. It is acknowledged that the only effective and reasonable
manner in which the company's rights in respect of its
business secrets and client connection can be protected is
the restraint imposed upon the employee in terms of this
clause 11, subject to the payment by the company to the
employee of the amount of R240 000,00 (two hundred and forth
thousand rand) which said R240 000,00 (two hundred and forty
thousand rand) shall be payable by the company to the
employee in 2 (two equal annual payments of R120 000,00 (one
hundred and twenty thousand rand) each, the first whereof
shall be due and payable by the company to the employee on 1
September 1999 and the second and subsequent payments being
due and payable by the company to the employee on 1
September 2000.
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11.3. Without derogating from the employee's obligations under
clause 6.1 the employee shall not, for 2 (two) years from
the termination date, whether as proprietor, partner,
director, shareholder, member, employee, consultant,
contractor, financier, agent, representative, assistant,
trustee or beneficiary of a trust or otherwise and whether
for reward or not, directly or indirectly;
11.3.1. carry on; or
11.3.2. be interested or engaged in or concerned with or
employed by any company, close corporation, firm,
undertaking or concern which carries on;
in any of the prescribed areas any business which sells
prescribed goods or renders prescribed services or competing
services or in the course of which prescribed goods are sold
or prescribed services or competing services are rendered;
provided that the employee shall not be deemed to have
breached his undertaking by reason of his:
11.3.3. holding shares in the company; or
11.3.4. holding shares in any company the shares of which
are listed on a recognized stock exchange if the
shares owned by -
11.3.4.1. him;
11.3.4.2. his ascendants and descendants;
11.3.4.3. his spouse;
11.3.4.4. any person related to him or his spouse
within the third degree of
consanguinity;
11.3.4.5. any trust created primarily for the
benefit of one or more of the persons
referred to in clauses 11.3.4.1 to
11.3.4.5; and
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11.3.4.6. any company effectively controlled by
one or more of the persons and trusts
referred to in clauses 11.3.4.1 to
11.3.4.5
do not in the aggregate constitute more than 5%
(five per cent) of any class of the issued share
capital of such company.
11.4. The employee undertakes that neither he nor any company,
close corporation, firm, undertaking or concern in or by
which he is directly or indirectly interested or employed
will within 2 (two) years after the termination date and
whether for reward or not, directly or indirectly -
11.4.1. encourage or entice or incite or persuade or
induce any other employee or the company, who was
employed whilst the employee was employed by the
company and who is engaged or participates in the
sale or other marketing by the company of the
prescribed goods, or in a material respect in the
rendering or in the marketing of the prescribed
services, to terminate his employment by the
company; or
11.4.2. furnish any information or advice to any employee
to whom clause 11.4.1 applies or to any
prospective employer of such employee or use any
other means which are directly or indirectly
designed, or in the ordinary course of events
calculated, to result in any such employee
terminating his employment by the company and/or
becoming employed by or directly or indirectly in
any way interested in or associated with any other
company, close corporation, firm, undertaking or
concern; or
11.4.3. furnish any information or advice (whether oral or
written) to any prescribed client that the
employee intends to or will (whether as
proprietor, partner, director shareholder, member,
employee, consultant, contractor, financier,
agent, representative or otherwise) directly or
indirectly, be interested or engaged in or
concerned with or employed by any company, close
corporation, firm, undertaking or concern carried
on in any of the prescribed areas which sells
prescribed
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goods or competing goods or renders prescribed
services or competing services or in the course of
which prescribed goods or competing goods are sold
or prescribed services or competing services are
rendered after the expiry of 2 (two) years after
the termination date; or
11.4.4. furnish any information or advice (whether oral or
written) to any prescribed client or use any other
means or take any other action which is directly
or indirectly designed, or in the ordinary course
of events calculated, to result in any such
prescribed client terminating its association with
the company and/or transferring its business to or
purchasing any prescribed goods or competing goods
or accepting the rendering of any prescribed
services or competing services from any person
other than the company, or attempt to do so.
11.5. Without derogating from the obligations imposed by this
clause 11 the employee undertakes that neither he nor any
company, firm, undertaking or concern in or by which he is
directly or indirectly interested, engaged, concerned or
employed will for a period of 2 (two) years after the
termination date directly or indirectly, whether as
proprietor, partner, director, shareholder, employee,
consultant, contractor, financier, agent, representative,
assistant, trustee or beneficiary of a trust or otherwise in
any part of the prescribed areas and whether for reward or
not;
11.5.1. solicit orders from prescribed clients for the
prescribed services or any competing services;
11.5.2. canvass business in respect of the prescribed
services from prescribed clients;
11.6.3. sell or otherwise supply to any prescribed client;
11.5.4. render any competing service to any prescribed
client;
11.5.5. purchase from any prescribed supplier or accept
the rendering of any prescribed services from it;
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11.5.6. solicit appointment as a distributor, licensee,
agent or representative of any prescribed supplier
in respect of prescribed services, including on
behalf of or for the benefit of a prescribed
supplier.
11.6. Each of the undertakings set out in this clause 11
(including those appearing in a single clause) is severable
inter alia as to:
11.6.1. nature of interest, act or activity;
11.6.2. the categories of persons falling within the
definition of prescribed clients;
11.6.3. the categories of goods falling within the
definition of the competing goods;
11.6.4. the categories of services falling within the
definition of the prescribed services and
competing services;
11.6.5. the categories of persons falling within the
definition of prescribed supplier;
11.6.6. the individual magisterial districts and areas
which are defined as the prescribed areas and are
acknowledged to be reasonably required for the
protection of the company and are generally fair
and reasonable.
11.7. The employee acknowledges that the company will suffer
financial harm and lose if he breaches any provision of this
clause 11. Upon the breach of any of the provisions of
clause 11.3 the company shall be entitled to enforce the
restraint in question and, in addition or alternatively
thereto, as the company may elect, be entitled to claim and
recover from the employee the sum of ten thousand rand per
month during the period of the breach, and to the extent
that it is not prohibited from doing so by any law, to set
off its claim against any amount due by it to the employee
(and he authorizes the company to do so) and to recover its
claim from any benefits due to the employee from any pension
funds due to the
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employee and, to the extent not precluded by law, he cedes
his right to those benefits to the company accordingly.
12. GENERAL
12.1. No remedy granted by this agreement shall exclude any other
remedy available at law.
12.2. No amendment of this agreement or any consensual
cancellation thereof or any part thereof shall be binding on
the parties unless reduced to a written document and signed
by them.
12.3. If any of the terms of this agreement, such as the rate of
remuneration payable to the employee, are varied, the other
terms shall, unless otherwise agreed in writing, remain of
full force and effect.
12.4. No relaxation or indulgence which the company may show to
the employee shall in any way prejudice or be deemed to be a
waiver of its rights hereunder nor shall such relaxation or
indulgence preclude or estop the company from exercising its
rights in terms of this agreement in respect of any further
breach.
12.5. This agreement constitutes the whole agreement between the
parties and no warranties or representations whether express
or implied have been given or made by the company to the
employee.
12.6. Subject to the provisions of clause 3 the employee's
employment by the company shall be governed by the
provisions of any applicable agreement or determination
concluded in terms of the Act and/or the Wage Act of 1957,
and/or the provisions of any applicable law.
12.7. Any term of this agreement which conflicts with the
provisions of any agreement or determination referred to in
this agreement, or any applicable law shall be treated as
pro non scripto and shall be severed from the balance of
this agreement, which shall continue to be of full force and
effect.
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12.8. The company shall be entitled to cede and delegate all or
any of its rights and obligations under this agreement to
the successor in title of the undertakings of the company or
any member thereof, whether such cession and delegation
takes place before or after the termination date.
13. DOMICILIUM CITANDI ET EXECUTANDI
13.1. The parties choose as their domicilia citandi et executandi
for all purposes under this agreement, whether in respect of
court process, notices or other documents or communications
of whatsoever nature, the following addresses;
13.1.1. the company:
Physical: 2nd Floor, Ransen House, Constitution
Street, Cape Town
Postal: 10118 Caledon Square 7905
Telefax: (021) 441 2287
13.1.2. the employee: Dimitri Haralambous
Physical: Ta Meteora, Price Drive Constantia,
Cape Town
Postal: PO Box 346
Constantia
7848
Telefax: 021 794 3039
13.2 Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent to
give notice by telefax.
13.3. Either party may by notice to the other party change the
physical address chosen as its domicilium citandi et
executandi to another physical address where postal delivery
occurs in South Africa or its postal address or its telefax
number, provided that the change shall become effective on
the 7th business day from the deemed receipt of the notice
by the other party.
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13.4 Any notice to a party:
13.4.1. sent by prepaid registered post (by airmail if
appropriate) in a correctly addressed envelope to
it at an address chosen as its domicilium citandi
et executandi to which post is delivered shall be
deemed to have been received on the 7th business
day after posting unless the contrary is proved);
13.4.2. delivered by hand to a responsible person during
ordinary business hours at the physical address
chosen as its domicilium citandi et executandi
shall be deemed to have been received on the day
of delivery; or
13.4.3. sent by telefax to its chosen telefax number
stipulated in clause 13.1, shall be deemed to have
been received on the date of despatch unless the
contrary is proved).
13.5. Notwithstanding anything to the contrary herein contained a
written notice or communication actually received by a party
shall be an adequate written notice or communication to it
notwithstanding that it was not sent to or delivered at its
chosen domicilium citandi et executandi.
14. RESIGNATION
14.1. If the employee is a Director of the company on termination
date the employee will ipso facto resign as a Director of
the Company.
14.2. The employee hereby irrevocably appoints the then auditors
of the company as his agent in rem suam to sign all such
documents and to do all such acts as may be necessary to
effect and implement such resignation.
15. COSTS
The costs of and incidental to the drawing of this agreement and the
stamp duty hereon shall be paid by the company.
16. SMOKING POLICY
It is the policy of the company not to permit smoking in the premises
from which the company conducts its business.
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17. SAFETY AND HEALTH
The employee acknowledges that he is aware of the dangers to his
safety and health attached to the work he has to perform, any article
or substance he has to produce, process, use, handle, store or
transport and any plant and machinery, which he is required or
permitted to use, and also with the precautionary measures to be taken
and observed with respect of those dangers.
18. COUNTERPARTS
This agreement may be entered into in any number of counterparts and
by the parties to this agreement on separate counterparts, each of
which when so executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
For: COLORSMART.COM
1. /s/ [ILLEGIBLE]
-------------------
[ILLEGIBLE] 99 Madison, TN /s/ Roger D. [ILLEGIBLE]
- -------------- ----------- ------------------------
2.
-------------------
1. /s/ [ILLEGIBLE]
-------------------
8/7/99 Cape Town /s/ Dimitri Haralambous
- -------------- ----------- ------------------------
2. DIMITRI HARALAMBOUS
-------------------
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Exhibit 10.12
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
MEMORANDUM OF AGREEMENT OF LEASE
made and entered into between
NORWICH LIFE SOUTH AFRICA LIMITED
REG NO. 87/03755/06
VAT NO. 4250102227
(hereinafter called "the Landlord") of the First Part
(herein represented by FEDSURE PROPERTIES (PTY) LIMITED)
REG NO. 94/09029/07
VAT NO. 4110151380
(duly authorised hereto)
and
COLOUR SMART.COM SOUTH AFRICA
REG NO. ..........
VAT NO. ..........
(herein represented by ...................................)
(hereinafter called "the Tenant") of the Second Part
The Landlord hereby lets to the Tenant who hereby hires the premises described
in Section 3 of the Schedule annexed hereto on the terms and conditions as set
out in the said Schedule and General Conditions annexed hereto.
REF: CST009-HO6320
------------------------------
"FOR OFFICE USE ONLY"
TERMS AS
AGREED
-------------------
NEGOTIATOR
VERIFIED TO
MASTER FILE
-------------------
PROP. ADMIN.
------------------------------
INITIAL HERE
[ILLEGIBLE]
<PAGE>
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
- --------------------------------------------------------------------------------
SCHEDULE
- --------------------------------------------------------------------------------
1. PROPERTY : CAVANARD BUILDING
2. NAME OF LANDLORD : NORWICH LIFE SOUTH AFRICA LIMITED
2.1 NAME OF TENANT : COLOUR SMART.COM SOUTH AFRICA
2.2 ADDRESS OF BUILDING : CAVANARD BUILDING
COWEN STREET
CLAREMONT
3. DESCRIPTION OF PREMISES : Portion of 1st Floor, being the address of
the tenant as per Annexure "A" (diagram of
premises). The rentable area in terms of the
S.A.P.O.A. standard of measurement is equal
to approximately 189.30 square metres as
shown in Annexure "A" for identification
purposes only.
4. LEASE PERIOD : 3 (Three) years
4.1 Commencement date : 01.10.1999
4.2 Possession date : 01.10.1999
4.3 Termination date : 30.09.2002
4.4 Option to Renew : 3 (Three) years at market related terms and
conditions. From 01.10.2002 to 30.09.2005.
5. RENTAL OF THE PREMISES :
5.1 NET RENTAL
Monthly net rental for Lease Period calculated at R23,60 per square
meter for the first period being 01.10.1999 to 30.09.2000 thereafter
escalating at 12% per annum, namely:
NET VAT GROSS
--- --- -----
From 01.10.1999 to 30.09.2000 = R4 467.48 R625.45 R5 092.93
From 01.10.2000 to 30.09.2001 = R5 003.58 R700.50 R5 704.08
From 01.10.2001 to 30.09.2002 = R5 604.01 R784.56 R6 388.57
INITIAL HERE
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Revised Version - 25 June 1999
5.2 OPERATING COSTS
Monthly operating costs for Lease Period calculated at R7,90 per square
meter for the first period being 01.10.1999 to 30.09.2000 thereafter
escalating at 14% per annum, namely
NET VAT GROSS
--- --- -----
From 01.10.1999 to 30.09.2000 = R1 495.47 R209.37 R1 704.84
From 01.10.2000 to 30.09.2001 = R1 704.84 R238.68 R1 943.52
From 01.10.2001 to 30.09.2002 = R1 943.51 R272.09 R2 215.60
6. PARKING RENTAL:
Includes 2 single open parking bays at R225,00 per bay per month for the
first period being 01.10.1999 to 30.09.2000 thereafter escalating at 12% per
annum, namely
NET VAT GROSS
--- --- -----
From 01.10.1999 to 30.09.2000 = R 450.00 R 63.00 R 513.00
From 01.10.2000 to 30.09.2001 = R 504.00 R 70.56 R 574.56
From 01.10.2001 to 30.09.2002 = R 564.48 R 79.03 R 643.51
7. RATES
Tenant's proportionate share of = 30,73% (three nought
assessment rates and taxes in terms comma seven three
of clause 9 of the Lease annexured hereto. percentum)
8. ELECTRICITY
Tenant's Portion of electricity in = 30,73% (three nought
terms of clause 10 of the Lease comma seven three
annexured hereto percentum)
9. SOLE PERMITTED USAGE OF PREMISES:
Administration offices for photocopying workshop.
10. DOMICILIUM CITANDI ET EXECUTANDI OF LANDLORD
c/o Fedsure Properties (Pty) Limited, Norwich Oval, 2nd Floor, Oakdale
House, 1 Oakdale Road, Newlands, 7700.
11. DOMICILIUM CITANDI ET EXECUTANDI OF TENANT
1st Floor, Cavanard Building, Cowen Street, Claremont, 7735.
INITIAL HERE
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12. DEPOSIT / BANK GUARANTEE : The Tenant will supply an irrevocable
bank guarantee equivalent to R29
730,69 which guarantee shall remain
in full force and effect to cover any
claims of the Landlord based on a
cause of action arising in terms of
the Lease arising during the period of
the lease, which guarantee shall be in
the form of the draft annexed hereto
marked "B" or in such other form as
may be approved in writing by the
Landlord.
13. SURETYSHIP BY : Not Applicable.
14. TURNOVER RENTAL : Not Applicable.
15. THE FOLLOWING ANNEXURES FORM PART OF THIS LEASE:
Annexure "A" : Floor Plan.
Annexure "B" : Irrevocable Bank Guarantee.
Annexure "C" : Resolution of Members.
Annexure "D" : Option to Renew.
Annexure "E" : Not Applicable.
Annexure "F" : Rental Debit Authorization.
INITIAL HERE
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Revised Version - 25 June 1999
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INDEX TO GENERAL CONDITIONS OF LEASE
- --------------------------------------------------------------------------------
CLAUSE CONTENTS PAGE
18 ADVERTISING SIGNS 09
02 AGREEMENT OF LEASE 03
46 ALIENS 19
19 AIRCONDITIONERS AND BLINDS 09
15 ALTERATIONS 08
09 ASSESSMENT RATES AND TAXES 05
14 BLOCKAGE OF PIPES 08
37 BREACH 15
21 BUILDING SECURITY 11
11 COMMON AREAS, JOINING FACILITIES & ACCESS TO THE BUILDING 06
43 COMPANY OR CLOSE CORPORATION TO BE FORMED 18
42 CONDITIONS OF USE OF PARKING AREA 17
48 COSTS 20
01 DEFINITIONS 02
35 DESTRUCTION 14
10 ELECTRICITY 05
16 FIXTURES AND FITTINGS 09
30 FUTURE TENANTS 13
47 GENERAL 19
26 GLASS, WINDOW PANELS AND SHOP FRONTS 12
44 HOLDING OVER 19
31 HOUSE RULES AND REGULATIONS 13
17 INDICATOR SIGN BOARDS 09
25 INVALIDATION OF INSURANCE 12
38 JURISDICTION 16
27 LANDLORD'S LIABILITIES AND TENANT'S WAIVERS 12
45 LANDLORD'S HYPOTHEC 19
29 LANDLORD'S RIGHT OF ENTRY 13
32 LANDLORD'S RIGHT TO ADD TO BUILDINGS 13
03 LEASE PERIOD 03
24 LICENCES AND MUNICIPAL REGULATIONS 11
28 MAINTAIN EXTERIOR 13
12 MAINTAIN INTERIOR 07
23 NON-REMISSION OF RENT DURING BUILDING 11
39 NOTICE AND DOMICILIA 16
05 NOTIFICATION OF DEFECTS 04
22 NO WITHHOLDING PAYMENTS 11
41 NUISANCE 17
08 PARTNERSHIP 05
36 REBUILDING AND/OR RENOVATION 14
13 REFUSE 08
34 RELOCATION 14
04 RENTAL AND DEPOSIT 03
49 RENTAL DEBIT AUTHORISATION 20
40 SECTIONAL TITLE, SALE OF PREMISES OR CHANGE OF NAME 17
20 SUB-LETTING AND SALE OF SHARES 10
07 SURETY 05
06 USAGE 04
33 VACATION OF PREMISES 14
50 VALUE ADDED TAX (VAT) 20
INITIAL HERE
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GENERAL CONDITIONS OF LEASE
- --------------------------------------------------------------------------------
1 DEFINITIONS
In these General Conditions of Lease and in the Schedule, unless the
context clearly otherwise indicates:
1.1 "Schedule" means the Schedule attached to the Lease;
1.2 "the lease" means the agreement of lease entered into between the
parties in terms of this document;
1.3 "the premises" means the premises, including the parking areas, let
in terms of this lease and as described in Section 3 of the
Schedule;
1.4 "the building" means the building of which the premises form a
portion;
1.5 "the property" means the property upon which the building is
situated;
1.6 "the commencement date" means the date upon which this lease
commences as specified in clause 4 of the schedule:
1.7 "the possession date" means the date upon which the keys to the
premises are delivered to the tenant;
1.8 "the expiry date" means the date upon which this lease expires as
specified in clause 4 of the schedule;
1.9 "the common area" means at any time during the currency of this
Lease, those parts of the building not actually let and not intended
to be let by the Landlord or its duly authorised representatives,
including but not necessarily limited to foyers, malls, arcades,
passages, parking areas, entrances, exits, loading docks, ramps,
landscape areas. interior and exterior stairways, toilets, and all
other amenities provided by the Landlord for general use in common
by the tenants and their servants, employees, customers and invitees
in or about the building or the property;
1.10 "pro-rata share" means the ratio, which the rentable floor area of
the leased premises bears to the total rentable floor area of the
building. In order to derive the aforesaid ratio, the rentable floor
areas of the leased premises and of the building respectively shall
be determined by using the SAPOA Method of Measuring Floor Areas in
Commercial Buildings;
1.11 "operating costs" will mean reasonable costs incurred by the
Landlord in respect of maintaining and running the building and/or
property for which the Tenant is not otherwise liable in terms of
this Lease, including (but not limited to):
* fees, levies and/or charges payable to the local or any other
responsible authorities (excluding only assessment rates and
taxes);
* cleaning expenses - for common areas only
* security expenses;
* the lift service including maintenance, repairs and
replacements;
* refuse and sewerage rates and charges;
* insurance premiums (including political riot insurance);
* airconditioning repairs and maintenance costs (applies to
central airconditioning plant only);
* the cost of water used in or at the building for any purposes
(unless charged directly to the tenants);
* building amenity cost, including towel and other toilet
services and the costs of maintaining indoor and outdoor
gardens, plants and grounds and fire fighting equipment,
drains and sewerage pipes and plumbing works;
* management and administration expenses and fees;
1.12 "monthly rental" means the total of all amounts referred to in
sub-paragraph 4.2 of this lease;
1.13 Words importing any one gender shall include the other two and words
importing the singular shall include the plural and vice versa;
1.14 The headings to paragraphs are used for reference only and are not
terms of the lease.
INITIAL HERE
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Revised Version - 25 June 1999
2 AGREEMENT OF LEASE
The Landlord hereby leases the premises to the Tenant, which hires the
premises from the Landlord on the terms set out in this Agreement
incorporating the Schedule and Annexures annexed hereto.
Each and every term of this agreement, including terms contained in the
Schedule and Annexures hereto, shall be material terms of this Lease and
shall not be severable from the remainder of the agreement.
3 LEASE PERIOD
3.1 The lease shall be for the lease period stipulated in Section 4 of
the Schedule and shall (unless terminated earlier in terms of the
lease), expire on the expiry date stipulated in Section 4 of the
Schedule.
3.2 If the Landlord is unable to give the Tenant possession and/or
occupation of the premises on the Commencement Date as stipulated in
the Schedule by reason of the premises being incomplete, or in a
state of disrepair, or by reason of any existing Tenant not having
vacated the premises, or for any other reason whatsoever, the Tenant
shall have no claim for damages or right of cancellation and shall
accept occupation on such later date on which the premises are
available. In the event of such a delay the Commencement Date shall
be the date on which the premises shall become available for
occupation and the lease period and expiry date shall be extended by
the period of the delay; provided that if the premises are not ready
for occupation within ONE (1) month of the Commencement Date
stipulated in the Schedule, the Tenant shall be entitled to cancel
this Lease on ONE (1) month's written notice to the Landlord.
3.3 Notwithstanding the abovementioned provisions, and subject to the
provisions of 3.5 below, the Lease shall only come into force when
signed by the Tenant and the Landlord, until which time the Tenant
shall have no right of occupation whatsoever and shall have no claim
to the existence of a tenancy as a result of:
3.3.1 negotiations having been conducted and/or concluded;
3.3.2 this Lease having been drafted, and signed by the Tenant only;
3.3.3 the acceptance by the Landlord and/or its agents and/or
employees of payment of a deposit or of rental or the giving
of possession of the premises to the Tenant.
3.4 Signature of this Lease by the Tenant shall constitute an offer by
the Tenant to Lease the premises on the terms set out herein, which
offer shall be irrevocable unless and until declined in writing by
the Landlord. The failure of the Landlord to sign the Lease shall
not be deemed to indicate that the Landlord has declined to accept
the Tenant's offer aforesaid.
3.5 Notwithstanding the provisions of 3.3 above, should the Tenant
already have taken possession of the premises and the Landlord
thereafter declines to sign the Lease, the Tenant shall nevertheless
be bound by the terms of this Lease save that the Tenant's
occupation of the premises shall be deemed to be a monthly tenancy
terminable on ONE (1) month's written notice given by either party
to the other.
4 RENTAL AND DEPOSIT
4.1 The Tenant shall, simultaneous with its signature of this lease,
furnish the bank guarantee/deposit specified in section 12 of the
Schedule to the Landlord. The Landlord shall have the right to apply
the whole or portion of such bank guarantee/deposit towards payment
of the rent, water and electricity charges, key replacements,
damages, repairs, renovations and any other liability for which the
Tenant is responsible in terms of this lease. The Tenant may not set
off against the deposit any rent or other amount owed by it to the
Landlord in terms of this lease. If any portion of the bank
guarantee/deposit is so applied, the Tenant shall, on written demand
by the Landlord, reinstate the bank guarantee/deposit to its
original amount. The Tenant shall, if required by the Landlord, be
obliged to top up the bank guarantee/deposit on each anniversary of
the commencement date so as to ensure that it always remains
equivalent to at least the monthly rental for the premises, or the
original amount, whichever is the greater. The bank
guarantee/deposit, or the balance thereof as the case may be, shall
be refunded by the Landlord to the Tenant:
4.1.1 after the Tenant has vacated the leased premises; and
4.1.2 after all the tenant's obligations to the Landlord in terms
hereof have been fully discharged; and
4.1.3 free of interest.
4.2 The monthly rental payable by the Tenant to the Landlord for the
premises shall be the aggregate of the amounts as specified in
clause 5.1 and, where applicable, clause 6 of the Schedule and
subject to the escalation(s) as specified in the Schedule.
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4.3 In addition to and separate from the monthly rental, the Tenant
shall pay to the Landlord a monthly contribution towards the
operating costs of the building in an amount as specified in Clause
5.2 of the Schedule, and subject to the escalation(s) as specified
in the Schedule.
4.4 The monthly rental as set out in 4.2 and the operating costs set out
in 4.3 shall be paid by the Tenant to the Landlord monthly in
advance on or before the first day of each and every calendar month,
commencing from the occupation date or the commencement date,
whichever occurs first. The monthly rental and operating costs
shall, in respect of any period during the currency of this lease
which is less than a full calendar month, will be reduced
proportionately with regard to the length of the period concerned in
relation to a full month.
4.5 All amounts payable by the Tenant to the Landlord in terms of the
agreement shall be paid free of deduction and set-off and with the
addition of bank commission at the place specified in the schedule.
Unless otherwise agreed by the Landlord in writing, the payment of
such amounts shall be effected through an automatic electronic fund
transfer system, the requirements of which are detailed in the
Rental Debit Authorisation Form, being Annexure "F" to this Lease.
Notwithstanding the aforegoing, the Landlord may at its sole and
absolute discretion direct the Tenant to pay such amounts in cash at
such place as the Landlord may direct.
4.6 Where applicable, the Tenant shall pay to the Landlord turnover
rental as set out in clause 14 of the Schedule, and on the basis as
set out in Annexure "H" to the Lease.
4.7 In addition to the monthly rental and operating costs set out above,
the Tenant shall pay such additional amounts as may be specified in
the Schedule and in this Lease.
4.8 Appropriation of Payments: The Landlord is entitled in its sole
discretion to appropriate any payments received by the Landlord from
the Tenant towards the payment of any other amounts owing by the
Tenant to the Landlord other than the debt in respect of which
payment is made. The Landlord shall advise the Tenant of any such
appropriation which it makes.
5 NOTIFICATION OF DEFECTS
5.1 The Tenant shall notify the Landlord in writing within thirty (30)
days after the commencement date, or occupation date, whichever is
the earlier, of any defects in the premises. If it has not notified
the Landlord as aforesaid, it shall be deemed to have acknowledged
that the premises were received in good order and condition.
Notwithstanding the aforegoing, the Landlord shall not be obliged to
effect any repairs and/or maintenance in respect of the defects
listed by the Tenant, unless such defects relate to the Landlords
obligations in terms of 28 below, and the Tenant accepts the
premises "voetstoots".
5.2 The Tenant shall have no claim against the landlord of any nature
whatsoever, including but not limited to an enrichment claim, should
the area of the premises be smaller than the area referred to in
clause 3 of the schedule.
6 USAGE
6.1 The Tenant shall use the premises solely for the purpose described
in Section 9 of the Schedule and for no other purpose whatsoever
without the Landlord's prior written consent. The Tenant
acknowledges that it shall not have any exclusive right to any
particular type of business being conducted in the building.
6.2 The Tenant shall not conduct on the premises any "auction", "fire",
"going out of business", "closing down", "bankruptcy" or similar
sales.
6.3 The Tenant shall not exceed the floor loading capacity of the
premises or the building and the Tenant shall be responsible for any
and shall make good any and all damage to the premises and/or the
building caused by exceeding the floor loading capacity.
6.4 It is hereby recorded for the sake of clarity that the premises
shall not under any circumstances be used by the Tenant for the
conducting of any insurance business of any nature whatsoever.
6.5 The Landlord does not warrant that the premises are suitable for the
purposes of the Tenant, or that the Tenant will be granted any
license or consent in respect of its business.
6.6 In the event that the premises are retail premises, the Landlord
shall be entitled (after consultation with the Tenants in the
building/property and in the event of the majority of the Tenants so
agreeing), to introduce extended shopping hours at the centre eg.
Late night shopping, trading on Saturday afternoons, Sundays and
public holidays. Any alteration in the said core trading/business
hours shall be effective on not less than 2 (two) calendar month's
notice.
INITIAL HERE
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7. SURETY
The Tenant shall procure that the person/s (if any) stipulated in Section
13 of the Schedule sign and throughout the period of this Lease, including
any extensions thereof, remain bound by a written Deed of Suretyship in
the form set out in Annexure "E" to this Lease. The Tenant shall ensure
that such written Deed of Suretyship duly signed as aforesaid is delivered
to the Landlord before the commencement date or occupation date, whichever
is the earlier. Should any such Suretyship not be furnished to the
Landlord within the required period as provided, or should any surety
named in Section 14 of the Schedule be declared insolvent or for any
reason become released from his obligations in terms of this suretyship,
the Tenant shall be deemed to be in breach of this Lease unless the Tenant
furnishes such other security for its obligations under this Lease to the
satisfaction of and within the time stipulated by the Landlord. The
Landlord may in its discretion waive or compromise its rights in respect
of any suretyship of one or more of the sureties named in the Schedule
without affecting its rights in respect of the remaining sureties.
8. PARTNERSHIP
If the Tenant is a partnership then by their signature hereto each partner
shall be liable jointly and severally both in his capacity as a partner
and in his personal capacity for all the obligations of the partnership as
the Tenant. The composition of the partnership as set out in this Lease
will not be altered for the duration of this agreement except with the
Landlord's prior written consent. If the composition of a partnership is
altered without such consent, the partners whose names appear in this
Lease will remain jointly and severally liable in terms of this Lease as
if the partnership had not been dissolved. Any person purporting to
represent a partnership by signing this Lease warrants by his signature
that he is authorised to bind the other partners to all provisions of this
Lease. The above provisions apply, mutatis mutandis, in the case of a
joint tenancy.
9 ASSESSMENT RATES AND TAXES
Commencing as from the occupation date or commencement date, which ever is
the earlier, the Tenant shall pay to the Landlord the following further
amounts on the first day of every month during the currency of this
agreement:
9.1 the tenant's pro-rata share of such assessment rates as are payable
by the Landlord on the property. The monthly amounts so payable by
the Tenant is specified in section 7 of the schedule;
9.2 the tenant's pro-rata share of the total amount payable by the
Landlord to the local authority for sewage and refuse removal and
any other utility services rendered by the local authority for the
property. The monthly amounts so payable by the Tenant is based on
the percentage specified in Section 7 of the Schedule;
9.3 the tenant's pro-rata share of any other charges or imposts payable
by the Landlord which are not or which may hereafter become payable
by the Landlord to any government, regional, local or other lawful
authority in respect of the property or the building;
9.4 the tenant's pro-rata share of value added tax or any other form of
tax, charge or levy imposed by the State or any regional, local or
other competent authority on the rental or any other amount payable
by the Tenant to the Landlord in terms hereof; provided that if it
shall be or shall become unlawful for the Landlord to recover any
portion of such tax, charge or levy by way of a refund, the Tenant
shall pay to the Landlord, as an additional charge an amount equal
to the tenants pro-rata share of any such tax, charge or levy.
10 ELECTRICITY
10.1 The Tenant shall be liable for the payment to the Landlord of a
monthly amount on or before the first day of every month during the
currency of this agreement in respect of the consumption of electric
current including electric power, which amount will be equal to the
aggregate of the following two amounts which will be calculated at
the standard commercial rate per electricity unit from time to time
and will include any increase from time to time.
10.1.1 The amount of electricity used in the premises as indicated
by the reading of the sub-meter, which the Landlord will be
entitled to install to measure the units of electric current
including electric power consumed on or in respect of the
premises. The reading of that meter will be accepted as
correct by the parties unless proved by the Tenant to be
wrong. If separate sub-meters are installed at any time
during this Lease (which installation shall be entirely at
the discretion of the Landlord), the Tenant shall also be
liable for and shall on demand pay the basic and service
charges in respect of the services so mentioned as supplied
to the premise during the period of this Lease (which shall
include a reasonable service charge for such sub-meters); and
INITIAL HERE
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10.1.2 A proportionate share, calculated on a pro-rata rentable area
basis as stipulated in Section 8 of the Schedule, of the
amount payable by the Landlord for electric current including
electric power in respect of common area which latter amount
will be calculated monthly from a reading of the main
electricity meter of the building which reading will be
accepted by the parties as correct unless proved by the
Tenant to be wrong.
10.2 Should the Landlord not install a separate sub-meter in respect of
the premises as contemplated in 10.1.1 then the Tenant will be
liable for payment of a pro rata amount as determined in Section 8
of the Schedule of all electricity consumed in the building
excluding what is paid for by the Tenants whose premises have
sub-meters. The Tenant's share of such consumption will be in
proportion to such consumption as the area of the Tenant's premises
bear to the total area of the building including the common area,
less the areas of the premises which have sub-meters. The total
electricity consumption of the building will be ascertained from a
reading of the main meter(s) installed to meter the consumption of
electricity in the building. The reading on said meter will be
accepted as correct, unless it is proved by the Tenant to be wrong.
10.3 The Tenant shall pay each and every monthly amount due by the Tenant
in terms of paragraph 10.1 or 10.2, as the case may be, within seven
(7) days of the date on which a monthly electricity account, which
may form part of the rental statement, is rendered to the Tenant by
the Landlord specifying the amount due by the Tenant for
electricity. Should the Tenant fail to pay the electricity account
by due date, then without prejudice to any other rights it may have,
the Landlord shall be entitled to terminate the supply of
electricity current to the premises and the Landlord shall not be
liable for any consequent damages or losses howsoever arising or of
any nature whatsoever sustained by the Tenant, as a result thereof
notwithstanding that the Landlord or its agents or employees may
have acted negligently.
10.4 Should the electrical equipment in unmetered leased premises, in the
opinion of the Landlord, lead or be likely to lead to abnormal or
excessive electricity consumption, the Landlord will be entitled to
increase the amount payable by the Tenant for electricity after
consultation with the Tenant with regard to the amount of the
adjustment. Failing agreement as to the amount of the increase, the
Landlord shall be entitled to install a sub-meter at the expense of
the Tenant to measure the units of electricity consumed on the
premises, in which event the Tenant will be liable for the cost of
electricity in accordance with the provisions of 10.1.1.
10.5 The Tenant shall not alter, interfere with or overload the
electrical, lighting or heating installations in the premises;
10.6 The Tenant shall notify the Landlord should the electrical current
to the premises cease or become defective or be interrupted.
10.7 If any dispute arises as to the amount of the Tenant's liability for
any electricity charges, the onus of proof shall be on the Tenant.
10.8 The readings on the meter referred to in this clause 10 shall be
carried out by an independent recognised meter reading agency
appointed by the Landlord from time to time during the currency of
this Lease.
11 COMMON AREAS, JOINING FACILITIES AND ACCESS TO THE BUILDING
11.1 The Tenant shall have the right of reasonable use, having regard to
the rights of other tenants, of the common areas, service roads,
loading facilities, side walks and yard, toilets and other
conveniences and facilities provided by the Landlord on the property
and in the building. The Tenant undertakes that its employees and
its agents and/or invitees will use such spaces, toilets,
conveniences and facilities as may be allocated from time to time in
respect of the Tenant and its employees, agents and/or invitees
generally or in respect of particular categories of those employees.
11.2 The Tenant shall be entitled to the use of the lifts, if any,
provided that all goods and parcels shall be transported in the
goods lift, if any, and shall be brought into the building by the
service entrances, if any, of the building. No goods, packing cases,
furniture or safes shall be taken into the lifts or left in the
passage and on the landing of such building or the surroundings
thereof without the Landlord's prior written consent.
11.3 The Landlord shall have the right in terms of clause 31 from time to
time to make and from time to time to vary, amend or add to
equitable rules and regulations governing the relationship between
tenants of the building in regard to:
11.3.1 the common area;
11.3.2 any joint facilities which may exist in the building; and
11.3.3 generally the use of joint, common or open areas within and
outside the building;
and the Tenant undertakes to observe the said rules and regulations
from time to time in force as if the same were terms and conditions
of this Lease and to ensure the observance thereof by the Tenant's
employees, officers, invitees, agents and/or visitors.
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11.4 The Landlord shall not be responsible to the Tenant for the
non-observance or violation of the terms of any Lease which may be
enforced from time to time between the Landlord and any other Tenant
of the building or the non-observance or violation of any rules or
regulations by any such Tenant, nor shall the Tenant have any right
to require of the Landlord that it enforce any such terms, rules or
regulations.
11.5 The Landlord shall be entitled to relocate, from time to time at its
sole and absolute discretion, the parking areas and the common areas
in the property or building or extensions thereof.
11.6 The Landlord shall have the right to cause the removal of any
persons from the common areas or to deny the use of the common areas
by persons.
11.7 The Tenant shall have access to the premises or the building, and
the use of lifts and any other common facilities in the building
during normal business hours. Should the Tenant require access to
the premises outside normal business hours, the Tenant shall obtain
the Landlord's consent and the Landlord shall, having regard to its
security services and the other provisions of this Lease, be
entitled to make its consent conditional upon any terms and
conditions which the Landlord in its sole and absolute discretion
may deem necessary for the proper administration and/or security of
the premises or of the building.
12 MAINTAIN INTERIOR
12.1 The Tenant shall at its own cost, keep and maintain the premises in
a clean, sanitary and good condition. Without derogating from the
generality of the aforegoing, the Tenant shall:
12.1.1 replace or repair all fixtures and fittings, appliances,
doors, door handles, locks, keys, entrances and windows in or
serving the premises and on the expiration or earlier
termination of this agreement shall deliver the premises to
the Landlord in the same good order and condition as existed
at the commencement date;
12.1.2 replace when necessary all fluorescent tubes and incandescent
bulbs, starters, water ballast's, washers, taps, cisterns,
toilet bowls and basins in the leased premises and shall be
responsible at its own cost to maintain all light fittings in
the premises in proper order and clean condition;
12.1.3 except for normal fixturing purposes, not drive or permit to
be driven into the walls or ceiling of the premises or the
building any nails, screws or other instruments, nor do or
permit anything to be done that may damage the walls or
ceilings or any other portion of the premises or the
building;
12.1.4 maintain in good order and condition any floor covering
and/or carpeting which may be supplied by the Landlord in the
premises, and shall, on expiration or earlier termination of
this agreement, deliver such floor covering and/or carpeting
to the Landlord in the same good order and condition as
existed at the commencement date, fair wear and tear alone
accepted. It is specifically recorded that, for the purpose
of this clause "fair wear and tear" shall not apply to usage
of the floor covering and/or carpets other than for
pedestrian traffic and shall not release the Tenant of its
obligation to clean the floor covering and/or carpets at
regular intervals;
12.1.5 at the expiration or earlier termination of this agreement,
and in the event only that the Tenant shall have failed to
restore the premises to the Landlord in the same good order
and condition as they were at the commencement of this
lease, fair wear and tear excepted, pay to the Landlord, on
demand, the reasonable cost of restoring the premises to the
same good order and condition in which it was at the
commencement date. Without derogating from the generality of
the aforegoing, the cost of restoring the leased premises
shall include the cost of redecoration and the cost of steam
cleaning and carpeting in the premises.
12.2 The Tenant shall make good and repair at its own costs any damages
or breakage's and shall, in the event of it failing to replace,
repair or make good any broken, damaged or missing articles or to
repair or maintain any items as required in terms of this Lease,
permit the Landlord, without prejudice and in addition to the
Landlord's other rights, to carry out such work without liability on
the part of the Landlord to the Tenant for any loss or damage that
the Tenant may sustain or suffer as a result of such work. The
Tenant shall pay to the Landlord, within SEVEN (7) days of written
demand for payment the costs of such work together with interest at
the maximum rate permissible by law from the date of payment for the
work by the Landlord to date of payment by the Tenant. Without
detracting from the generality of the above, the Tenant shall repair
any damage caused to the premises inclusive of the doors, windows,
ceiling(s), floors and walls of the premises which may be
occasioned by any cause including forcible entry or exit and
malicious damage.
12.3 Without derogating from the generality of 12.1 above, the Tenant
shall maintain and keep clean the inside surfaces of the windows and
of the doors of the premises as no such service shall be supplied by
the Landlord.
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13 REFUSE
13.1 The Tenant shall for the purposes of collecting and disposing of its
refuse provide and use at its expense such bins and other containers
as may from time to time be specified by the local authority and/or
the Landlord.
13.2 All bins and containers referred to in 13.1 above shall be
maintained in good order and condition and kept neat and tidy by the
Tenant throughout the period of this Lease. The Tenant shall ensure
that the refuse does not remain or accumulate on or outside the
premises but shall be prepared for collection in the manner and at
the times and places specified by the local authority and/or the
Landlord. The failure by the Tenant to comply with the above shall
permit the Landlord, without prejudice and in addition to the
Landlord's other rights, to carry out preparation and removal of
refuse without liability on the part of the Landlord to the Tenant
for any loss or damage that the Tenant may sustain or suffer as a
result thereof. On completion of such preparation and removal, the
Tenant shall pay to the Landlord, within SEVEN (7) days of written
demand for payment the costs of such work together with interest at
the maximum rate permissible by law from the date of payment for the
work by the Landlord to date of payment by the Tenant.
13.3 The Tenant shall be responsible for the replacement cost of all/any
bins or containers used by or in connection with the premises, which
may be stolen, lost or unlawfully removed.
13.4 The Tenant shall if so directed by the Landlord, use such compactor
service and/or incinerator service as may be provided, for the
disposal of refuse, and the Landlord shall be entitled to charge the
Tenant a fair and reasonable amount for use of such compactor
service and/or incinerator service. The charge shall be payable by
the Tenant monthly in advance on the first day of each and every
month together with the total monthly rental.
14 BLOCKAGE OF PIPES
14.1 The Tenant shall use its best endeavours to prevent any blockage of
sewerage or water pipes or drains in or connected with the premises.
14.2 The Tenant shall remove at its cost any obstruction or blockage in
any sewerage, water pipes or drains serving the premises exclusively
and where necessary repair the sewerage pipe or drain concerned.
14.3 The failure by the Tenant to comply with the above shall permit the
Landlord, without prejudice and in addition to the Landlord's other
rights, to carry out the removal of the obstruction or blockage
and/or necessary repair without liability on the part of the
Landlord to the Tenant for any loss or damage that the Tenant may
sustain or suffer as a result of such work. On completion of such
removal of obstruction or blockage and/or repair, the Tenant shall
pay to the Landlord, within SEVEN (7) days of written demand for
payment the costs of such work together with interest at the maximum
rate permissible by law from the date of payment for the work by the
Landlord to date of payment by the Tenant.
14.4 The Tenant shall be responsible for the consequences, of any nature
whatsoever, of the disposal of waste water from the premises by the
Tenant. Without limiting the generality of the aforegoing, the
Tenant shall be liable to pay any fine and/or effluent levy in
respect of such disposal of waste water which may be imposed by the
relevant local authority.
15 ALTERATIONS
15.1 The Tenant shall not make any structural alterations and/or
additions to the premises.
15.2 The Tenant shall not make any alterations or additions and/or
improvements (for convenience hereafter collectively referred to in
this clause as "the alterations") of a non-structural nature
whatsoever to the premises or the building without the Landlord's
prior written consent. The Landlord shall be entitled, if it
consents to the alterations, to require that the work is carried out
on behalf of the Tenant by a contractor nominated by the Landlord on
fair and reasonable conditions stipulated by the Landlord and the
Landlord shall also have the right to nominate any professional
consultants necessary to supervise the work at the Tenant's expense.
The Tenant shall obtain any required approval from the Local
Authority before the commencement of any works. If any alterations
are made by the Tenant it shall, on the expiry of the Lease or the
expiry of any renewal or extension thereof, remove and reinstate the
premises to the condition they were in before additions and
alterations were effected, unless the Landlord otherwise directs or
agrees in writing, in which latter case the alterations shall become
the Landlord's property. The Tenant shall under no circumstances
have any claim for compensation for any such alterations, whether or
not they are removed and the premises reinstated.
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16 FIXTURES AND FITTINGS
16.1 The Tenant may from time to time install any fixtures, fittings,
partitions and equipment (hereafter referred to for convenience as
'the fixtures and fittings') in the premises for the purpose of
carrying on the Tenant's business after obtaining the Landlord's
prior written consent thereto, (which consent shall not be
unreasonably withheld).
16.2 The Tenant may from time to time, and shall, prior to the
termination of this lease, remove the fixtures and fittings
installed in terms of 16.1 provided that the Tenant shall, at its
own cost, repair any damage caused by the installation and/or
removal of the fixtures and fittings. If the Tenant does not remove
any fixtures and fittings on vacating the premises, these will
become the property of the Landlord without prejudice to the
Landlord's right to recover the reasonable cost of reinstating the
premises as a result of the Tenant's failure to do so, and the
Tenant shall not at any time or under any circumstances have any
claim of any nature whatsoever against the Landlord in respect of
any fixtures and fittings not removed on or before the termination
of this Lease, whatever the reason may be.
16.3 All the Tenant's fixtures and fittings shall be installed at the
Tenants expense, and shall be executed in accordance with drawings
and specifications approved by the Landlord and in compliance with
any requirements of the Local Authority. The work shall be done by
contractors and sub-contractors nominated or approved by the
Landlord, which contractor and sub-contractors shall comply with
such reasonable rules and regulations as to safety, administration
and coordination as the Landlord may stipulate. The Tenant shall
keep and maintain at its own costs all the fixtures and fittings in
good order and condition and the Tenant shall be liable to pay to
the Landlord any additional local authority rates and taxes and/or
insurance premiums levied or charged as a result of the installation
of the said fixtures and fittings.
17 INDICATOR SIGN BOARDS
The Tenant shall be entitled to have its name placed on the Indicator Sign
Board, if any, at the main entrance and on its respective floor at its own
expense. The design of such sign will be in conformity with the standard
specification as laid down by the Landlord in respect of the building in
force on the commencement date.
18 ADVERTISING SIGNS
18.1 The Tenant shall not be entitled to affix, paint, erect, install or
display any advertising or other signs (including neon signs) on the
windows, doors, exterior or roof or any other part of the leased
premises or building, without the Landlord's prior written consent.
When applying for such consent the Tenant shall submit to the
Landlord in duplicate plans drawn to scale of each sign or
advertisement together with all relevant information relating
thereto including, inter alia, details of the size and depth of the
letters to be used, the materials to be used, and the method of
manufacture, illumination and attachment to, or suspension from, the
leased premises or the building. The Landlord shall have the right
to refuse such consent should the Landlord deem in its sole
discretion that any aspect of the sign or advertisement is not in
keeping with the Landlord's signage requirements or with the general
signage or aesthetics of the building. In the event of such consent
being granted, the Tenant:
18.1.1 shall keep and maintain any such signs in good, clean and
proper working order and condition to comply with the
requirements of any competent authority pertaining to such
signs. Should the Tenant fail to do so the Landlord shall be
entitled, after giving the Tenant seven (7) days written
notice, to attend to the signs in such manner as the Landlord
deems necessary and to recover the costs of so doing from the
Tenant on demand;
18.1.2 hereby indemnifies the Landlord against claims of whatsoever
nature made against the Landlord as a result of the
installation, erection or operation of such signs.
18.2 The Tenant shall, by not later than the expiry or earlier
termination of this agreement, remove all signs affixed, painted,
placed, displayed, erected or installed by it and make good at its
own cost any damage caused as a result of such removal. Should the
Tenant fail to so remove all signs or make good such damage, the
Landlord shall be entitled to do so and recover the costs thereof
from the Tenant on demand.
18.3 The Tenant shall not affix any posters, placards or notices on the
external windows, doors or walls of the premises or the building,
without the Landlord's prior written consent.
19 AIRCONDITIONERS AND BLINDS
19.1 The Tenant shall not install any blind, airconditioner or like
device on or adjacent to any window of the premises unless the
manner of installation thereof has been approved in writing by the
Landlord. The Tenant shall not change or interfere with the
electrical or air-conditioning installation in the premises without
the prior written consent of the Landlord.
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19.2 In the event of the premises being air-conditioned by means of an
air-conditioning plant controlled by the Landlord, the Landlord may
from time to time establish, and the Tenant will conform to, the
reasonable rules and regulations relating to the switching on and
off of the air-conditioning plant as the Landlord shall advise the
Tenant in writing of the same and any amendments thereto from time
to time.
19.3 The Tenant shall be responsible during the currency of this Lease
for the maintenance, replacement, service and repair charges in
respect of all airconditioning units and/or parts thereof, including
controls or diffusers, which are located on, or which form part of,
the premises. The Landlord shall further have the right to enter
into a contract for the maintenance of the airconditioning units
and/or parts thereof, the reasonable cost of which will be pro rata
for the Tenant's account, and which may, at the Landlord's
discretion, be added to the operating costs payable by the Tenant to
the Landlord.
19.4 The failure by the Tenant to comply with the above shall permit the
Landlord, without prejudice and in addition to the Landlord's other
rights, to carry out maintenance, replacement, service and repairs
of the air conditioning units without liability on the part of the
Landlord to the Tenant for any loss or damage that the Tenant may
sustain or suffer as a result thereof. On completion of such
maintenance, replacement, service and repairs, the Tenant shall pay
to the Landlord, within SEVEN (7) days of written demand for payment
the costs of such work together with interest at the maximum rate
permissible by law from the date of payment for the work by the
Landlord to date of payment by the Tenant
19.5 Should the Landlord install during the currency of this Lease by
agreement with the Tenant any or further airconditioning units
within the premises, all maintenance replacement, service and repair
charges for these units will be for the Tenant's account.
19.6 The Tenant shall remove any blind, airconditioner or like device
affixed in terms of 19.1 at the expiration or earlier termination of
the Lease and reinstate the relevant part of the premises to the
same good order and condition as it was at the commencement date
Should the Tenant have failed to do so, the Landlord may attend to
this work at the Tenant's expense.
20 SUB-LETTING AND SALE OF SHARES
20.1 The Tenant shall not be entitled to sublet the whole or any part of
the premises, save as follows:
20.1.1 the Tenant shall apply to the Landlord in writing for its
consent to the subletting of the premises or part thereof
giving, in regard to the proposed sublease, the name of the
subtenant, the guarantor/s, if any, of the sub-Tenant's
obligations, the proposed date of commencement (which shall
not be later than 60 (sixty) days from the date on which the
Landlord receives the Tenant's application), the duration of
the proposed sublease, the exact premises and the rental and
any other considerations payable thereunder;
20.1.2 The Landlord shall not unreasonably withhold its consent to
the sub-letting of the premises but reserves to itself
completely the right to approve any proposed sub-Tenant and
shall not be obliged to furnish any reasons for withholding
such approval. The Landlord may make its consent conditional
upon whatever conditions it may deem necessary for the
protection of its interests and in which case:
20.1.2.1 the Tenant may on receipt of written confirmation by
the Landlord sublet the premises or part thereof as
the case may be in accordance with the written
application submitted to the Landlord in terms of
20.1.1 hereof and to any further conditions which
the Landlord may have stipulated as referred to
above. In the event of a sub-lease being permitted
in terms of this Clause, the Tenant will be deemed
to have ceded all its rights against the sub-tenant
in terms of that sub-lease to the Landlord as
collateral security for the obligations of the
Tenant in terms of this Lease;
20.1.2.2 The Tenant shall be obliged to account and to pay
over on demand to the Landlord, any profit made
arising out of any sub-lease entered into in respect
of the premises;
or alternatively -
20.1.3 The Landlord may give the Tenant written notice of its
intention to enter into a direct written lease with the
proposed sublessee, in which event on the commencement date
of the new written lease entered into between the Landlord
and the proposed sublessee this lease shall be cancelled and
be of no further force and effect. This cancellation shall,
however, in no way detract from the Landlord's right to
recover from the Tenant any amounts which have arisen in
terms of this lease and which are still outstanding at the
date of such cancellation or to enforce any obligations
arising before the cancellation
20.2 The Tenant shall not, without the Landlord's prior written consent,
cede, assign, transfer, alienate, or otherwise dispose of its rights
and/or obligations under this lease or pledge or hypothecate this
lease.
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20.3 Notwithstanding the provisions stipulated in terms of 20.1 hereof
should the Tenant request the Landlord's consent to cede and/or
assign or sub-let, the Landlord, at its option, may treat this
request as an offer by the Tenant to the Landlord to terminate this
lease on 3 (three) calendar month's notice commencing from the first
of the month following that in which the request to cede and/or
assign or to sub-let is made, and the Landlord shall have a period
of 30 (thirty) days (during which the offer shall be irrevocable) in
which to accept the offer.
20.4 If the Tenant is an unlisted company' or a close corporation or a
trust, no shares or membership interest therein, as the case may be,
shall be transferred from its shareholders or members, nor may any
shares or membership interest be allotted to any person other than
existing shareholders or members, nor may there be any change in the
trustees or beneficiaries of a trust, without the Landlord's prior
written consent, save in the case of a transfer of shares or
membership interest which will leave control of the Tenant with the
original shareholder or member, or of a transfer of shares or
membership interest to a deceased shareholder or members heirs. or
trustees, as the case may be. Any transfer or allotment of shares or
of members interest, or change of trustees or beneficiaries in the
case of a trust, effected without such consent shall constitute a
fundamental breach of the terms of this lease by the Tenant,
entitling but not obliging the Landlord to cancel this lease.
20.5 Without in any way derogating from the Landlord's rights in terms of
20.3 hereof, should a turnover rental be payable under this lease
the Landlord shall be entitled instead of consenting to a
sub-letting of the premises or assignment of the lease, to cancel
the lease with effect from the date of the proposed sub-letting or
assignment.
20.6 The Tenant shall not give up occupation or possession of the
premises or and portion thereof to any person whether as licensee,
agent, occupier, custodian or otherwise, without the Landlord's
prior written consent.
21 BUILDING SECURITY
21.1 Security of and control of access to the premises shall be the
responsibility of the Tenant
21.2 The Tenant shall join and be and remain a member of good standing of
a Building Security Association, if any, that may be promoted or
approved by the Landlord and having as its members the Tenants of
the Building, the object of which shall be the promotion of the
security of the Building and the safety of the Tenants thereof The
Tenant shall pay' to the Association all such reasonable membership
fees, subscriptions, contributions and levies as the Association
shall from time to time by its rules lawfully require, which amounts
shall be covered in the operating costs set out in clause 5.2 of the
Schedule. The Tenant shall throughout the period of the Lease
conform and comply with the Articles of Association, constitution
and rules and/or by-laws issued by the Association from time to
time. The Landlord does not bind itself by these presents to promote
any such Association during the currency of this lease.
22 NO WITHHOLDING PAYMENTS
The Tenant shall not be entitled for any reason whatsoever to withhold,
delay, set off or deduct from any amounts due to the Landlord in terms of
the Lease.
23 NON-REMISSION OF RENT DURING BUILDING
The Tenant shall not be entitled to claim a remission or reduction of rent
or cancellation of the Lease by reason of alterations or additions to the
building being carried out by the Landlord from time to time, provided
that the Landlord shall use its best endeavours to ensure that as little
inconvenience as is reasonably possible is caused to the Tenant.
24 LICENCES AND MUNICIPAL REGULATIONS
24.1 The Tenant shall be liable for obtaining all necessary licenses and
permits in respect of the Tenant's business in the premises.
24.2 The Tenant shall conform to all laws, ordinances, proclamations,
regulations and conditions of title relating to the property or to
tenants or occupiers of the property and the building in which the
premises are situated or affecting the conduct of the Tenant's
business in the premises.
24.3 The Landlord shall not be obliged to effect any repairs and/or
alterations and/or additions to the premises or the building or the
property in order to comply with the requirements of the
Municipality and/or other competent authorities in connection with
the conduct of the Tenant's business on the premises.
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24.4 The Landlord does not warrant or represent that the premises are fit
for any specific purpose or that any licence in respect of the
premises or the conduct of the Tenant's business therein will be
granted or renewed.
25 INVALIDATION OF INSURANCE
25.1 The Tenant shall not do or omit to do anything or keep in or on the
premises anything or allow to be done or kept in or on the premises
which in terms of any fire insurance policy held from time to time
by the Landlord in respect of the premises and/or the building may
not be done or kept therein, or which may render any policy void or
voidable and the Tenant shall comply in all respects with the terms
of any such policy, provided that if any such premium payable in
respect of any such policy is increased:
25.1.1 by reason of the nature or scope of the business which the
Tenant carries on in the premises in terms of the lease; or
25.1.2 as a result of the Tenant not complying with the aforesaid
provisions;
then without prejudice to any other rights which the Landlord may
have as a result of that breach, the Tenant shall on written demand
refund to the Landlord the amount of that additional premium.
25.2 The Tenant shall be obliged at its cost to take out and keep in
force during this Lease, a public liability insurance policy with
such insurance company as may be approved in writing by the Landlord
(which approval shall not be unreasonably withheld) for such amount
as will provide indemnity in respect of all claims which may
foreseeably be made against the Tenant and/or the Landlord arising
out of the Tenant's business in the premises, including but not
necessarily limited to any claims arising as described in 27 below.
The Tenant shall, if so required by the Landlord, exhibit to the
Landlord from time to time proof of payment of the premiums that
fall due.
26 GLASS, WINDOW PANELS AND SHOP FRONTS
The Tenant shall be responsible for any glass, both internal and external,
and mirrors, window panels and shopfronts in or on the premises and shall
be obliged at its expense to replace any such glass, mirrors, window
panels or shopfronts as may be damaged however and by whomsoever such
damages shall be caused. Without prejudice to and without absolving it
from its aforesaid obligations, the Tenant shall, except for any period
during which the Landlord may elect to insure the plate glass and
shopfronts itself, insure plate glass, window panels and shopfronts
against damage with an insurer nominated by the Landlord and maintain the
insurance in force throughout its occupation of the premises. The Tenant
shall on demand by the Landlord cede the policy of insurance to the
Landlord as security for its obligations hereunder. The Tenant shall if so
required by the Landlord exhibit to the Landlord from time to time proof
of payment of the premiums that fall due. If the Tenant fails to pay any
premiums the Landlord shall be entitled without prejudice to its rights
under this lease to pay the premium and to recover it from the Tenant. If
the Landlord elects to insure the plate glass, window panels and
shopfronts for any period, the Tenant shall pay to the Landlord on demand
so much of each reasonable premium paid by the Landlord as is attributable
to the insurance of the plate glass, window panels and shopfronts in or on
the premises.
27 LANDLORD'S LIABILITIES AND TENANT'S WAIVERS
27.1 The Tenant hereby indemnifies the Landlord and holds the Landlord
harmless from all claims by third parties in connection with loss of
life, bodily or personal injury or property damage arising from or
out of any occurrence in, upon at or from the occupancy or use by
the Tenant of the said premises or any part thereof or occasioned
wholly or in part by any act or omission of the Tenant, its officer,
agents, contractors, employees, sub-tenants, customers or guests.
27.2 The Tenant shall not have any right, remedy or claim of any nature
whatsoever and howsoever arising against the Landlord for any loss,
damage (whether general, special or consequential) expenses or
injury of any nature whatsoever or howsoever arising which may be
suffered by the Tenant, directly or indirectly, irrespective of
whether or not such loss, damage, expense or injury shall have been
caused through or as a result of the negligence (gross or otherwise)
of the Landlord or any person for whose acts or omissions the
Landlord is vicariously liable in law. Without derogating from the
generality of the aforegoing, the Landlord shall have no liability
to the Tenant in respect of any such loss, damage, expense or injury
which may be suffered by the Tenant by reason of any latent or
patent defects in the premises or in the building or in the
property, or from any fire in the premises or in the building, or
any theft from the premises or the building, or by reason of the
premises or the building or part thereof being in or falling into a
defective condition or state of disrepair, or as a result of any
particular repair not being effected by the Landlord either
timeously or at all, or arising out of vis major or causus
fortuitus, or arising out of any act of omission of any Tenant of
the building or a change of the building's facade, appearance or any
other feature thereof, or arising in any manner whatsoever out of
the use of the premises or of the building by any person.
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28 MAINTAIN EXTERIOR
The Landlord shall keep and maintain the exterior structure, window's and
roof of the building and the common area in good condition. The Tenant
shall not be entitled to any remission of rental, compensation or damage
by reason of the earning out of any maintenance and/or repair work by the
Landlord in order to comply with its obligations in terms of this clause.
29 LANDLORD'S RIGHT OF ENTRY
The Landlord may at all reasonable times either through its
representatives, employees or workmen or through its agents or
contractors:
29.1 have reasonable access to the premises for the purpose of inspecting
or repairing the premises or any part of the building and/or
equipment or installations located therein or for any other purpose
associated therewith;
29.2 repair or add to the premises;
29.3 alter the premises when required to do so by any lawful Authority;
29.4 suspend the operation of the lift serving the premises for service
and/or repair or any other similar purpose provided;
provided that the Landlord shall use its best reasonable endeavours
to exercise its rights in terms hereof with the least possible
inconvenience to the Tenant.
30 FUTURE TENANTS
30.1 The Landlord may display in or on or near the premises 'To Let'
notices during the six (6) months immediately preceding the expiry
of the Lease, and a 'For Sale' notice at any time during the period
of the Lease;
30.2 The Landlord may at all reasonable times during the period of this
Lease show any prospective Tenants or buyers the interior of the
premises.
30.3 The Landlord may during the period of the Lease display on the
premises any notice which may be required by the Landlord or any of
the Landlord's tenants or prospective tenants in connection with any
application for a licence for any business to be carried out on the
premises.
31 HOUSE RULES AND REGULATIONS
The Landlord shall be entitled and is hereby empowered at its sole
discretion from time to time to prescribe rules and regulations to
facilitate the management, administration and appearance of the building
for the general benefit of tenants and other persons lawfully using the
building. The Tenant shall abide by these rules and regulations in force
from time to time. The Landlord shall notify the Tenant of the rules and
regulations and of any amendments from time to time provided always that
such rules and regulations may not detract from or vary the rights of the
Tenant in terms of this Lease.
32 LANDLORD'S RIGHT TO ADD TO BUILDINGS
32.1 The Landlord shall be entitled to at all times during the lease
period to complete or add to the buildings on the property (other
than the premises) and to effect any repairs, alterations,
improvements and additions (including new buildings whether or not
linked) to the buildings and for such purpose to erect scaffolding,
hoardings and building equipment in, at, near or in front of the
premises and also such devices as may be required by law or which
the Landlord's Architects may certify to be reasonably necessary for
the protection of any person against injury arising out of the
building operations in such manner as may be reasonably necessary
for the purposes of any of the works aforesaid. The Landlord shall
further be entitled to all such rights of access to any portion of
the premises as may be reasonably necessary for the purposes
aforesaid. The Landlord shall further be entitled to lead pipes and
other services through the premises should it be necessary to link
such pipes or other services with any other premise provided that in
doing so the Landlord does not unreasonably interfere with the
Tenant's beneficial occupation of the premises. In exercising its
above rights the Landlord shall use its best endeavours to cause as
little interference as possible with the Tenant's beneficial
occupation of the premises.
32.2 The provisions of clause 32.1 above shall apply irrespectively as to
whether any of the work referred to therein is carried on by the
Landlord or by its servants or agents or by any contractor appointed
by the Landlord.
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32.3 The Tenant shall not be entitled to any remission of rent,
compensation or damages by reason of the exercise by the Landlord of
its rights under this clause. Furthermore the Tenant shall not have
any claims of any nature whatsoever and howsoever arising against
the Landlord or against it's servants or agents, or any contractor
arising out of the exercise by the Landlord of any of its rights
referred to in clause 32 above (nor shall the Tenant have the right
to cancel this Lease).
33 VACATION OF PREMISES
At the expiry of this Lease the Tenant shall on vacating the premises,
forthwith deliver all keys and/or security devices to the Landlord or its
agents.
34 RELOCATION
The Landlord may from time to time at its sole and absolute discretion
relocate the Tenant within the building to premises which in the
reasonable opinion of the Landlord are reasonably comparable to the
premises previously let, in which event the Landlord shall pay to the
Tenant all reasonable costs connected with the relocation.
35 DESTRUCTION
35.1 Should the premises and/or the building be destroyed or damaged to
an extent which prevents the Tenant from having beneficial
occupation of the premises, then:
35.1.1 the Tenant shall have no claim of any nature whatever against
the Landlord as a result thereof;
35.1.2 the Landlord shall be entitled within thirty (30) days after
such destruction or damage to advise the Tenant in writing
that it intends to reinstate the building and/or the premises
as the case may be;
35.1.3 should the Landlord not, within the aforesaid period, notify
the Tenant of its intention to reinstate the building and/or
the premises as the case may be, then the Landlord shall be
deemed to have elected to cancel the Lease.
35.2 Should the Landlord elect (or be deemed to have elected) to cancel
the Lease, then the Tenant shall have no claim whatever against the
Landlord as a result of that cancellation.
35.3 Should the Landlord elect to reconstruct the building and/or the
premises as the case may be, then:
35.3.1 the Lease shall not be cancelled and the Landlord shall at
its cost reinstate the building/premises substantially to its
previous state as quickly as is possible in the
circumstances;
35.3.2 the Tenant shall not be liable for any further rent for as
long as it is deprived of beneficial occupation of the
premises;
35.4 Should the building and/or the premises be damaged to a lesser
extent that which prevents the Tenant from having beneficial
occupation of the premises, then:
35.4.1 the Lease shall not be cancelled;
35.4.2 the rental payable by the Tenant shall be reduced pro rata
to the extent (if any) by which the Tenant is deprived of
beneficial occupation of the premises;
35.4.3 the Landlord shall at its own cost repair the building
and/or the premises as the case may be as quickly as possible
in the circumstances;
35.4.4 the Tenant shall have no claim of any nature whatsoever
against the Landlord as a result of the said destruction or
damage howsoever arising.
35.5 Should a dispute arise between the Landlord and the Tenant in
respect of the amount of rental payable by the Tenant in terms of
clause 35.4.2 then the amount of rental to be paid by the Tenant
shall be determined by an independent expert to be appointed by
agreement between the Landlord and the Tenant, and/or failing such
agreement, the expert shall be appointed at the request of either
party by the President for the time being of the South African
Institute of Valuers, or his nominee. The decision of such appointed
expert shall be final and binding on both parties.
36 RE-BUILDING AND/OR RENOVATION
36.1 The Landlord may terminate this lease or any renewal thereof by
giving the Tenant six (6) months written notice to such effect in
all or any of the following circumstances:
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36.1.1 should the Landlord wish to demolish the building or the
premises or any part thereof; or
36.1.2 should the Landlord wish to reconstruct and/or redevelop
and/or renovate the building or the premises or any part
thereof, provided always such reconstruction and/or
redevelopment and/or renovation be of a substantial and/or
major nature.
36.2 The Landlord, shall, however, have the right at any time to commence
the reconstruction and/or redevelopment and/or renovation of the
building, other than the premises, and these operations may proceed
while the Tenant is in occupation of the premises.
36.3 Notwithstanding the implementation of any work as contemplated in
36.2 above, the Tenant shall have no right to object to such work or
to claim any rebate of rental and costs during the period in which
the said work may be in progress nor shall the Tenant have any claim
for damages of whatsoever nature by reason of the earlier
termination of this lease as provided in 36.1 above.
36.4 Expropriation
36.4.1 should the STAND or the BUILDINGS or the LEASED PREMISES or
part thereof be expropriated, this agreement will terminate
with effect from the date of such expropriation and the
Tenant will not be entitled to recover any compensation or
damages from the Landlord by reason of such expropriation.
36.4.2 should any portion of the STAND or of the BUILDINGS or any
part thereof (but excluding the LEASED PREMISES) be
expropriated, this agreement shall not terminate as a result
thereof and the Tenant will not be entitled to recover any
compensation or damages from the Landlord.
37 BREACH
37.1 Should the Tenant:
37.1.1 fail to pay any rental and/or any other amount due by the
Tenant in terms of the Lease on due date;
37.1.2 commit any other breach of any terms of the Lease and
fail to remedy that breach within period of FIVE (5) days
after the receipt of notice to that effect by the Tenant; or
37.1.3 repeatedly breach any of the terms of the Lease in such
manner as to justify the Landlord in holding that the
Tenant's conduct is inconsistent with the intention or
ability of the Tenant to comply with its obligations in terms
of the Lease;
37.1.4 commit an act of insolvency;
then and in any such event, the Landlord shall be entitled, but not
obliged, without prejudice to its rights to damages or to its right
to eject the Tenant from the premises or to any other claim of any
nature whatsoever that the Landlord may have against the Tenant as a
result thereof:
37.1.4.1 to cancel this Lease; or
37.1.4.2 in the case of 37.1.2 to remedy such breach and
immediately recover the total of the fair and
reasonable cost incurred by the Landlord in so doing
from the Tenant.
37.2 Should the Landlord institute action against the Tenant or refer the
matter to it's attorneys for collection pursuant to a breach by the
Tenant of the Lease, then without prejudice to any other rights
which the Landlord may have, the Landlord shall be entitled to
recover from the Tenant all legal costs incurred by it including all
fees, charges, tracing fees and collection commission as the
Landlord is obliged to pay to its attorneys, as between attorney and
own client All amounts payable in terms of this sub-paragraph are
payable by the Tenant to the Landlord within THREE (3) days of
written demand.
37.3 Should the Landlord cancel the Lease and the Tenant dispute the
Landlord's rights to do so and remain in occupation of the premises
pending the determination of that dispute, then:
37.3.1 the Tenant shall continue to pay, on due date all amounts due
by the Tenant in terms of the Lease;
37.3.2 the Landlord shall be entitled to recover and accept those
payments and the acceptance thereof shall not in any manner
whatsoever affect the Landlord's claim to cancellation of the
Lease or of any other nature whatsoever.
37.4 Should a dispute between the Landlord and the Tenant be determined
in favour of the Landlord then the payments made to the Landlord in
terms of 37.3 shall be regarded as damages paid by the Tenant on
account of the loss sustained by the Landlord as a result of the
holding over by the Tenant of the premises. Should the loss
sustained by the Landlord be found to be less than the payments made
to the Landlord in terms of 37.3 then the Landlord will refund to
the Tenant the amount by which the said repayments exceed the
damages within 14 days after such damages have been determined.
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37.5 Without prejudice to all or any of the Landlord's rights granted
hereunder, should the Tenant fail to pay the monthly rental or any
other sum(s) which may become due by the Tenant to the Landlord on
due date, then in any such event, the Tenant shall pay the Landlord
interest on any amount outstanding in terms of this lease at 2% (two
percentum) per month, from due date of payment to the date of actual
payment.
37.6 A certificate signed by a director, company secretary, credit
manager or internal accountant of the Landlord or the Landlord's
agent shall be prima facie proof of the amount of any indebtedness
owing by the Tenant to the Landlord at any time and also the fact
that payment of the whole, or, as the case may be, any portion of
that amount is due and payable to the Landlord.
37.7 In the event of the Landlord's banker levying any charges against
the account of the Landlord arising from nonpayment of a cheque
tendered in payment of rental or any other amount due by the Tenant
in terms of this lease, or should the Tenant's debit order be
rejected, or should any charges be levied by the Landlord's banker
against the account of the Landlord for any other reason whatsoever
relating to the Tenant's conduct, then the said charges shall be for
the account of the Tenant and debited to the Tenant's rental
account. In addition to the above, the Tenant shall be liable to the
Landlord for a R50.00 administration fee in respect of each and
every non-payment of a cheque and/or debit order, which fee will be
debited to the Tenant's rental account.
37.8 In the event that the Tenant fails to provide the documentation
and/or annexures required in terms of the Lease timeously, or fails
to keep same valid and of full force and effect, and or fails to
sign the Lease timeously, then in any such event, (hereafter
referred to as "an omission") the Landlord shall, without prejudice
to any of its rights in terms of this Lease, be entitled to charge
the Tenant a penalty of FIVE HUNDRED RAND (R500.00) per month for
each omission until such time as the omission is rectified by the
Tenant.
38 JURISDICTION
The interpretation and enforcement of this lease shall at all times be
governed by South African law. The Tenant consents that the Landlord may,
at its option, institute any legal proceedings arising out of this
agreement in the Magistrates Court in which jurisdiction the premises are
located, alternatively in the Magistrate's Court having jurisdiction over
the Tenant or surety's person, notwithstanding that the subject matter or
amount of the claim or cause of action would otherwise be beyond the
jurisdiction of the Magistrate's Court.
39 NOTICE AND DOMICILIA
39.1 The parties hereby choose domicilia citandi et executandi for all
purposes under the Lease at their respective addresses set forth in
Section 10 and Section 11 of the Schedule.
39.2 Any notice to any party shall be addressed to it at its domicilium
aforesaid and either sent by pre-paid registered post or delivered
by hand. In the case of any notice:
39.2.1 sent by pre-paid registered post, it shall be deemed to have
been received, unless the contrary is proved, on the third
business day after posting;
39.2.2 delivered by hand, it shall be deemed to have been received
unless the contrary is proved, on the date of delivery,
provided such date is a business day or otherwise on the next
following business day.
39.3 Any party shall be entitled, by notice in writing to the other, to
change its domicilium to any other address within the Republic of
South Africa, provided that the change shall only become effective
fourteen (14) days after delivery of the notice in question.
39.4 For the purposes hereof 'business day' means any day other than a
Saturday, Sunday or Public Holiday.
39.5 Any domicilium citandi et executandi address chosen by any party in
terms of this agreement must be a physical address and not a post
office box or poste restante. In the event that the Tenant fails to
choose a physical address, or any address, as its domicilium citandi
et executandi, the address of the premises will be deemed to be the
Tenant's domicilium citandi et executandi.
INITIAL HERE
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40 SECTIONAL TITLE, SALE OF PREMISES OR CHANGE OF NAME
Nothing contained in this lease shall prevent the Landlord from:
40.1 opening a sectional title register in respect of the property, or
from selling sectional title units forming part of the property,
provided that this does not interfere in the use by the Tenant of
the leased premises; the Tenant hereby consents, insofar as its
consent may be necessary, to the opening of a sectional title
register and the selling of sectional title units as aforesaid, and
undertakes to sign all documents which may be necessary in this
respect.
40.2 disposing of the property or any part thereof.
40.3 In the event of the Landlord disposing of or selling the property of
which the leased premises form a part, prior to the expiration of
this lease, such disposal or sale shall not affect this lease nor
shall it entitle the Tenant to resile from or cancel this lease.
40.4 The Landlord shall be entitled at any time during the currency of
this lease and in its sole and absolute discretion to change the
name of the building in which the premises is situated;
40.5 The sale or other alienation howsoever arising by the Landlord of
the premises or any part thereof prior to the termination date shall
not affect the lease, nor shall it entitle the Tenant to resile from
the lease or to cancel the lease nor shall the Tenant be entitled to
claim damages from the Landlord as a result of the aforesaid sale or
change of name.
41 NUISANCE
The Tenant shall not do or cause or permit to be done in or about the
premises anything, which may be or cause a nuisance or disturbance to
other occupants of the building of neighbouring premises.
42 CONDITIONS OF USE OF PARKING AREAS
42.1 The Tenant shall not be entitled to any exclusive parking bays in
the parking area and undertakes to accept the parking bays allocated
to it by the Landlord from time to time. The Tenant will pay for the
cost of any signage required in respect of such allocated bays.
42.2 The Tenant shall only be entitled to use the parking area for the
purpose of parking motor cars.
42.3 The Tenant shall not do nor suffer to be done anything which may
constitute a nuisance or which may disturb the beneficial use of any
other user of the parking area.
42.4 The Tenant shall not permit any motor car, which is parked in the
parking area to be washed, refuelled, oiled or repaired in the
parking area.
42.5 The Tenant and/or agents or invitees enters, uses and leaves the
parking area entirely at his own risk;
42.6 The Tenant shall have no claim of whatsoever nature against the
Landlord or any of its agents for any loss or damage arising
directly or indirectly from the use of the parking area and
including but without being limited to:
42.6.1 loss or damage suffered as a result of the theft, loss
destruction of damage of motor vehicles or any pan or
accessory thereof or any articles left therein;
42.6.2 loss or damage resulting from personal injury sustained by
the Tenant.
for the purposes of this clause 42.6, loss or damage shall include
direct use of the Tenant, its servants, agents or invitees of the
parking area.
42.7 The Tenant indemnifies the landlord, its servants or agents against:
42.7.1 loss or damage resulting from any claim, demand or action of
whatsoever nature which may be brought or made by any person
against any one of them;
42.7.2 all costs of any nature whatsoever (including any attorney
and own client costs) incurred by any one of them;
<PAGE>
arising from the direct or indirect use of the Tenant, its servants,
agents or invitees of the parking area.
For the purposes of this clause 42.7, loss or damage shall include
direct of indirect special or consequential damage or any loss of
profits of any nature whatever.
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42.8 The Tenant may only park vehicles, which are in running order and
are in use. No broken-down or partially dismantled vehicles may be
parked in the parking areas.
42.9 The Tenant shall not park nor permit the parking of any motor car
not owned by the Tenant in the parking area unless:
42.9.1 the user of that car is an employee of the Tenant;
42.9.2 the Tenant furnishes to the Landlord a written
acknowledgement by that user that he or she is bound by the
provisions of the Lease insofar as they relate to him or her.
42.10 The Tenant shall not sub-let the designated parking area nor (save
as provided for in clause 42.9) permit anyone else to occupy the
same, nor cede or assign any of its rights or obligations under the
parking provisions of this Lease.
42.11 The Landlord shall:
42.11.1 have the right from time to time to establish, modify and
enforce reasonable rules and regulations with respect to all
common area, facilities and parking areas mentioned in this
Lease.
42.11.2 have the right to construct, maintain and operate lighting
facilities on all the said parking areas and improvements,
to police the same and take security measures in regard
thereto, from time to time to change any parking area, level
location and arrangements of parking areas and other
facilities herein referred to, to restrict parking areas, to
close temporarily any portion of the parking areas or
facilities, to discourage non-Tenant parking, and to do and
perform such other acts in and to the said areas and
improvements as the Landlord considers will operate and
maintain the common facilities referred to above for the
benefit of all Tenants.
43 COMPANY OR CLOSE CORPORATION TO BE FORMED
If this lease is entered into by a person/s acting as Agent/s or trustee/s
on behalf of a company or close Corporation or trust not yet formed then:
43.1 The agent or trustee in his personal capacity hereby jointly and
severally warrant/s to the Landlord that the company or close
corporation or trust about to be formed will, within sixty (60) days
from the date of signature of the lease by such agent or trustee;
43.1.1 be duly formed and/or incorporated; and
43.1.2 duly adopt, ratify and conform without modification this
agreement lawfully binding; and
43.1.3 take all other steps necessary to render this agreement
lawfully binding on it; and
43.1.4 deliver to the Landlord a true copy of its memorandum and
articles of association, or association agreement or trust
deed as the case may be together with a true copy of the
resolution referred to in 43.1.2 duly certified by the
chairman of the meeting.
43.2 The agent or trustee binds himself irrevocably to the Landlord that,
failing compliance with the provisions of 43.1 hereof, he shall
personally be bound by all the obligations and entitled to all the
rights of the Tenant in terms and arising out of this agreement of
lease jointly and severally if there be more than one trustee.
43.3 In the event of proper compliance with the provisions of 43.1
hereof, the trustee or agent binds himself irrevocably to sign a
deed of suretyship as required in terms of clause 7 above,
guaranteeing performance by the Tenant of it's obligations to the
Landlord in terms of the Lease.
43.4 In the event of non-compliance for the provision of 43.1 hereof, the
trustee or agent will be personally bound by all obligations and be
entitled to all the rights of the Tenant in terms of the lease.
43.5 In the event that there is more than one trustee or agent, the
obligations and rights of such trustees or agents in terms of this
clause 43 will be joint and several.
44 HOLDING OVER
44.1 If the Tenant should after expiration or earlier termination of this
Lease, remain in occupation of the Leased premises, then:
44.1.1 the monthly rental payable by the Tenant shall immediately
and without notice increase by 12% (twelve percent) from the
date of expiration or termination, as the case may be;
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44.1.2 the operating costs payable by the Tenant shall immediately
and without notice increase by 14% (fourteen percent) from
the date of expiration or termination, as the case may be;
44.1.3 the other terms and conditions of this Lease shall mutatis
mutandis remain applicable to the Tenant, save that the
Lease shall be deemed to have been entered into for a month
at a time only;
44.1.4 the Tenant shall continue to pay the increased rental and
all other amounts due to the Landlord in terms of this lease
on due date;
44.1.5 the Landlord shall be entitled to recover and accept the
payments referred to in 44.1.1 and 44.1.2;
44.1.6 the recovery and acceptance by the Landlord of the payments,
referred to in 44.1.3, shall be without prejudice to and
shall not in any manner affect the Landlord's rights.
44.2 Payments made to the Landlord in terms of clause 44.1 above shall be
regarded as amounts paid by the Tenant on account of loss and/or
damage sustained by the Landlord as a result of the holding over by
the Tenant of the premises.
44.3 Unless otherwise stated by the Landlord or its agents, acceptance of
any rental or payment shall in no way whatever prejudice or operate
as a waiver, rescission or abandonment of any termination or right
of termination.
45 LANDLORDS HYPOTHEC
45.1 While this lease is in force, all furniture, fittings and fixtures,
equipment, stock and movables brought onto the premises, whether the
property of the Tenant or not, shall be subject to the Landlord's
hypothec and shall serve as partial or full security for the proper
compliance by the Tenant with all its obligations in terms of this
lease.
45.2 The Tenant undertakes that it:
45.2.1 shall have no Notarial Bond hypothecating any movable
property that he intends bringing to the leased premises.
45.2.2 shall obtain the Landlord's written permission before
encumbering any of the movable property on the leased
premises which have previously not been encumbered or which
belong to third parties consequent upon a lease or instalment
sale agreement.
45.2.3 will not dispose of or remove the movable property referred
to in this clause from the premises except in the ordinary
course of business.
46 ALIENS
In the event of the Tenant being an alien as defined in the Alien's Act,
he warrants that he is in possession of a permit issued in terms of the
said Act, which qualifies him to lease the premises. A certified copy of
such permit will be supplied by the Tenant to the Landlord prior to the
conclusion of this lease.
47 GENERAL
47.1 No variation of the lease shall be of force or effect unless it is
in writing and is signed by both the Landlord and the Tenant.
47.2 This lease contains all the terms and conditions of the agreement
between the Landlord and the Tenant. The parties acknowledge that
there are no understandings, representations or terms between the
Landlord and the Tenant in regard to the letting of the premises
other than those set out herein.
47.3 No act of relaxation on the part of the Landlord in regard to the
carrying out of any of the Tenant's obligations in terms of this
lease shall prejudice or be deemed to be a waiver of any of the
Landlord's rights in terms hereof.
47.4 If any amount(s) which the Tenant is obliged to pay the Landlord
over and above the rental provided for in this Lease represents a
recovery by the Landlord of certain monies paid or payable by it to
the supplier of the service or item in respect of which payment is
due to the Landlord by the Tenant in terms of this Lease which in
terms of any law presently in force or hereafter in force may only
be recovered by the supplier of such service or item and not by the
Landlord then all monies covered by this clause shall be regarded as
additional and/or increased rental and shall be treated as such by
the Landlord at its discretion as and when the occasion may require
it to ensure that the Landlord remains lawfully entitled to obtain
payment from the Tenant of all monies which the Tenant has
undertaken to pay the Landlord under and in terms of this Lease.
47.5 The Tenant undertakes that it shall not install any window covering
on the windows of the LEASES PREMISES except of a type and colour
approved by the Landlord (which approval shall not be unreasonably
withheld) and the cost thereof shall be borne by the Tenant.
INITIAL HERE
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47.6 The Tenant undertakes that it shall (in the event that the PERMITTED
USE includes trading purposes) ensure that the shopfronts (if any)
of the LEASED PREMISES are illuminated until 23H00 on every evening
during the currency of this lease and that the LEASED PREMISES are
kept open for business during all lawful trading hours (including
extended trading hours granted on the application of the Landlord)
on all days (save days during which the Tenant is not lawfully
entitled to keep such premises open).
47.7 The Tenant undertakes that it will not permit any person to sleep in
the LEASES PREMISES and will not permit any animals to be kept in
the LEASED PREMISES.
47.8 The Tenant undertakes that it will not use any lifts or escalators
in the BUILDINGS for any purpose for which they are not intended to
be used (as determined by the Landlord) which could cause any damage
or potential damage to such lifts or escalators.
47.9 The Tenant undertakes that it will not use any entrances or
facilities in the BUILDINGS for any purpose for which they are not
intended to be used (as determined by the Landlord).
47.10 The Tenant undertakes that it will not leave any goods, equipment,
boxes, furniture, packing cases or other items in the COMMON AREAS
without the prior written consent of the Landlord.
47.11 The Tenant undertakes that it will participate in any evacuation
drill or any other activity regarding the evacuation of the PROPERTY
in case of any emergency and attend any meeting relating to
emergency procedures for the PROPERTY.
48 COSTS
The costs of and incidental to the negotiation and preparation of this
agreement, together with all stamp duty payable thereon or in connection
with any renewal or extension thereof shall be borne by the Tenant and
paid upon demand.
49 RENTAL DEBIT AUTHORISATION
49.1 The Tenant shall, within seven (7) days of the commencement or
occupation date of the lease, whichever occurs first, complete and
lodge with the Landlord a Rental Debit Authorisation in the form of
Annexure "F" hereto, duly signed by the Tenant or its duly
authorised representative.
49.2 The Tenant shall furthermore furnish the Landlord with an updated
Rental Debit Authorisation in substantially the same form as and
when required as a result of increases from time to time in the
monthly rental and/or other amounts due by the Tenant to the
Landlord in terms of this lease.
50 VALUE ADDED TAX (VAT)
The Tenant agrees to pay all VAT in terms of the VAT Act (No. 89 of 1991)
(as amended from time to time) or other taxes leviable from time to time
in law, in respect of and together with any amounts payable by the Tenant
in terms of this Agreement of Lease.
Should the rate at which VAT is leviable alter during the subsistence of
this Lease or any renewal thereof, such alteration shall be applied to the
basic rental, operating costs and any other relevant charge.
INITIAL HERE
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Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
THUS DONE AND SIGNED AT ON THIS THE
DAY OF 19
For and on behalf of
COLOUR SMART.COM SOUTH AFRICA
AS WITNESSES:
1. /s/ R W H Burrows /s/ Roger D. Finchem Sr.
-------------------------------- ------------------------------
duly authorised hereto
R W H Burrows
--------------------------------
Full Name and Identity Number
Roger D. Finchem C.E.O.
------------------------------
Full Name and Designation of
Authorised Signatory
2. /s/ L. VAN DER MESCHT
--------------------------------
------------------------------
Identity Number of
Authorised Signatory
L. VAN DER MESCHT
--------------------------------
Full Name and Identity Number
THUS DONE AND SIGNED AT ON THIS THE
DAY OF 19
For and on behalf of
NORWICH LIFE SOUTH AFRICA LIMITED
AS WITNESSES:
1.
-------------------------------- ------------------------------
duly authorised hereto
--------------------------------
Full Name and Identity Number
------------------------------
Full Name and Designation of
Authorised Signatory
2.
--------------------------------
------------------------------
Identity Number of
Authorised Signatory
--------------------------------
Full Name and Identity Number
<PAGE>
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
ANNEXURE "B"
- --------------------------------------------------------------------------------
DRAFT IRREVOCABLE BANK GUARANTEE
- --------------------------------------------------------------------------------
The Manager
Fedsure Properties (Pty) Ltd.
P O Box 23783
CLAREMONT
7700
Dear Sir
AGREEMENT OF LEASE ("THE LEASE") ENTERED INTO BETWEEN NORWICH LIFE SOUTH AFRICA
LIMITED (the creditor") and COLOUR SMART.COM SOUTH AFRICA ("the debtor")
Letter of Guarantee No. ..............
We the undersigned, .............. and ............... representing
................. Reg No. .............. (hereinafter referred to as the "Bank")
in our capacities as .............. and ............... respectively and duly
authorised thereto, do hereby bind the said Bank as surety and co-principal
debtors in solidium to NORWICH LIFE SOUTH AFRICA LIMITED (the creditor) for the
due fulfilment by COLOUR SMART.COM SOUTH AFRICA (the debtor) for the due and
proper fulfilment of all the obligations of, and for the punctual payment of all
sums which are now and may hereafter become due by the debtor to the creditor
howsoever arising in terms of the lease entered into (or about to be entered
into) by the creditor and the debtor in respect of the premises situated at 1st
Floor, Cavanard Building, Cowen Street, Claremont. I/We agree that the guarantee
shall cover any failure by the debtor to fulfil the terms of the Lease,
including non-fulfillment of the terms of the Lease as a result of the
insolvency or sequestration of the debtor.
This guarantee shall not bind the Bank to do anything other than to effect the
payment of money and shall be limited to a maximum of R29 730,69 (Twenty Nine
Thousand Seven Hundred and Thirty Rand and Sixty Nine Cents Only).
This guarantee shall be a continuing covering security. We renounce on behalf of
the Bank the benefits of the legal exceptions of excussion and division and
agree that the Bank's liability hereunder shall not be reduced or in anyway
affected by the release by the debtor or by the creditor in respect of any or
all of the debtor's obligations to the creditor in terms of the lease, or any
concessions, variations, compromises, extensions of time or any other
arrangements made by the creditor with the debtor.
The Bank's liability under this Guarantee will expire on the 31st December 2002
(being three months after lease expiry date).
Notwithstanding anything to the contrary herein contained our obligation shall
be construed as principal and not as accessory to that of the principal debtor
and shall not be delayed or discharged by the fact that a dispute exists between
the debtor and the creditor.
SIGNED AT CAPE TOWN THIS 1ST DAY OF NOVEMBER 1999
For and on behalf of COLOUR SMART.COM SOUTH AFRICA
As witnesses: /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
---------------------- ------------------------
<PAGE>
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
ANNEXURE "C"
- --------------------------------------------------------------------------------
CERTIFIED COPY OF A RESOLUTION OF DIRECTORS
- --------------------------------------------------------------------------------
OF : COLOUR SMART.COM SOUTH AFRICA
PASSED IN :
------------------------------
ON :
------------------------------
- --------------------------------------------------------------------------------
IT WAS RESOLVED THAT
----------------------------------------
(FULL NAME AND IDENTITY NUMBER)
a member of the Close Corporation be and is hereby authorised to enter into and
sign a lease binding the Close Corporation (as Tenant) to NORWICH LIFE SOUTH
AFRICA LIMITED (as Landlord) in respect of premises upon such terms and
conditions as set out in the Agreement laid before the meeting and approved.
THE AFOREGOING IS CERTIFIED TO BE A TRUE COPY.
/s/ Roger D. Finchem Sr.
- ---------------------- -----------------------------
MEMBER PRINT FULL NAME AND DESIGNATION
As witnesses:
1. /s/ RWH Burrows 2. /s/ L. VAN DER MESCHT
-------------------------------- ----------------------------
RWH Burrows L. VAN DER MESCHT
-------------------------------- ----------------------------
PRINT FULL NAME OF WITNESS PRINT FULL NAME OF WITNESS
INITIAL HERE
[ILLEGIBLE]
<PAGE>
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
ANNEXURE "F"
- --------------------------------------------------------------------------------
RENTAL DEBIT AUTHORIZATION
- --------------------------------------------------------------------------------
I/We, the undersigned,
NAME/COMPANY NAME : Colour Smart.Com South Africa
BUILDING CODE AND TENANT NUMBER : CST001-HO6320
ADDRESS : 1st Floor, Cavanard Building,
Cowen Street, Claremont
hereby authorise FEDSURE PROPERTIES (PTY) LTD (the "Creditor") and STANDARD
BANK, on the Creditor's behalf, to debit my/our banking account at
NAME OF ACCOUNT : Colour Smart.Com South Africa
NAME OF BANK : Standard Bank of S.A.
BRANCH OF BANK : Claremont
BANK CLEARING CODE : 025109
CHEQUE / CURRENT : 72633778
ACCOUNT NUMBER
from time to time, at my/our cost, and to credit the Creditor's account at
Standard Bank.
This authority is subject to a monthly limit of R10 200,00 (Ten Thousand Two
Hundred Rand Only)
First payment to be effected on : DAY 01 MONTH 10 YEAR 1999 and on the
first day of each successive month thereafter.
I/We hereby authorise the creditor and Standard Bank to increase the amount of
this debit order to an amount in excess of the monthly limit referred to above
so as to take into account annual increase in the total monthly rental payable
from time to time by me/us in terms of the lease to the creditor.
I/We acknowledge that Standard Bank acts merely as the Creditor's collecting
banker and accordingly, all disputes regarding the amount or validity of any
debit or any other issue in connection with any transaction shall be a matter
between the Creditor and me/ourselves. Insofar as it may be necessary to do so,
I/we hereby waive any and all claims which I/we may have against Standard Bank.
I/We understand and undertake that the Creditor will receive all amounts without
prejudice to its rights. I/We confirm that the debt order authorisation has been
signed in terms of the mandates here by my/our bank.
I/We hereby acknowledge that the Rental Debit Authorisation is an integral part
of the Lease Agreement and accept that the Rental Debit Authorisation may not be
cancelled during the lease period unless replaced with an amended Rental Debit
Authorisation to the satisfaction of the Landlord.
Signed at ................. on the ........... day of .................. 19.....
- ----------------------------- -----------------------------
(Signature) duly authorised (Full Name)
in terms of attached
Resolution
WITNESS:
1. 2.
--------------------------- ---------------------------
INITIAL HERE
[ILLEGIBLE]
<PAGE>
Fedsure Properties (Pty) Ltd.
Revised Version - 25 June 1999
ANNEXURE "D"
- --------------------------------------------------------------------------------
OPTION TO RENEW
- --------------------------------------------------------------------------------
RENEWAL OF LEASE
The Tenant shall have the right upon giving the Landlord not less than six (6)
calendar month's written notice prior to the lease expiry date to renew this
lease for a further period as stated in Section 4.4 of the Schedule commencing
immediately after the lease expiry date on the Landlord's then prevailing
standard terms and conditions of lease save that the rental payable during such
renewal period is to be agreed upon in writing by the Landlord and the Tenant,
which rental shall be market related, no later than three (3) months prior to
the expiry date this Lease shall terminate on the lease expiry date. Should the
Landlord and the Tenant be unable to reach agreement in writing on the market
rental for the renewal period at least three (3) months prior to the expiry
date, the lease shall terminate on the lease expiry date.
INITIAL HERE
[ILLEGIBLE]
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 15
day of October, 1999 by and between ColorSmart.com Inc. ("Company") and Greg
Stooksberry.
WHEREAS, the Company desires to employ Greg Stooksberry as the "Network
Administrator" of the Company;
WHEREAS, Greg Stooksberry has agreed to provide such services in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Greg Stooksberry as manager during the
term of this Agreement and Greg Stooksberry hereby accepts such employment. Greg
Stooksberry shall be responsible for Network Administrator, and shall have such
other duties regarding the Company as shall be determined from time to time by
the Board of Directors of the Company ("Board")..
Term of Employment. The term of employment of Greg Stooksberry shall be
for a term of 2 years from the date of this Agreement ("Initial Term") and shall
automatically extend for additional terms of 2 year(s) ("Renewal Term") unless
this Agreement is terminated as of the last day of the Initial Term or as of the
last day of any Renewal Term upon not less than ninety (90) days prior written
notice by either party to the other, subject to earlier termination as provided
in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. Greg Stooksberry shall be paid a base salary rate of
$45,000.00 for the first ninety (90) days of employment, thereafter for the
remaining nine (9) months of his first year he shall be paid at a rate of
$48,000.00 per year at the annual rate of 10% in the 1st year of this Agreement;
increases for the second and third year are contingent upon review by the
compensation committee, which will be established by the Board of Directors,
commencing on the date that the Company completes full funding of the 23-27
million dollar offering of its common stock, which offering is being made
pursuant to the Company's Registration Statement on Form SB-2 to be filed under
the Securities Act of 1933, as amended, with the Securities and Exchange
Commission on or about November 1999 (the "Offering").
Cash Bonus. Greg Stooksberry shall be paid a cash bonus, if any, within
the sole discretion of the Board of Directors of the Company. Such bonus shall
be paid within a reasonable period of time after the Board of Directors in its
discretion awards such cash bonus.
(c) Stock Bonus. Greg Stooksberry shall receive a stock bonus, if any, within
the sole discretion of the Board of Directors of the Company. Such stock bonus
shall be implemented within a reasonable period of time after the Board of
Directors in its discretion awards such stock bonus.
(d) Vacation. Greg Stooksberry shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
<PAGE>
then in effect, but no less than one (1) week(s) of vacation the first year.
Every year thereafter the employee will receive two (2) weeks of vacation every
year up to five years.
(e) Other Benefits. Greg Stooksberry shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Greg Stooksberry shall also be provided, at Company expense, with a vehicle for
business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Greg Stooksberry
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one (1) lump-sum severance
benefits equal to ninety (90) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Greg Stooksberry within fifteen (15)
days of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Greg Stooksberry shall be
entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Greg
Stooksberry at any time for cause (as hereinafter defined) upon written notice.
The term "for cause" shall mean: the continued failure by Greg Stooksberry to
substantially perform his primary duties as Greg Stooksberry of the Company in a
reasonable professional manner other than due to temporary or total disability
or death, after a written demand for such substantial performance is delivered
to Greg Stooksberry by the Board of Directors of the Company; the unauthorized
dissemination of significant trade secrets or other proprietary property of the
Company; the commission of a felony or commission of a crime involving
dishonesty or moral turpitude; the commission of any act or acts of dishonesty
which acts are intended to result or do result directly or indirectly in gain or
personal enrichment of Greg Stooksberry or a related person or affiliated
company or when such acts are intended to cause harm or damages to the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
<PAGE>
prior written notice; provided, however, that such termination notice shall not
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Greg Stooksberry of his employment hereunder by
reason of the default of the Company shall be deemed for all purposes of this
Agreement a termination by the Company without cause.
Disability. The Company may terminate the employment of Greg Stooksberry
under this Agreement by written notice upon the total and permanent disability
of Greg Stooksberry. Total and permanent disability shall mean the inability of
Greg Stooksberry to substantially perform the essential functions of his
position, with or without reasonable accommodations, due to sickness or other
physical or mental disability, for thirty (30) days in any thirty (30) day
period or a period of time which exceeds the time for medical leave provided by
law, whichever period is longer. The Company shall give Greg Stooksberry written
notice of any termination hereunder.
Death. The employment of Greg Stooksberry under this Agreement
automatically terminates upon the death of Greg Stooksberry.
Expense Reimbursement. Greg Stooksberry shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Greg Stooksberry shall not use or disclose to others, without
the prior written consent of the Company, any customer lists, trade secrets,
secret know-how, or other confidential information relative to the business of
the Company obtained by Greg Stooksberry in the course of rendering services
pursuant to this Agreement. The obligation of Greg Stooksberry with respect to
any item of such information shall terminate if that item of information becomes
disclosed in published literature or otherwise becomes publicly available,
provided that such public disclosure did not result, directly or indirectly,
from any act or omission of Greg Stooksberry. Upon the leaving the employ of the
Company for any reason, Greg Stooksberry shall continue to be bound by this
Paragraph 8 for a period of one (1) years, and shall not take with him any
customer lists, confidential data, or other documents and instruments which are
the property of the Company. All such data, documents and instruments and all
copies thereof shall be surrendered by Greg Stooksberry to the Company on or
prior to the termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
<PAGE>
Non-Compete. Greg Stooksberry agrees that during the term of his
employment with the Company hereunder and for a period of one (1) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with, any business engaged in the providing of services or
products competitive to those provided by the Company in any geographic area in
which the Company operates as of the date that Greg Stooksberry leaves the
Company's employment. Ownership of less than 5% of companies whose securities
are publicly traded is not prohibited by this Agreement.
Non-solicitation of Customers. Greg Stooksberry agrees that during the
term of his employment with the Company hereunder and for a period of one (1)
years thereafter he shall not, on his own behalf, or on behalf of another,
directly or indirectly, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospective customer of the Company with a
view to the providing of services or products which are competitive with those
that are marketed or provided by the Company as of the date that Greg
Stooksberry leaves the Company's employment, provided that these restrictions
shall apply only to customers or prospects of the Company which have been
customers or prospects with whom Greg Stooksberry has had contacts on behalf of
the Company.
Non-solicitation of Employees. Greg Stooksberry agrees that during the
term of his employment hereunder and for a period of one (1) years thereafter,
Greg Stooksberry will not directly or indirectly solicit or in any other manner
encourage employees of the Company to leave its employ for an engagement in any
capacity with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Greg Stooksberry employment by the Company without cause or by
reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Greg Stooksberry and his estate and personal representatives and
upon the Company and its successors and assigns. This Agreement may not be
assigned, pledged or otherwise hypothecated by Greg Stooksberry.
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Greg Stooksberry to perform the obligations of the Company pursuant to this
Agreement in the same manner and to the same extent that the Company would be
<PAGE>
required to perform if no such succession had taken place. In the event the
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Greg Stooksberry hereunder shall inure to the benefit of
and be enforceable by Greg Stooksberry and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Greg Stooksberry by the Company
and supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr.
Chief Executive Officer --------------------
/s/ Gregory Stooksberry
-----------------------
Oct 4, 1999
-----------------------
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and Robert
McDowell.
WHEREAS, the Company desires to employ Robert McDowell as the "Manager" of the
Company;
WHEREAS, Robert McDowell has agreed to provide such services in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Robert McDowell as Manager during the
term of this Agreement and Robert McDowell hereby accepts such employment.
Robert McDowell shall be responsible for overseeing of operations in the Coconut
Creek, FL. facility, and shall have such other duties regarding the Company as
shall be determined from time to time by the Board of Directors of the Company
("Board")..
Term of Employment. The term of employment of Robert McDowell shall be for
a term of 2 years from the date of this Agreement ("Initial Term") and shall
automatically extend for additional terms of 2 year(s) ("Renewal Term") unless
this Agreement is terminated as of the last day of the Initial Term or as of the
last day of any Renewal Term upon not less than ninety (90) days prior written
notice by either party to the other, subject to earlier termination as provided
in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. Robert McDowell shall be paid a base salary of
$50,000.00 at the annual rate of 10% in the 1st year of this Agreement;
increases for the second and third year are contingent upon review by the
compensation committee, which will be established by the Board of Directors,
commencing on the date that the Company completes full funding of the 23-27
million dollar offering of its common stock, which offering is being made
pursuant to the Company's Registration Statement on Form SB-2 to be filed under
the Securities Act of 1933, as amended, with the Securities and Exchange
Commission on or about November 1999 (the "Offering").
Cash Bonus. Robert McDowell shall be paid a cash bonus, if any, within the
sole discretion of the Board of Directors of the Company. Such bonus shall be
paid within a reasonable period of time after the Board of Directors in its
discretion awards such cash bonus.
(c) Stock Bonus. Robert McDowell shall receive a stock bonus, if any, within the
sole discretion of the Board of Directors of the Company. Such stock bonus shall
be implemented within a reasonable period of time after the Board of Directors
in its discretion awards such stock bonus.
(d) Vacation. Robert McDowell shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
then in effect, but no less than one (1) weeks of vacation the first year.
<PAGE>
Every year thereafter the employee will receive two (2) weeks of vacation every
year up to five years.
(e) Other Benefits. Robert McDowell shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Robert McDowell shall also be provided, at Company expense, with a vehicle for
business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Robert McDowell
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one lump-sum severance
benefits equal to ninety (90) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Robert McDowell within fifteen (15)
days of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Robert McDowell shall be
entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Robert
McDowell at any time for cause (as hereinafter defined) upon written notice. The
term "for cause" shall mean: the continued failure by Robert McDowell to
substantially perform his primary duties as Robert McDowell of the Company in a
reasonable professional manner other than due to temporary or total disability
or death, after a written demand for such substantial performance is delivered
to Robert McDowell by the Board of Directors of the Company; the unauthorized
dissemination of significant trade secrets or other proprietary property of the
Company; the commission of a felony or commission of a crime involving
dishonesty or moral turpitude; the commission of any act or acts of dishonesty
which acts are intended to result or do result directly or indirectly in gain or
personal enrichment of Robert McDowell or a related person or affiliated company
or when such acts are intended to cause harm or damages to the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
prior written notice; provided, however, that such termination notice shall not
<PAGE>
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Robert McDowell of his employment hereunder by
reason of the default of the Company shall be deemed for all purposes of this
Agreement a termination by the Company without cause.
Disability. The Company may terminate the employment of Robert McDowell
under this Agreement by written notice upon the total and permanent disability
of Robert McDowell. Total and permanent disability shall mean the inability of
Robert McDowell to substantially perform the essential functions of his
position, with or without reasonable accommodations, due to sickness or other
physical or mental disability, for thirty (30) days in any thirty (30) day
period or a period of time which exceeds the time for medical leave provided by
law, whichever period is longer. The Company shall give Robert McDowell written
notice of any termination hereunder.
Death. The employment of Robert McDowell under this Agreement
automatically terminates upon the death of Robert McDowell.
Expense Reimbursement. Robert McDowell shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Robert McDowell shall not use or disclose to others, without the
prior written consent of the Company, any customer lists, trade secrets, secret
know-how, or other confidential information relative to the business of the
Company obtained by Robert McDowell in the course of rendering services pursuant
to this Agreement. The obligation of Robert McDowell with respect to any item of
such information shall terminate if that item of information becomes disclosed
in published literature or otherwise becomes publicly available, provided that
such public disclosure did not result, directly or indirectly, from any act or
omission of Robert McDowell. Upon the leaving the employ of the Company for any
reason, Robert McDowell shall continue to be bound by this Paragraph 8 for a
period of one (1) years, and shall not take with him any customer lists,
confidential data, or other documents and instruments which are the property of
the Company. All such data, documents and instruments and all copies thereof
shall be surrendered by Robert McDowell to the Company on or prior to the
termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
Non-Compete. Robert McDowell agrees that during the term of his
<PAGE>
employment with the Company hereunder and for a period of one (1) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with, any business engaged in the providing of services or
products competitive to those provided by the Company in any geographic area in
which the Company operates as of the date that Robert McDowell leaves the
Company's employment. Ownership of less than 5% of companies whose securities
are publicly traded is not prohibited by this Agreement.
Non-solicitation of Customers. Robert McDowell agrees that during the term
of his employment with the Company hereunder and for a period of one (1) years
thereafter he shall not, on his own behalf, or on behalf of another, directly or
indirectly, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospective customer of the Company with a view
to the providing of services or products which are competitive with those that
are marketed or provided by the Company as of the date that Robert McDowell
leaves the Company's employment, provided that these restrictions shall apply
only to customers or prospects of the Company which have been customers or
prospects with whom Robert McDowell has had contacts on behalf of the Company.
Non-solicitation of Employees. Robert McDowell agrees that during the term
of his employment hereunder and for a period of one (1) years thereafter, Robert
McDowell will not directly or indirectly solicit or in any other manner
encourage employees of the Company to leave its employ for an engagement in any
capacity with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Robert McDowell employment by the Company without cause or by
reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Robert McDowell and his estate and personal representatives and
upon the Company and its successors and assigns. This Agreement may not be
assigned, pledged or otherwise hypothecated by Robert McDowell.
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Robert McDowell to perform the obligations of the Company pursuant to this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. In the event the
<PAGE>
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Robert McDowell hereunder shall inure to the benefit of
and be enforceable by Robert McDowell and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Robert McDowell by the Company and
supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr. /s/ Roger Finchum Sr.
Chief Executive officer ----------------------
9/21/99
/s/ Robert L. McDowell
-----------------------
-----------------------
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and Roger
D. Finchum Sr..
WHEREAS, the Company desires to employ Roger D. Finchum Sr. as the
"CEO/President" of the Company;
WHEREAS, Roger D. Finchum Sr. has agreed to provide such services in accordance
with the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Roger D. Finchum Sr. as CEO/President
during the term of this Agreement and Currier hereby accepts such employment.
Roger D. Finchum Sr. shall be responsible for overseeing all operations both
foreign and domestic, and shall have such other duties regarding the Company as
shall be determined from time to time by the Board of Directors of the Company
("Board")..
Term of Employment. The term of employment of Roger D. Finchum Sr. shall
be for a term of 2 years from the date of this Agreement ("Initial Term") and
shall automatically extend for additional terms of 2 year(s)("Renewal Term")
unless this Agreement is terminated as of the last day of the Initial Term or as
of the last day of any Renewal Term upon not less than ninety (90) days prior
written notice by either party to the other, subject to earlier termination as
provided in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. $160,000.00 shall be paid a base salary at the annual
rate of 10% in the 1st year of this Agreement; increases for the second and
third year are contingent upon review by the compensation committee, which will
be established by the Board of Directors, commencing on the date that the
Company completes full funding of the 23-27 million dollar offering of its
common stock, which offering is being made pursuant to the Company's
Registration Statement on Form SB-2 to be filed under the Securities Act of
1933, as amended, with the Securities and Exchange Commission on or about
November 1999 (the "Offering").
Cash Bonus. Roger D. Finchum Sr. shall be paid a cash bonus, if any,
within the sole discretion of the Board of Directors of the Company. Such bonus
shall be paid within a reasonable period of time after the Board of Directors in
its discretion awards such cash bonus.
(c) Stock Bonus. Roger D. Finchum Sr. shall receive a stock bonus, if any,
within the sole discretion of the Board of Directors of the Company. Such stock
bonus shall be implemented within a reasonable period of time after the Board of
Directors in its discretion awards such stock bonus.
(d) Vacation. Roger D. Finchum Sr. shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
then in effect, but no less than one (1) weeks of vacation the first
<PAGE>
year. Every year thereafter the employee will receive two (2) weeks of vacation
every year up to five years.
(e) Other Benefits. Roger D. Finchum Sr. shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Roger D. Finchum Sr. shall also be provided, at Company expense, with a vehicle
for business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Roger D. Finchum Sr.
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one lump-sum severance
benefits equal to one year(365) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Roger D. Finchum Sr. within fifteen
(15) days of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Roger D. Finchum Sr.
shall be entitled to participate and receive stock option grants from the
Company's Employee Stock Option Plan ("ESOP") during his employment with the
Company, at the discretion of the Board of Directors or committee of the Board
responsible to administer the ESOP, in amounts which are proportional to and at
the same time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Roger D.
Finchum Sr. at any time for cause (as hereinafter defined) upon written notice.
The term "for cause" shall mean: the continued failure by Roger D. Finchum Sr.
to substantially perform his primary duties as Roger D. Finchum Sr. of the
Company in a reasonable professional manner other than due to temporary or total
disability or death, after a written demand for such substantial performance is
delivered to Roger D. Finchum Sr. by the Board of Directors of the Company; the
unauthorized dissemination of significant trade secrets or other proprietary
property of the Company; the commission of a felony or commission of a crime
involving dishonesty or moral turpitude; the commission of any act or acts of
dishonesty which acts are intended to result or do result directly or indirectly
in gain or personal enrichment of Roger D. Finchum Sr. or a related person or
affiliated company or when such acts are intended to cause harm or damages to
the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
<PAGE>
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
prior written notice; provided, however, that such termination notice shall not
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Roger D. Finchum Sr. of his employment hereunder by
reason of the default of the Company shall be deemed for all purposes of this
Agreement a termination by the Company without cause.
Disability. The Company may terminate the employment of Roger D. Finchum
Sr. under this Agreement by written notice upon the total and permanent
disability of Roger D. Finchum Sr.. Total and permanent disability shall mean
the inability of Roger D. Finchum Sr. to substantially perform the essential
functions of his position, with or without reasonable accommodations, due to
sickness or other physical or mental disability, for thirty (30) days in any
thirty (30) day period or a period of time which exceeds the time for medical
leave provided by law, whichever period is longer. The Company shall give Roger
D. Finchum Sr. written notice of any termination hereunder.
Death. The employment of Roger D. Finchum Sr. under this Agreement
automatically terminates upon the death of Roger D. Finchum Sr..
Expense Reimbursement. Roger D. Finchum Sr. shall be reimbursed, upon a
proper accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Roger D. Finchum Sr. shall not use or disclose to others,
without the prior written consent of the Company, any customer lists, trade
secrets, secret know-how, or other confidential information relative to the
business of the Company obtained by Roger D. Finchum Sr. in the course of
rendering services pursuant to this Agreement. The obligation of Roger D.
Finchum Sr. with respect to any item of such information shall terminate if that
item of information becomes disclosed in published literature or otherwise
becomes publicly available, provided that such public disclosure did not result,
directly or indirectly, from any act or omission of Roger D. Finchum Sr.. Upon
the leaving the employ of the Company for any reason, Roger D. Finchum Sr. shall
continue to be bound by this Paragraph 8 for a period of one (1) years, and
shall not take with him any customer lists, confidential data, or other
documents and instruments which are the property of the Company. All such data,
documents and instruments and all copies thereof shall be surrendered by Roger
D. Finchum Sr. to the Company on or prior to the termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
<PAGE>
Limitations.
Non-Compete. Roger D. Finchum Sr. agrees that during the term of his
employment with the Company hereunder and for a period of one (1) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with, any business engaged in the providing of services or
products competitive to those provided by the Company in any geographic area in
which the Company operates as of the date that Roger D. Finchum Sr. leaves the
Company's employment. Ownership of less than 5% of companies whose securities
are publicly traded is not prohibited by this Agreement.
Non-solicitation of Customers. Roger D. Finchum Sr. agrees that during the
term of his employment with the Company hereunder and for a period of one (1)
years thereafter he shall not, on his own behalf, or on behalf of another,
directly or indirectly, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospective customer of the Company with a
view to the providing of services or products which are competitive with those
that are marketed or provided by the Company as of the date that Roger D.
Finchum Sr. leaves the Company's employment, provided that these restrictions
shall apply only to customers or prospects of the Company which have been
customers or prospects with whom Roger D. Finchum Sr. has had contacts on behalf
of the Company.
Non-solicitation of Employees. Roger D. Finchum Sr. agrees that during the
term of his employment hereunder and for a period of one (1) years thereafter,
Roger D. Finchum Sr. will not directly or indirectly solicit or in any other
manner encourage employees of the Company to leave its employ for an engagement
in any capacity with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Roger D. Finchum Sr. employment by the Company without cause or
by reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Roger D. Finchum Sr. and his estate and personal representatives
and upon the Company and its successors and assigns. This Agreement may not be
assigned, pledged or otherwise hypothecated by Roger D. Finchum Sr..
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
<PAGE>
written agreement in form and substance reasonably satisfactory to counsel to
Roger D. Finchum Sr. to perform the obligations of the Company pursuant to this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. In the event the
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Roger D. Finchum Sr. hereunder shall inure to the benefit
of and be enforceable by Roger D. Finchum Sr. and his estate and legal
representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Roger D. Finchum Sr. by the
Company and supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr.: /s/ Roger Finchum Sr.
Chief Executive Officer ---------------------
Sept 20, 1999
---------------------
/s/ Roger D. Finchum Sr.
------------------------
Sept 20, 1999
------------------------
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and Lee
Watson.
WHEREAS, the Company desires to employ Lee Watson as the "CFO" of the Company;
WHEREAS, Lee Watson has agreed to provide such services in accordance with the
terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Lee Watson as CFO during the term of this
Agreement and Lee Watson hereby accepts such employment. Lee Watson shall be
responsible for overseeing all financial duties as related to the company, and
shall have such other duties regarding the Company as shall be determined from
time to time by the Board of Directors of the Company ("Board")..
Term of Employment. The term of employment of Lee Watson shall be for a
term of 2 years from the date of this Agreement ("Initial Term") and shall
automatically extend for additional terms of 2 year(s)("Renewal Term") unless
this Agreement is terminated as of the last day of the Initial Term or as of the
last day of any Renewal Term upon not less than ninety (90) days prior written
notice by either party to the other, subject to earlier termination as provided
in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. Lee Watson shall be paid a base salary of, $72,000.00
at the annual rate of 10% in the 1st year of this Agreement; increases for the
second and third year are contingent upon review by the compensation committee,
which will be established by the Board of Directors, commencing on the date that
the Company completes full funding of the 23-27 million dollar offering of its
common stock, which offering is being made pursuant to the Company's
Registration Statement on Form SB-2 to be filed under the Securities Act of
1933, as amended, with the Securities and Exchange Commission on or about
November 1999 (the "Offering").
Cash Bonus. Lee Watson shall be paid a cash bonus, if any, within the sole
discretion of the Board of Directors of the Company. Such bonus shall be paid
within a reasonable period of time after the Board of Directors in its
discretion awards such cash bonus.
(c) Stock Bonus. Lee Watson shall receive a stock bonus, if any, within the sole
discretion of the Board of Directors of the Company. Such stock bonus shall be
implemented within a reasonable period of time after the Board of Directors in
its discretion awards such stock bonus.
(d) Vacation. Lee Watson shall be entitled to paid vacation and paid Federal and
state holidays in accordance with the vacation policy of the Company then in
effect, but no less than one (1) weeks of vacation the first year. Every year
thereafter the employee will receive two (2) weeks of vacation every year up to
five years.
<PAGE>
(e) Other Benefits. Lee Watson shall be entitled to participate in all benefit
programs made generally available to other management employees of the Company,
on the same terms and conditions as they are offered to others, including but
not limited to medical, dental, and term life insurance benefits. Lee Watson
shall also be provided, at Company expense, with a vehicle for business use,
including all transportation and insurance costs associated therewith.
(f) Severance Payment. In the event of the termination of Lee Watson employment
hereunder prior to the end of the Initial Term, or any Renewal Term, by the
Company without cause (except termination upon death or total and permanent
disability) including any deemed termination by the Company as set forth in
paragraph 4(b) hereof, the Company shall pay one lump-sum severance benefits
equal to ninety (90) days of base compensation ("Severance Payment"), which
Severance Payment shall be made to Lee Watson within fifteen (15) days of the
notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Lee Watson shall be
entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Lee Watson at
any time for cause (as hereinafter defined) upon written notice. The term "for
cause" shall mean: the continued failure by Lee Watson to substantially perform
his primary duties as Lee Watson of the Company in a reasonable professional
manner other than due to temporary or total disability or death, after a written
demand for such substantial performance is delivered to Lee Watson by the Board
of Directors of the Company; the unauthorized dissemination of significant trade
secrets or other proprietary property of the Company; the commission of a felony
or commission of a crime involving dishonesty or moral turpitude; the commission
of any act or acts of dishonesty which acts are intended to result or do result
directly or indirectly in gain or personal enrichment of Lee Watson or a related
person or affiliated company or when such acts are intended to cause harm or
damages to the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
prior written notice; provided, however, that such termination notice shall not
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Lee Watson of his employment hereunder by reason of
<PAGE>
the default of the Company shall be deemed for all purposes of this Agreement a
termination by the Company without cause.
Disability. The Company may terminate the employment of Lee Watson under
this Agreement by written notice upon the total and permanent disability of Lee
Watson. Total and permanent disability shall mean the inability of Lee Watson to
substantially perform the essential functions of his position, with or without
reasonable accommodations, due to sickness or other physical or mental
disability, for thirty (30) days in any thirty (30) day period or a period of
time which exceeds the time for medical leave provided by law, whichever period
is longer. The Company shall give Lee Watson written notice of any termination
hereunder.
Death. The employment of Lee Watson under this Agreement automatically
terminates upon the death of Lee Watson.
Expense Reimbursement. Lee Watson shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Lee Watson shall not use or disclose to others, without the
prior written consent of the Company, any customer lists, trade secrets, secret
know-how, or other confidential information relative to the business of the
Company obtained by Lee Watson in the course of rendering services pursuant to
this Agreement. The obligation of Lee Watson with respect to any item of such
information shall terminate if that item of information becomes disclosed in
published literature or otherwise becomes publicly available, provided that such
public disclosure did not result, directly or indirectly, from any act or
omission of Lee Watson. Upon the leaving the employ of the Company for any
reason, Lee Watson shall continue to be bound by this Paragraph 8 for a period
of one (1) years, and shall not take with him any customer lists, confidential
data, or other documents and instruments which are the property of the Company.
All such data, documents and instruments and all copies thereof shall be
surrendered by Lee Watson to the Company on or prior to the termination of his
employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
Non-Compete. Lee Watson agrees that during the term of his employment with
the Company hereunder and for a period of one (1) years thereafter he shall
refrain, directly and indirectly, jointly and severally, from managing,
<PAGE>
operating, financing, participating in the ownership, management or operation of
or be employed by, consult with, advise or be otherwise engaged in any manner
with, any business engaged in the providing of services or products competitive
to those provided by the Company in any geographic area in which the Company
operates as of the date that Lee Watson leaves the Company's employment.
Ownership of less than 5% of companies whose securities are publicly traded is
not prohibited by this Agreement.
Non-solicitation of Customers. Lee Watson agrees that during the term of
his employment with the Company hereunder and for a period of one (1) years
thereafter he shall not, on his own behalf, or on behalf of another, directly or
indirectly, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospective customer of the Company with a view
to the providing of services or products which are competitive with those that
are marketed or provided by the Company as of the date that Lee Watson leaves
the Company's employment, provided that these restrictions shall apply only to
customers or prospects of the Company which have been customers or prospects
with whom Lee Watson has had contacts on behalf of the Company.
Non-solicitation of Employees. Lee Watson agrees that during the term of
his employment hereunder and for a period of one (1) years thereafter, Lee
Watson will not directly or indirectly solicit or in any other manner encourage
employees of the Company to leave its employ for an engagement in any capacity
with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Lee Watson employment by the Company without cause or by reason
of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrators) shall be binding on the parties. Notwithstanding the foregoing, any
party hereto may apply to any court for a temporary or permanent injunction or
restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Lee Watson and his estate and personal representatives and upon the
Company and its successors and assigns. This Agreement may not be assigned,
pledged or otherwise hypothecated by Lee Watson.
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Lee Watson to perform the obligations of the Company pursuant to this Agreement
in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. In the event the Company has a
parent, the parent shall guaranty the obligations of the Company hereunder. The
rights and obligations of the Company under this Agreement shall inure to the
<PAGE>
benefit of and be binding upon the successors and assigns of the Company
regardless of whether such successor or assign consents in writing thereto. The
rights of Lee Watson hereunder shall inure to the benefit of and be enforceable
by Lee Watson and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Lee Watson by the Company and
supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr. /s/ Roger Finchum Sr.
Chief Executive Officer ---------------------
9-21-99
/s/ Lee Watson
--------------
9/21/99
--------------
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement',) is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and Roger
D. Finchum Jr..
WHEREAS, the Company desires to employ Roger D. Finchum Jr. as the "Vice
President" of the Company;
WHEREAS, Roger D. Finchum Jr. has agreed to provide such services in accordance
with the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Roger D. Finchum Jr. as Vice President
during the term of this Agreement and Carrier hereby accepts such employment.
Roger D. Finchum Jr. shall be responsible for US operations on a daily basis,
and shall have such other duties regarding the Company as shall be determined
from time to time by the Board of Directors of the Company ("Board")..
Term of Employment. The term of employment of Roger D. Finchum Jr. shall
be for a term of 2 years from the date of this Agreement ("Initial Term") and
shall automatically extend for additional terms of 2 year(s) ("Renewal Term")
unless this Agreement is terminated as of the last day of the Initial Term or as
of the last day of any Renewal Term upon not less than ninety (90) days prior
written notice by either party to the other, subject to earlier termination as
provided in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. $78,000.00 shall be paid a base salary at the annual
rate of 10% in the 1st year of this Agreement; increases for the second and
third year are contingent upon review by the compensation committee, which will
be established by the Board of Directors, commencing on the date that the
Company completes full funding of the 23-27 million dollar offering of its
common stock, which offering is being made pursuant to the Company's
Registration Statement on Form SB-2 to be filed under the Securities Act of
1933, as amended, with the Securities and Exchange Commission on or about
November 1999 (the "Offering").
Cash Bonus. Roger D. Finchum Jr. shall be paid a cash bonus, if any,
within the sole discretion of the Board of Directors of the Company. Such bonus
shall be paid within a reasonable period of time after the Board of Directors in
its discretion awards such cash bonus.
(c) Stock Bonus. Roger D. Finchum Jr. shall receive a stock bonus, if any,
within the sole discretion of the Board of Directors of the Company. Such stock
bonus shall be implemented within a reasonable period of time after the Board of
Directors in its discretion awards such stock bonus.
(d) Vacation. Roger D. Finchum Jr. shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
then in effect, but no less than one (1) weeks of vacation the first
<PAGE>
year. Every year thereafter the employee will receive two (2) weeks of vacation
every year up to five years.
(e) Other Benefits. Roger D. Finchum Jr. shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Roger D. Finchum Jr. shall also be provided, at Company expense, with a vehicle
for business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Roger D. Finchum Jr.
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one (1) lump-sum severance
benefits equal to ninety (90) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Roger D. Finchum Jr. within fifteen(15)
days of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Roger D. Finchum Jr.
shall be entitled to participate and receive stock option grants from the
Company's Employee Stock Option Plan ("ESOP") during his employment with the
Company, at the discretion of the Board of Directors or committee of the Board
responsible to administer the ESOP, in amounts which are proportional to and at
the same time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Roger D.
Finchum Jr. at any time for cause (as hereinafter defined) upon written notice.
The term "for cause" shall mean: the continued failure by Roger D. Finchum Jr.
to substantially perform his primary duties as Roger D. Finchum Jr. of the
Company in a reasonable professional manner other than due to temporary or total
disability or death, after a written demand for such substantial performance is
delivered to Roger D. Finchum Jr. by the Board of Directors of the Company; the
unauthorized dissemination of significant trade secrets or other proprietary
property of the Company; the commission of a felony or commission of a crime
involving dishonesty or moral turpitude; the commission of any act or acts of
dishonesty which acts are intended to result or do result directly or indirectly
in gain or personal enrichment of Roger D. Finchum Jr. or a related person or
affiliated company or when such acts are intended to cause harm or damages to
the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
<PAGE>
prior written notice; provided, however, that such termination notice shall not
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Roger D. Finchum Jr. of his employment hereunder by
reason of the default of the Company shall be deemed for all purposes of this
Agreement a termination by the Company without cause.
Disability. The Company may terminate the employment of Roger D. Finchum
Jr. under this Agreement by written notice upon the total and permanent
disability of Roger D. Finchum Jr.. Total and permanent disability shall mean
the inability of Roger D. Finchum Jr. to substantially perform the essential
functions of his position, with or without reasonable accommodations, due to
sickness or other physical or mental disability, for thirty (30) days in any
thirty (30) day period or a period of time which exceeds the time for medical
leave provided by law, whichever period is longer. The Company shall give Roger
D. Finchum Jr. written notice of any termination hereunder.
Death. The employment of Roger D. Finchum Jr. under this Agreement
automatically terminates upon the death of Roger D. Finchum Jr..
Expense Reimbursement. Roger D. Finchum Jr. shall be reimbursed, upon a
proper accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Roger D. Finchum Jr. shall not use or disclose to others,
without the prior written consent of the Company, any customer lists, trade
secrets, secret know-how, or other confidential information relative to the
business of the Company obtained by Roger D. Finchum Jr. in the course of
rendering services pursuant to this Agreement. The obligation of Roger D.
Finchum Jr. with respect to any item of such information shall terminate if that
item of information becomes disclosed in published literature or otherwise
becomes publicly available, provided that such public disclosure did not result,
directly or indirectly, from any act or omission of Roger D. Finchum Jr.. Upon
the leaving the employ of the Company for any reason, Roger D. Finchum Jr. shall
continue to be bound by this Paragraph 8 for a period of one (1) years, and
shall not take with him any customer lists, confidential data, or other
documents and instruments which are the property of the Company. All such data,
documents and instruments and all copies thereof shall be surrendered by Roger
D. Finchum Jr. to the Company on or prior to the termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
<PAGE>
Non-Compete. Roger D. Finchum Jr. agrees that during the term of his
employment with the Company hereunder and for a period of one (1) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with, any business engaged in the providing of services or
products competitive to those provided by the Company in any geographic area in
which the Company operates as of the date that Roger D. Finchum Jr. leaves the
Company's employment. Ownership of less than 5% of companies whose securities
are publicly traded is not prohibited by this Agreement.
Non-solicitation of Customers. Roger D. Finchum Jr. agrees that during the
term of his employment with the Company hereunder and for a period of one (1)
years thereafter he shall not, on his own behalf, or on behalf of another,
directly or indirectly, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospective customer of the Company with a
view to the providing of services or products which are competitive with those
that are marketed or provided by the Company as of the date that Roger D.
Finchum Jr. leaves the Company's employment, provided that these restrictions
shall apply only to customers or prospects of the Company which have been
customers or prospects with whom Roger D. Finchum Jr. has had contacts on behalf
of the Company.
Non-solicitation of Employees. Roger D. Finchum Jr. agrees that during the
term of his employment hereunder and for a period of one (1) years thereafter,
Roger D. Finchum Jr. will not directly or indirectly solicit or in any other
manner encourage employees of the Company to leave its employ for an engagement
in any capacity with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Roger D. Finchum Jr. employment by the Company without cause or
by reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Roger D. Finchum Jr. and his estate and personal representatives
and upon the Company and its successors and assigns. This Agreement may not be
assigned, pledged or otherwise hypothecated by Roger D. Finchum Jr..
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Roger D. Finchum Jr. to perform the obligations of the Company pursuant to this
<PAGE>
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. In the event the
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Roger D. Finchum Jr. hereunder shall inure to the benefit
of and be enforceable by Roger D. Finchum Jr. and his estate and legal
representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Roger D. Finchum Jr. by the
Company and supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
BY: /s/ Roger Finchum Sr. /s/ Roger Finchum Sr.
Chief Executive Officer ---------------------
Sept 20, 1999
/s/ Roger Finchum Jr.
---------------------
20 Sept 99
---------------------
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and Erich
Fischer.
WHEREAS, the Company desires to employ Erich Fischer as the "Vice President of
Marketing" of the Company;
WHEREAS, Erich Fischer has agreed to provide such services in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Erich Fischer as Vice President during
the term of this Agreement and Erich Fischer hereby accepts such employment.
Erich Fischer shall be responsible for US marketing operations on a daily basis,
and shall have such other duties regarding the Company as shall be determined
from time to time by the Board of Directors of the Company ("Board")..
Term of Employment. The term of employment of Erich Fischer shall be for a
term of 2 years from the date of this Agreement ("Initial Term") and shall
automatically extend for additional terms of 2 year(s)("Renewal Term") unless
this Agreement is terminated as of the last day of the Initial Term or as of the
last day of any Renewal Term upon not less than ninety (90) days prior written
notice by either party to the other, subject to earlier termination as provided
in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. Erich Fischer shall be paid a base salary of
$48,000.00 at the annual rate of %10% in the 1st year of this Agreement;
increases for the second and third year are contingent upon review by the
compensation committee, which will be established by the Board of Directors,
commencing on the date that the Company completes full funding of the 23-27
million dollar offering of its common stock, which offering is being made
pursuant to the Company's Registration Statement on Form SB-2 to be filed under
the Securities Act of 1933, as amended, with the Securities and Exchange
Commission on or about November 1999 (the "Offering"). As deferred payment Erich
Fischer shall receive 15,000 shares of common stock after the offering.
Cash Bonus. Erich Fischer shall be paid a cash bonus, if any, within the
sole discretion of the Board of Directors of the Company. Such bonus shall be
paid within a reasonable period of time after the Board of Directors in its
discretion awards such cash bonus.
(c) Stock Bonus. Erich Fischer shall receive a stock bonus, if any, within the
sole discretion of the Board of Directors of the Company. Such stock bonus shall
be implemented within a reasonable period of time after the Board of Directors
in its discretion awards such stock bonus.
(d) Vacation. Erich Fischer shall be entitled to paid vacation and paid Federal
and state holidays in accordance with the vacation policy of the Company then in
effect, but no less than one (1) weeks of vacation the first year.
<PAGE>
Every year thereafter the employee will receive two (2) weeks of vacation every
year up to five years.
(e) Other Benefits. Erich Fischer shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Erich Fischer shall also be provided, at Company expense, with a vehicle for
business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Erich Fischer
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one lump-sum severance
benefits equal to ninety (90) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Erich Fischer within fifteen (15) days
of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Erich Fischer shall be
entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Erich Fischer
at any time for cause (as hereinafter defined) upon written notice. The term
"for cause" shall mean: the continued failure by Erich Fischer to substantially
perform his primary duties as Erich Fischer of the Company in a reasonable
professional manner other than due to temporary or total disability or death,
after a written demand for such substantial performance is delivered to Erich
Fischer by the Board of Directors of the Company; the unauthorized dissemination
of significant trade secrets or other proprietary property of the Company; the
commission of a felony or commission of a crime involving dishonesty or moral
turpitude; the commission of any act or acts of dishonesty which acts are
intended to result or do result directly or indirectly in gain or personal
enrichment of Erich Fischer or a related person or affiliated company or when
such acts are intended to cause harm or damages to the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company; or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
prior written notice; provided, however, that such termination notice shall not
<PAGE>
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Erich Fischer of his employment hereunder by reason
of the default of the Company shall be deemed for all purposes of this Agreement
a termination by the Company without cause.
Disability. The Company may terminate the employment of Erich Fischer
under this Agreement by written notice upon the total and permanent disability
of Erich Fischer. Total and permanent disability shall mean the inability of
Erich Fischer to substantially perform the essential functions of his position,
with or without reasonable accommodations, due to sickness or other physical or
mental disability, for thirty (30) days in any thirty (30) day period or a
period of time which exceeds the time for medical leave provided by law,
whichever period is longer. The Company shall give Erich Fischer written notice
of any termination hereunder.
Death. The employment of Erich Fischer under this Agreement automatically
terminates upon the death of Erich Fischer.
Expense Reimbursement. Erich Fischer shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Erich Fischer shall not use or disclose to others, without the
prior written consent of the Company, any customer lists, trade secrets, secret
know-how, or other confidential information relative to the business of the
Company obtained by Erich Fischer in the course of rendering services pursuant
to this Agreement. The obligation of Erich Fischer with respect to any item of
such information shall terminate if that item of information becomes disclosed
in published literature or otherwise becomes publicly available, provided that
such public disclosure did not result, directly or indirectly, from any act or
omission of Erich Fischer. Upon the leaving the employ of the Company for any
reason, Erich Fischer shall continue to be bound by this Paragraph 8 for a
period of one (1) years, and shall not take with him any customer lists,
confidential data, or other documents and instruments which are the property of
the Company. All such data, documents and instruments and all copies thereof
shall be surrendered by Erich Fischer to the Company on or prior to the
termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
Non-Compete. Erich Fischer agrees that during the term of his employment
<PAGE>
with the Company hereunder and for a period of one (1) years thereafter he shall
refrain, directly and indirectly, jointly and severally, from managing,
operating, financing, participating in the ownership, management or operation of
or be employed by, consult with, advise or be otherwise engaged in any manner
with, any business engaged in the providing of services or products competitive
to those provided by the Company in any geographic area in which the Company
operates as of the date that Erich Fischer leaves the Company's employment.
Ownership of less than 5% of companies whose securities are publicly traded is
not prohibited by this Agreement.
Non-solicitation of Customers. Erich Fischer agrees that during the term
of his employment with the Company hereunder and for a period of one (1) years
thereafter he shall not, on his own behalf, or on behalf of another, directly or
indirectly, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospective customer of the Company with a view
to the providing of services or products which are competitive with those that
are marketed or provided by the Company as of the date that Erich Fischer leaves
the Company's employment, provided that these restrictions shall apply only to
customers or prospects of the Company which have been customers or prospects
with whom Erich Fischer has had contacts on behalf of the Company.
Non-solicitation of Employees. Erich Fischer agrees that during the term
of his employment hereunder and for a period of one (1) years thereafter, Erich
Fischer will not directly or indirectly solicit or in any other manner encourage
employees of the Company to leave its employ for an engagement in any capacity
with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Erich Fischer employment by the Company without cause or by
reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Erich Fischer and his estate and personal representatives and upon
the Company and its successors and assigns. This Agreement may not be assigned,
pledged or otherwise hypothecated by Erich Fischer.
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Erich Fischer to perform the obligations of the Company pursuant to this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. In the event the
<PAGE>
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Erich Fischer hereunder shall inure to the benefit of and
be enforceable by Erich Fischer and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Erich Fischer by the Company and
supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr.
Chief Executive Officer ------------------
/s/ Erich Fischer
-----------------
9/20/99
-----------------
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 16
day of September, 1999 by and between ColorSmart.com Inc. ("Company") and
Reginald Burrows.
WHEREAS, the Company desires to employ Reginald Burrows as the "Vice President"
of the Company;
WHEREAS, Reginald Burrows has agreed to provide such services in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Employment. Company shall employ Reginald Burrows as Vice President during
the term of this Agreement and Reginald Burrows hereby accepts such employment.
Reginald Burrows shall be responsible for Operations outside the US on a daily
basis, and shall have such other duties regarding the Company as shall be
determined from time to time by the Board of Directors of the Company ("Board").
Term of Employment. The term of employment of Reginald Burrows shall be
for a term of 2 years from the date of this Agreement ("Initial Term") and shall
automatically extend for additional terms of 2 year(s) ("Renewal Term") unless
this agreement is terminated as of the last day of the Initial Term or as of the
last day of any Renewal Term upon not less than ninety (90) days prior written
notice by either party to the other, subject to earlier termination as provided
in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. Reginald Burrows shall be paid a base salary of
$96,000.00 at the annual rate of 10% in the 1st year of this Agreement;
increases for the second and third year are contingent upon review by the
compensation committee, commencing on the date that the company completes full
funding of the 23-27 million dollar offering of its common stock, which offering
is being made pursuant to the Company's Registration Statement on Form SB-2 to
be filed under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission on or about November 1999 (the "Offering").
Cash Bonus. Reginald Burrows shall be paid a cash bonus, if any, within
the sole discretion of the Board of Directors of the Company. Such bonus shall
be paid within a reasonable period of time after the Board of Directors in its
discretion awards such cash bonus.
(c) Stock Bonus. Reginald Burrows shall receive a stock bonus, if any, within
the sole discretion of the Board of Directors of the Company. Such stock bonus
shall be implemented within a reasonable period of time after the Board of
Directors in its discretion awards such stock bonus.
(d) Vacation. Reginald Burrows shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
then in effect, but no less than one (1) weeks of vacation the first year.
<PAGE>
Every year thereafter the employee will receive two (2) weeks of vacation every
year up to five years.
(e) Other Benefits. Reginald Burrows shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
Reginald Burrows shall also be provided, at Company expense, with a vehicle for
business use, including all transportation and insurance costs associated
therewith.
(f) Severance Payment. In the event of the termination of Reginald Burrows
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause (except termination upon death or total and
permanent disability) including any deemed termination by the Company as set
forth in paragraph 4(b) hereof, the Company shall pay one lump-sum severance
benefits equal to ninety (90) days of base compensation ("Severance Payment"),
which Severance Payment shall be made to Reginald Burrows within fifteen (15)
days of the notice of termination of employment.
(g) Stock Option Grants/Employee Stock Ownership Plan. Reginald Burrows shall be
entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of the Company's senior management.
Termination of Employment.
Termination For Cause. The Company may terminate the employment of Reginald
Burrows at any time for cause (as hereinafter defined) upon written notice. The
term "for cause" shall mean: the continued failure by Reginald Burrows to
substantially perform his primary duties as Reginald Burrows of the Company in a
reasonable professional manner other than due to temporary or total disability
or death, after a written demand for such substantial performance is delivered
to Reginald Burrows by the Board of Directors of the Company; the unauthorized
dissemination of significant trade secrets or other proprietary property of the
Company; the commission of a felony or commission of a crime involving
dishonesty or moral turpitude; the commission of any act or acts of dishonesty
which acts are intended to result or do result directly or indirectly in gain or
personal enrichment of Reginald Burrows or a related person or affiliated
company or when such acts are intended to cause harm or damages to the Company;
the continued use of alcohol so as to have an adverse effect on the
performance of his duties;
the misappropriation or embezzlement of Company assets;
the knowingly furnishing of material false reports or information to the
directors or officers of the Company, or the making of serious disparaging
remarks regarding the Company publicly or to suppliers and/or customers or
potential customers of the Company.
Default. Either party may terminate this Agreement upon the breach of any
material provision of this Agreement by the other party upon thirty (30) days
prior written notice; provided, however, that such termination notice shall not
<PAGE>
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by Reginald Burrows of his employment hereunder by
reason of the default of the Company shall be deemed for all purposes of this
Agreement a termination by the Company without cause.
Disability. The company may terminate the employment of Reginald Burrows
under this Agreement by written notice upon the total and permanent disability
of Reginald Burrows. Total and permanent disability shall mean the inability of
Reginald Burrows to substantially perform the essential functions of his
position, with or without reasonable accommodations, due to sickness or other
physical or mental disability, for thirty (30) days in any thirty (30) day
period or a period of time which exceeds the time for medical leave provided by
law, whichever period is longer. The Company shall give Reginald Burrows written
notice of any termination hereunder.
Death. The employment of Reginald Burrows under this Agreement
automatically terminates upon the death of Reginald Burrows.
Expense Reimbursement. Reginald Burrows shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, Reginald Burrows shall not use or disclose to others, without
the prior written consent of the Company, any customer lists, trade secrets,
secret know-how, or other confidential information relative to the business of
the Company obtained by Reginald Burrows in the course of rendering services
pursuant to this Agreement. The obligation of Reginald Burrows with respect to
any item of such information shall terminate if that item of information becomes
disclosed in published literature or otherwise becomes publicly available,
provided that such public disclosure did not result, directly or indirectly,
from any act or omission of Reginald Burrows. Upon the leaving the employ of the
Company for any reason, Reginald Burrows shall continue to be bound by this
Paragraph 8 for a period of one (1) years, and shall not take with him any
customer lists, confidential data, or other documents and instruments which are
the property of the Company. All such data, documents and instruments and all
copies thereof shall be surrendered by Reginald Burrows to the Company on or
prior to the termination of his employment.
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
Limitations.
Non-Compete. Reginald Burrows agrees that during the term of his
<PAGE>
employment with the Company hereunder and for a period of one (1) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with, any business engaged in the providing of services or
products competitive to those provided by the Company in any geographic area in
which the Company operates as of the date that Reginald Burrows leaves the
Company's employment. Ownership of less than 5% of companies whose securities
are publicly traded is not prohibited by this Agreement.
Non-solicitation of Customers. Reginald Burrows agrees that during the
term of his employment with the Company hereunder and for a period of one (1)
years thereafter he shall not, on his own behalf, or on behalf of another,
directly or indirectly, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospective customer of the Company with a
view to the providing of services or products which are competitive with those
that are marketed or provided by the Company as of the date that Reginald
Burrows leaves the Company's employment, provided that these restrictions shall
apply only to customers or prospects of the Company which have been customers or
prospects with whom Reginald Burrows has had contacts on behalf of the Company.
Non-solicitation of Employees. Reginald Burrows agrees that during the
term of his employment hereunder and for a period of one (1) years thereafter,
Reginald Burrows will not directly or indirectly solicit or in any other manner
encourage employees of the Company to leave its employ for an engagement in any
capacity with any other company or entity.
Limitations. Notwithstanding the foregoing, the covenants of
ColorSmart.com Inc. pursuant to this paragraph 10 shall terminate upon the
termination of Reginald Burrows employment by the Company without cause or by
reason of the Company's breach of its obligations hereunder.
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of any complaint with the AAA, the parties
shall meet and attempt to resolve the dispute. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Reginald Burrows and his estate and personal representatives and
upon the Company and its successors and assigns. This Agreement may not be
assigned, pledged or otherwise hypothecated by Reginald Burrows.
Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to counsel to
Reginald Burrows to perform the obligations of the Company pursuant to this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. In the event the
<PAGE>
Company has a parent, the parent shall guaranty the obligations of the Company
hereunder. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company regardless of whether such successor or assign consents in writing
thereto. The rights of Reginald Burrows hereunder shall inure to the benefit of
and be enforceable by Reginald Burrows and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of Reginald Burrows by the Company
and supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Nevada, without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COLORSMART INC.
By: /s/ Roger Finchum Sr. /s/ Roger Finchum Sr.
-----------------------------
Chief Executive Officer
Oct 1 1999
/s/ Reginald Burrows
--------------------
18/10/1999.
<PAGE>
Exhibit 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
23rd day of September, 1998 by and between ColorSmart, Inc. and Chris England;
WHEREAS, ColorSmart desires to employ Chris England ("England") as the
"President" of ATW Inc. (the "Company"); and
WHEREAS, England has agreed to provide such services in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
I. EMPLOYMENT TERMS
Engagement. ColorSmart shall employ England as President of ATW, Inc.,
during the term of this Agreement and England hereby accepts such employment.
England shall be responsible for the day-to-day operation and management of ATW,
and shall have such other duties regarding the Company as shall be determined
from time to time by the Board of Directors of ColorSmart ("Board").
Term of Employment. The term of employment of England shall be for a term
of 2 (two) years from the date of the closing of the Stock and Asset Purchase
Agreement of even date herewith ("Initial Term"), and may be extended by mutual
agreement of the parties for additional terms of 2 (two) year(s) ("Renewal
Term"), unless this Agreement is terminated as of the last day of the Initial
Term or as of the last day of any Renewal Term upon not less than ninety (90)
days prior written notice by either party to the other, subject to earlier
termination as provided in paragraphs 4, 5, and 6 hereof.
Compensation. Base Salary. England shall be paid annual compensation of $
100,000.00 payable in equal monthly installments, commencing on the closing date
of ColorSmart's purchase of ATW, Inc. in accordance with the terms of the Stock
and Asset Purchase Agreement of even date herewith, with payments 30 days in
arrears. It is understood and agreed the annual compensation represents the
following: $80,000.00 as salary, and $20,000 as advance compensation for
restraint of trade (non-compete) should this Agreement not be renewed or
extended, or terminated as defined further in this Agreement.
Cash Bonus: England shall be paid a cash bonus, if any, within the sole
discretion of the Board of Directors of ColorSmart. Such bonus shall be paid
within a reasonable
<PAGE>
period of time after the Board of Directors in its discretion awards such cash
bonus, but not to exceed a period of 90 (ninety) days of the end of ColorSmarts
accounting period during which the cash bonus was declared.
Vacation. England shall be entitled to paid vacation and paid public
holidays in accordance with the vacation policy of ColorSmart then in effect,
but no less than 15 (fifteen) working days of vacation each year.
Other Benefits. England shall be entitled to participate in all benefit
programs made generally available to other management employees of ColorSmart,
on the same terms and conditions as they are offered to others, including but
not limited to medical, dental, and term life insurance benefits. England shall
maintain, at the company's expense his current health insurance as is in place
on the date of which employment commences, with no interruptions in coverage.
Stock Option Grants/Employee Stock Ownership Plan. England shall be
entitled to participate and receive stock option grants from the ColorSmart
Employee Stock Option Plan ("ESOP") during his employment with the ColorSmart,
at the discretion of the Board of Directors or committee of the Board
responsible to administer the ESOP, in amounts which are proportional to and at
the same time as option grants are made to other members of ColorSmart's senior
management and according to terms and conditions which are comparable to such
ESOP option grants received by other members of ColorSmart's senior management.
II. TERMINATION OF EMPLOYMENT.
Termination for Cause. ColorSmart may terminate the employment of England
at any time for cause (as hereinafter defined) upon written notice. The term
"cause" shall mean: the continued failure by England to substantially perform
his primary duties as President of ATW in a reasonable professional manner other
than due to temporary or total disability or death, after a written demand for
such substantial performance is delivered to England by the Board of Directors
of ColorSmart; the unauthorized dissemination of significant trade secrets or
other proprietary property of ColorSmart; the commission of a felony or
commission of a crime involving dishonesty or moral turpitude; the commission of
any act or acts of dishonesty which acts are intended to result or do result
directly or indirectly in gain or personal enrichment of England or a related
person or affiliated company or when such acts are intended to cause harm or
damages to ColorSmart; the continued use of alcohol so as to have an adverse
effect on the performance of his duties; the misappropriation or embezzlement of
ColorSmart assets; the knowingly furnishing of material false reports or
information to the directors or officers of ColorSmart; or the making of serious
disparaging remarks regarding ColorSmart publicly or to suppliers and/or
customers or potential customers of ColorSmart.
Default. Either party may terminate this Agreement upon the breach of any
<PAGE>
material provision of this Agreement by the other party upon 30 (thirty) days
prior written notice; provided, however, that such termination notice shall not
be effective if the defaulting party corrects such default prior to the date of
termination. Termination by England of his employment hereunder by reason of the
default of ColorSmart shall be deemed for all purposes of this Agreement a
termination by ColorSmart without cause.
Disability. ColorSmart may terminate the employment of England under this
Agreement by written notice upon the total and permanent disability of England.
Total and permanent disability shall mean the inability of England to
substantially perform the essential functions of his position, with or without
reasonable accommodations, due to sickness or other physical or mental
disability, for 30 (thirty) days in any 90 (ninety) day period or a period of
time which exceeds the time for medical leave provided by law, whichever period
is longer. ColorSmart shall give England written notice of any termination
hereunder.
Death. The employment of England under this Agreement automatically
terminates upon his death.
III. EXPENSES OF EMPLOYMENT
Expense Reimbursement. England shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with this
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to ColorSmart's policy.
IV. CONFIDENTIAL INFORMATION
Confidential Information. During the Initial Term or any Renewal Term of
this Agreement, England shall not use or disclose to others, without the prior
written consent of ColorSmart, any customer lists, trade secrets, secret
know-how, or other confidential information relative to the business of
ColorSmart obtained by England in the course of rendering services pursuant to
this Agreement. The obligation of England with respect to any item of such
information shall terminate if that item of information becomes disclosed in
published literature or otherwise becomes publicly available, provided that such
public disclosure did not result, directly or indirectly, from any act or
omission of England. Upon the leaving the employ of ColorSmart for any reason,
England shall continue to be bound by this Paragraph IV for a period of 2 (two)
years from the date of his termination of employment, and shall not take with
him any customer lists, confidential data, or other documents and instruments
which are the property of ColorSmart. All such data, documents and instruments
and all copies thereof shall be surrendered by England to ColorSmart on or prior
to the termination of his employment.
V. NOTICES
<PAGE>
Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or upon delivery to the address set forth below, if
delivered by any other means, addressed to the party and delivered to the
address set forth below or to such other address as such party gives written
notice in substitution therefor:
VI. LIMITATIONS
Non-Compete. England agrees that during the term of his employment with
ColorSmart hereunder and for a period of 2 (two) years thereafter, he shall
refrain, directly and indirectly, jointly and severally, from managing,
operating, financing, participating in the ownership, management or operation of
or be employed by, consult with, advise or be otherwise engaged in any manner
with, any business engaged in the providing of services or products competitive
to those provided by ColorSmart in any geographic area in which ColorSmart
operates as of the date that England leaves ColorSmart's employment. Ownership
of less than 2% of companies whose securities are publicly traded that are in
competition with the business or products of ColorSmart is not prohibited by
this Agreement.
Non-solicitation of Customers. England agrees that during the term of his
employment with ColorSmart hereunder and for a period of 2 (two) years
thereafter, he shall not, on his own behalf, or on behalf of another, directly
or indirectly, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospective customer of ColorSmart with a view
to the providing of services or products which are competitive with those that
are marketed or provided by ColorSmart as of the date that England leaves
ColorSmart's employment, provided that these restrictions shall apply only to
customers or prospects of ColorSmart which have been customers or prospects with
whom England has had contacts on behalf of ColorSmart.
Non-solicitation of Employees. England agrees that during the term of his
employment hereunder and for a period of 2 (two) years thereafter, he will not
directly or indirectly solicit or in any other manner encourage employees of
ColorSmart to leave its employ for an engagement in any capacity with any other
company or entity.
Limitations. Notwithstanding the foregoing, the covenants of England
pursuant to this paragraph IV shall terminate upon the termination of England's
employment by ColorSmart without cause or by England by reason of ColorSmart's
breach of its obligations hereunder.
VII. MISCELLANEOUS
Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before the Rules of
Commercial Arbitration of the American
<PAGE>
Arbitration Association ("AAA") by one or more arbitrators appointed by the
parties named herein on a mutual basis according to the Rules of the AAA, and
said arbitration shall take place in the City of Atlanta, Georgia. Either party
may institute the action by notice to the other party. Prior to the filing of
any complaint, the parties shall meet and attempt to resolve the dispute, and if
necessary appoint a mediator who shall be an attorney of at least 10 (ten) years
standing to assist in such dispute resolution. The cost of such arbitration
shall be borne equally by the parties. Any decision or award by said
arbitrator(s) shall be binding on the parties. Notwithstanding the foregoing,
any party hereto may apply to any court for a temporary or permanent injunction
or restraining order to specifically enforce any provision hereof.
Binding Effect. This Agreement shall inure to the benefit of and be
binding upon England and his estate and personal representatives and upon
ColorSmart and its successors and assigns. This Agreement may not be assigned,
pledged or otherwise hypothecated by England.
Successors and Assigns. ColorSmart shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of ColorSmart, by
written agreement in form and substance reasonably satisfactory to counsel to
England to perform the obligations of ColorSmart pursuant to this Agreement in
the same manner and to the same extent that ColorSmart would be required to
perform if no such succession had taken place. In the event ColorSmart has a
parent, the parent shall guaranty the obligations of ColorSmart hereunder. The
rights and obligations of ColorSmart under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of ColorSmart
regardless of whether such successor or assign consents in writing thereto. The
rights of England hereunder shall inure to the benefit of and be enforceable by
England and his estate and legal representative.
Severability. In the event of the invalidity, in whole or in part, of any
term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
Entire Agreement. This Agreement constitutes the entire understandings of
the parties with respect to the employment of England by ColorSmart and
supersedes all prior agreements and understandings, oral or written.
Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
Waiver. The failure by a party to insist upon strict performance of any
provision hereof shall not constitute a waiver of such provision. All waivers
must be in writing to be enforceable hereunder.
<PAGE>
Governing Law. This Agreement shall be made and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Georgia without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COLORSMART, INC.
By: /s/ Roger D. Finchum Sr.
------------------------
Chief Executive Officer
/s/ Chris England
------------------------
CHRIS ENGLAND
<PAGE>
[Letterhead of ATW Advertising That Works]
9/7/99
To: Roger Finchum SR
Dear Roger,
This is to confirm that the contract between ColorSmart Inc. and Chris England
for the acquisition of ATW Inc. has been extended until 1/31/00. Please sign and
fax back copy of such and send original back by FedEx mail.
/s/ Chris England
- ------------------------
(Signature) seller
9/7/99
- ------------------------
(Date)
/s/ ColorSmart /s/ Roger Finchum/CEO
- ------------------------------------
(Signature) purchaser
9/7/99
- ------------------------
(Date)
Best Regards,
Chris England
/s/ Chris England
ATW/ Advertising That Works
<PAGE>
Exhibit 10.21
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
12th day of October 1998 by and between Stonehouse Graphics (Pty) Limited
("Company") and Nolan Weight (Weight).
WHEREAS, the Company desires to employ Nolan Weight (Weight) as the
"General Manager" of the Company;
WHEREAS, Weight has agreed to provide such services in accordance with the
terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made and of
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1.00 Employment terms
1.01 Engagement.
The Company shall employ Weight as General Manager during the term of this
Agreement and Weight hereby accepts such employment. Weight shall be
responsible for the day-to-day operation and management of the Company,
and shall have such other duties regarding the Company as shall be
determined from time to time by the Board of Directors of the Company
("Board").
1.02 Term of Employment.
The term of employment of Weight shall be for a term of 2 (two) years from
the date of this Agreement ("Initial Term") and shall automatically extend
for additional terms of 2 (two) year(s) ("Renewal Term") unless this
Agreement is terminated as of the last day of the initial Term or as of
the last day of any Renewal Term upon not less than ninety (90) days prior
written notice by either party to the other, subject to earlier
termination as provided in paragraphs 2.01, 2.02 and 2.03 hereof.
<PAGE>
2
1.03 Compensation.
Base Salary. Weight shall be paid a base salary at the annual rate of R200
000 (two hundred thousand rand) payable in equal monthly installments,
commencing on the 16th October 1998. In addition Weight shall be paid the
sum of R100 000 (one hundred thousand rand) per annum likewise payable in
equal monthly installments commencing on the 16th October 1998 in
consideration of the limitations and restraints on termination of this
agreement as imposed upon him as hereinafter recorded. The base salary
shall be reviewed after a period of 1 (one) year.
1.04 Cash Bonus.
Weight shall be paid a cash bonus, if any, within the sole discretion of
the Board. Such bonus shall be paid within a reasonable period of time
after the Board in its discretion awards such cash bonus, but not to
exceed a period or 90 (ninety) days of the end of the Company's accounting
period during which the cash bonus was declared.
1.05 Vacation.
Weight shall be entitled to paid vacation and paid public holidays in
accordance with the vacation policy of the Company then in effect, but no
less than 20 (twenty) working days of vacation each year.
1.06 Other Benefits.
Weight shall be entitled to participate in all benefit programs made
generally available to other management employees of the Company, on the
same terms and conditions as they are offered to others, including but not
limited to medical, dental, and term life insurance benefits. Weight shall
in the discretion of the Board also be entitled to a motor allowance in
respect of all motor expenses incurred for business purposes.
1.07 Stock Option Grants/Employee Stock Ownership Plan.
Weight shall be entitled to participate and receive stock option grants
from the Company's Employee Stock Option Plan ("ESOP") during his
employment with the Company, at the discretion of the Board of Directors
or committee of the Board responsible to administer
<PAGE>
3
the ESOP, in amounts which are proportional to and at the same time as
option grants are made to other members of the Company's senior management
and according to terms and conditions which are comparable to such ESOP
option grants received by other members of the Company's senior
management.
2.00 Termination of Employment.
2.01 Termination for Cause.
The Company may terminate the employment of Weight at any time for cause (as
hereinafter defined) upon written notice. The term "for cause" shall mean: the
continued failure by Weight to substantially perform his primary duties as
General Manager of the Company in a reasonable professional manner other than
due to temporary or total disability or death, after a written demand for such
substantial performance is delivered to Weight by the Board of Directors of the
Company; the unauthorized dissemination of significant trade secrets or other
proprietary property of the Company: the commission of a crime involving
dishonesty or moral turpitude; the commission of any act or acts of dishonesty
which acts are intended to result or do result directly or indirectly in gain or
personal enrichment of Weight or a related person or affiliated company or when
such acts are intended to cause harm or damages to the Company; the continued
use of alcohol so as to have an adverse effect on the performance of his duties;
the misappropriation or embezzlement of Company assets; the knowingly furnishing
of material false reports or information to the directors or officers of the
Company; or the making of serious disparaging remarks regarding the Company
publicly or to suppliers and/or customers or potential customers of the Company.
2.02 Default.
Either party may terminate this Agreement upon the breach of any material
provision of this Agreement by the other party upon 30 (thirty) days prior
written notice; provided, however, that such termination notice shall not be
effective if the defaulting party corrects such default prior to the date of
termination. Termination by Weight of his employment hereunder by reason of the
default of the Company shall be deemed for all purposes of this Agreement a
termination by the Company without cause.
<PAGE>
4
2.03 Disability.
The Company may terminate the employment of Weight under this Agreement by
written notice upon the total and permanent disability of Weight. Total and
permanent disability shall mean the inability of Weight to substantially perform
the essential functions of his position, with or without reasonable
accommodations, due to sickness or other physical or mental disability, for 30
(thirty) days in any 90 (ninety) day period or a period of time which exceeds
the time for medical leave provided by law, whichever period is longer. The
Company shall give Weight written notice of any termination hereunder.
2.04 Death.
The employment of Weight under this Agreement automatically terminates upon his
death.
3.00 Limitations.
3.01 Non-Compete.
Weight agrees that during the term of his employment with the Company hereunder
and for a period of 2 (two) years thereafter he shall refrain, directly and
indirectly, jointly and severally, from managing, operating, financing,
participating in the ownership, management or operation of or be employed by,
consult with, advise or be otherwise engaged in any manner with, any business
engaged in the providing of services or products competitive to those provided
by the Company in the Republic of South Africa or in any geographic area in
which the Company operates as of the date that Weight leaves the Company's
employment. Ownership of less than 2% of companies whose securities are publicly
traded is not prohibited by this Agreement.
3.02 Non-solicitation of Customers.
Weight agrees that during the term of his employment with the Company hereunder
and for a period of 2 (two) years thereafter he shall not, on his own behalf, or
on behalf of another, directly or indirectly, solicit, contact, call upon,
communicate with or attempt to communicate with any customer or prospective
customer of the Company with a view to the providing of services or products
which are competitive with those that are marketed or provided by the Company as
of the
<PAGE>
5
date that Weight leaves the Company's employment, provided that these
restrictions shall apply only to customers or prospects of the Company which
have been customers or prospects with whom Weight has had contacts on behalf of
the Company.
3.03 Non-solicitation of Employees.
Weight agrees that during the term of his employment hereunder and for a period
of 2 (two) years thereafter, he will not directly or indirectly solicit or in
any other manner encourage employees of the Company to leave its employ for an
engagement in any capacity with any other company or entity.
3.04 Limitations.
Notwithstanding the foregoing, the covenants of Weight pursuant to this
paragraph 10 shall terminate upon the termination of Weight's employment by the
Company without cause or by Weight by reason of the Company's breach of its
obligations hereunder.
3.05 Dispute Resolution.
Any dispute regarding the interpretation, breach, damages or otherwise related
to the interpretation or construction of this Agreement shall be resolved by
binding arbitration before one or more arbitrators appointed by the Chairman of
the Law Society of Gauteng in the city of Johannesburg according to the
arbitration laws of the Republic of South Africa. Either party may institute the
action by notice to the other party. Prior to the filing of any complaint, the
parties shall meet and attempt to resolve the dispute, and if necessary appoint
a mediator who shall be an attorney of at least 10 (ten) years standing to
assist in such dispute resolution. The cost of such arbitration shall be borne
equally by the parties. Any decision or award by said arbitrator(s) shall be
binding on the parties. Notwithstanding the foregoing, any party hereto may
apply to any court for a temporary or permanent injunction or restraining order
to specifically enforce any provision hereof.
4.00 General
4.01 Expense Reimbursement.
<PAGE>
6
Weight shall be reimbursed, upon a proper accounting, for all expenses
reasonably incurred in connection with this employment hereunder, including all
reasonable travel and entertainment expenses pursuant to Company policy.
4.02 Confidential Information.
During the Initial Term or any Renewal Term of this Agreement, Weight shall not
use or disclose to others, without the prior written consent of the Company, any
customer lists, trade secrets, secret know-how, or other confidential
information relative to the business of the Company obtained by Weight in the
course of rendering services pursuant to this Agreement. The obligation of
Weight with respect to any item of such information shall terminate if that item
of information becomes disclosed in published literature or otherwise becomes
publicly available, provided that such public disclosure did not result,
directly or indirectly, from any act or omission of Weight. Upon the leaving the
employ of the Company for any reason, Weight shall continue to be bound by this
Paragraph 8 for a period of 2 (two) years, and shall not take with him any
customer lists, confidential data, or other documents and instruments which are
the property of the Company. All such data, documents and instruments and all
copies thereof shall be surrendered by Weight to the Company on or prior to the
termination of his employment.
4.03 Notices.
All notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been given when
delivered by hand or upon delivery to the address set forth below, if delivered
by any other means, addressed to the party and delivered to the address set
forth below or to such other address as such party gives written notice in
substitution therefor.
4.04 Binding Effect.
This Agreement shall inure to the benefit of and be binding upon Weight and his
estate and personal representatives and upon the Company and its successors and
assigns. This Agreement may not be assigned, pledged or otherwise hypothecated
by Weight.
4.05 Successors and Assigns.
<PAGE>
7
The Company shall cause any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the assets or
outstanding securities of the Company, by written agreement in form and
substance reasonably satisfactory to counsel to Weight to perform the
obligations of the Company pursuant to this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. In the event the Company has a parent, the parent
shall guaranty the obligations of the Company hereunder. The rights and
obligations of the Company under this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company regardless of
whether such successor or assign consents in writing thereto. The rights of
Weight hereunder shall inure to the benefit of and be enforceable by Weight and
his estate and legal representative.
4.06 Severability.
In the event of the invalidity, in whole or in part, of any term or provision of
this Agreement, the parties agree that such invalidity shall not affect the
validity of any other term or provision of this Agreement and that such
provision shall be subject to partial enforcement to the extent permitted under
applicable law.
4.07 Entire Agreement.
This Agreement constitutes the entire understandings of the parties with respect
to the employment of Weight by the Company and supersedes all prior agreements
and understandings, oral or written.
4.08 Amendments.
This Agreement may not be amended or modified except in a writing signed by both
parties.
4.09 Waiver.
The failure by a party to insist upon strict performance of any provision hereof
shall not constitute a waiver of such provision. All waivers must be in writing
to be enforceable hereunder.
<PAGE>
8
4.09 Governing Law.
This Agreement shall be made and in all respects shall be interpreted, construed
and governed by and in accordance with the laws of the Republic of South Africa
without giving effect to the rules governing conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
STONEHOUSE GRAPHICS (PTY) LIMITED
By: /s/ Roger D. Finchum, Sr
---------------------------------------
Chief Executive Officer
/s/ Nolan Weight
- ------------------------------------------
NOLAN WEIGHT
- ----------
*Prepared by Lams (Pty) Ltd 1st September 1998
Revised 11th October 1998
<PAGE>
Page 1
DEED OF PLEDGE
between
Colorsmart, Inc.
(Colorsmart) a Nevada Corporation of 537 Myatt Drive, Madison, Tennessee, U.S.A.
and
Nolan Weight
(Weight) of Unit 38, Sunnyrock Park, Sun Rock Close, Bedfordview East
1. Recitals
WHEREAS:
1.1 Colorsmart has purchased from Weight for the sum of R15 000 000.00
(fifteen million rand) the total issued shares and loan claims in
Stonehouse Graphics (Pty) Limited (Stonehouse) in terms of a Sales
of Shares Agreement dated the 12th October 1998 and amended on the
4th and ... November 1998;
1.2 The Effective Date of the purchase and sale referred to is the close
of business on the 30th November 1998.
1.3 Transfer of the shares and cession of the loan claims purchased will
be delivered and ceded by Weight to Colorsmart on the Effective
Date;
1.4 Payment of the purchase consideration will be effected by way of the
delivery of a Promissory Note due and payable on the 28th February
1999 drawn by Colorsmart in favour of Weight
<PAGE>
Page 2
1.5 Pending discharge of the Promissory Note and as security for the
payment thereof, Colorsmart has agreed to pledge and cede to Weight
respectively the shares and loan claims.
2. Definitions
In this document:
2.1 "Shares" mean the shares in Stonehouse purchased by Colorsmart in
terms of the Agreement dated the 12th October 1998.
2.2 "Claims" mean the loan claims in Stonehouse acquired by Colorsmart
from Weight.
2.3 "Agreement" means the agreement referred to in 1.1.
3. Pledge and Cession
3.1 As security for the payment of the Promissory Note referred to above
Colorsmart does hereby
(i) pledge to Weight the shares, and
(ii) cede, assign and transfer to Weight all its right title and
interest in the loan claims;
and undertakes to deliver the said shares to Weight together with a
duly signed cession of loan claims when executing this Deed of
Pledge.
3.2 The pledge and cession herein recorded shall operate as a continuing
covering security in favour of Weight for such sum or sums of money
as may now or hereafter be indebted to him by Colorsmart in terms of
the Agreement.
3.3 Against payment of the Promissory Note in respect whereof this
Pledge has been given as security, the Pledge shall be deemed to be
automatically cancelled and shall be null and void. Weight hereby
agrees
<PAGE>
Page 3
and undertakes to return both the shares and claims forthwith to
Colorsmart against such payment.
3.4 Should the Promissory Note not be paid by the 28th February 1999 or
any extended payment date to which the parties hereto may have
agreed, ownership in the shares and loan claims shall likewise
automatically revert to Weight.
3.5 Colorsmart hereby constitutes Weight irrevocably and in rem suam,
with power of substitution, as its agent to execute all such
documents and do all such other things as may in Weight's discretion
be necessary to give due and proper effect to the terms hereof,
particularly should the Promissory Note not be paid on the 28th
February 1999 or any extended payment date, to transfer the shares
and loan claims to his name.
THUS DONE AND SIGNED AT ______________ ON THIS THE ________ DAY OF NOVEMBER 1998
IN THE PRESENCE OF THE UNDERSIGNED WITNESSES.
AS WITNESSES:
1 --------------------------
Colorsmart
2 --------------------------
Weight
- ----------
*Prepared by Lams (Pty) Ltd 22 November 1998
<PAGE>
[LETTERHEAD OF STONEHOUSE GRAPHICS]
13 October 1999
Colorsmart.com.inc
Fax 021 461 2287
Attention Reg Burrows,
We are prepared to extend the date of our agreement to January 2000.
All financials will then run to that date and be subject to an audit.
Kind regards,
/s/ Nolan Weight
Nolan Weight.
<PAGE>
Exhibit 10.22
AGREEMENT
entered into and between
COLORSMART.COM INC.
and
AARDT DAVIDTZ
(Identity Number: 710402 5152 08 6)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ........................................ 2
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES .......................... 6
3. PERIOD OF EMPLOYMENT .................................................. 6
4. EFFECT OF TERMINATION OF EMPLOYMENT ................................... 7
5. SUSPENSION OF EMPLOYMENT .............................................. 8
6. DUTIES OF EMPLOYEE .................................................... 8
7. REMUNERATION .......................................................... 10
8. INVENTIONS, DISCOVERIES AND COPYRIGHT ................................. 10
9. LEAVE ................................................................. 11
10. OUT OF POCKET EXPENSES ................................................ 12
11. RESTRAINT OF TRADE .................................................... 12
12. GENERAL ............................................................... 17
13. DOMICILIUM CITANDI ET EXECUTANDI ...................................... 18
14. RESIGNATION ........................................................... 19
15. COSTS ................................................................. 19
16. SMOKING POLICY ........................................................ 19
17. SAFETY AND HEALTH ..................................................... 20
18. COUNTERPARTS .......................................................... 20
<PAGE>
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. word importing --
1.1.1. any one gender include the other two
genders;
1.1.2. the singular include the plural and vice
versa; and
1.1.3. natural persons include created entities
(corporate or unincorporate) and the state
and vice versa;
1.2. the following terms shall have the meanings assigned to
them hereunder and cognate expressions shall have
corresponding meanings, namely --
1.2.1. "Act" means the Labour Relations Act, 1995;
1.2.2. "board" means the board of directors of the
Colorsmart.com USA Inc. from time to time;
1.2.3. "competing services" means any services
rendered in competition with the prescribed
services;
1.2.4. "company" means Colorsmart.Com Inc. with
limited liability incorporated in terms of
the laws of the State of Nevada per
contract;
1.2.5. "employee" means Aardt Davidtz;
1.2.6. "effective date" means 31 January 2000;
<PAGE>
1.2.7. "prescribed areas" means each magisterial
district in the Western Cape;
1.2.8. "prescribed clients" means any person --
1.2.8.1.1. who is or was a client of the
company at the termination date
or of the effective date; or
1.2.8.2. who is or was a prospective
client of the company at the
termination date or of at the
effective date whom the employee
had approached to do business
with the company within the
period of 1 (one) year preceding
the termination date or whom the
employee had approached to do
business with within the period
of one year preceding the
effective date; or
1.2.8.3. to whom prescribed services were
rendered by the company within
the period of 1 (one) year
preceding the termination date
or by Virtual Colour within the
period of one year preceding the
effective date;
1.2.9. "prescribed services" means any services
rendered by the company in the ordinary
course of business;
1.2.10. "prescribed suppliers" means any person who
--
1.2.10.1. is or was a supplier of
prescribed services to the
company at the termination date
or at the effective date; or
1.2.10.2. was a prospective supplier of
prescribed services to the
company at the termination date
or the effective date whom the
employee had approached to do
business with the company within
the period of 1 (one) year
preceding the termination date
or within the period of one year
of the effective date;
<PAGE>
12.10.3. supplied prescribed services to
the company within the period of
1 (one) year preceding the
termination date or to the
company within the period of 1
(one) year preceding the
effective date;
1.2.11. "the Virtual Colour Group" means the
business of copying and specialist printing
and bureau digital printing presently
conducted by Virtual Colour Group under the
name Virtual Colour as sold in terms of an
agreement of sale between the company and
Virtual Colour CC dated 8th November 1999;
1.2 any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date
of the last signature of this agreement;
1.3 any reference to an enactment is to that enactment as at
the date of signature hereof and as amended or
re-enacted from time to time;
1.4 if any provision in a definition is a substantive
provision conferring rights or imposing obligations on
any party, notwithstanding that it is only in the
definition clause, effect shall be given to it as if it
were a substantive provision in the body of the
agreement;
1.5 when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on
a Saturday, Sunday or public holiday, in which case the
last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.6 where figures are referred to in numerals and in words,
if there is any conflict between the two, the words
shall prevail;
1.7 expressions defined in this agreement shall bear the
same meanings in schedules or annexures to this
agreement which do not themselves contain their own
definitions;
1.8 reference to day/s, month/s or year/s shall be construed
as Gregorian calendar day/s month/s or year/s;
<PAGE>
1.9 the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation eiusdem generis) shall,
if any of the parties to this agreement is subject to
the law of any other jurisdiction, be construed as
including any equivalent or analogous proceedings under
the law of such defined jurisdiction;
1.10 where any term is defined within the context of any
particular clause in this agreement, the term so
defined, unless it is clear from the clause in question
that the term so defined has limited application to the
relevant clause, shall bear the meaning ascribed to it
for all purposes in terms of this agreement,
notwithstanding that that term has not been defined in
this interpretation clause;
1.11 the expiration for termination of this agreement shall
not affect such of the provisions of this agreement as
expressly provide that they will operate after any such
expiration or termination or which of necessity must
continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves
do not expressly provide for this;
1.12 the rule of construction that the contract shall be
interpreted against the party responsible for the
drafting or preparation of the agreement, shall not
apply.
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES
2.1 The company appoints the employee as Aardt Davidtz,
Support of Virtual Colour Group. The employee accepts
such appointment;
<PAGE>
3. PERIOD OF EMPLOYMENT
The employee's employment shall commence on 1st February 2000 until
31st January 2002 hereafter it shall be terminable on not less than
1 (one) calendar months' written notice given by the company or the
employee to the other, provided that:
3.1. the company shall be entitled to terminate the
employee's employment summarily (or on such other basis
as it considers appropriate) if the employee:
3.1.1. is guilty of conduct justifying a summary
dismissal according to the common law;
and/or
3.1.2. is guilty of conduct which is likely to
bring himself or the company into disrepute
or is convicted of an offence involving
dishonesty; and or
3.1.3. commits a breach of any of the terms of this
agreement; and/or
3.1.4. becomes incapacitated, which shall mean
that --
3.1.4.1. he is precluded in terms of any
statute from holding office as a
director; or
3.1.4.2. he has suffered some illness or
disability which has precluded
him from providing his services
hereunder for a period in excess
of 28 (twenty eight) days in the
determination of which
intermittent returns to work or
service which do not constitute
a bona fide resumption of duties
shall be disregarded;
<PAGE>
Any termination in terms of this clause 3 will not be or
deemed to be unlawful, unfair or an unfair labour practice as
defined in the Act. To the extent that such termination may
otherwise have accorded the employee the right to seek
reinstatement by, or any other form of redress against the
company whether under the Act or otherwise, such right is
hereby waived by the employee.
4. EFFECT OF TERMINATION OF EMPLOYMENT
The termination of the employee's employment for any reason
whatsoever shall not affect the operation of any provisions of this
agreement to the extent to which they confer rights or impose
obligations upon the parties which are exercisable or enforceable
after the termination date, and such provisions shall to that extent
continue to be of full force and effect. The termination of the
employee's employment shall furthermore not prejudice any rights
which have accrued to the parties as at the termination date.
5. SUSPENSION OF EMPLOYMENT
If the company suspects that the employee is guilty of the conduct
referred to in clause 3.1 and/or clause 3.1.1. or any other conduct
which may, if proved, justify his dismissal, or has committed a
breach of any of the terms of this agreement, it may, pending a duly
constituted enquiry into the alleged conduct in question, but
without prejudice to its right of summary dismissal in terms of
clause 3.1 and without giving rise to any claim for damages or
otherwise against it, suspend the employee for a period not
exceeding 30 days during which the employee shall:
5.1. not be entitled to attend work at the premises of the
company;
5.2 be entitled to his normal salary.
6. DUTIES OF EMPLOYEE
The employee shall:
6.1 devote the whole of his time and attention during the
company's normal business hours, and such reasonable
amount of additional time as may be necessary on an
unpaid basis, having regard to the exigencies of the
business of the company, to the business and
<PAGE>
affairs of the company and shall not, before the
termination of this agreement or during any period after
such date in which he is employed by the company,
without the company's prior written consent, whether as
proprietor, partner, director, shareholder, member,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise, and whether for reward or not,
directly or indirectly be interested or engaged in or
concerned with or employed by any business, trade,
undertaking or concern:
6.1.1. other than that of the company; or
6.1.2. which competes with any business carried on
by the company,
the undertakings in clause 6.1.1. and 6.1.2. being
separate, provided that he shall not be deemed to have
breached his undertakings by reason of:
6.1.3. his having bona fide financial interest in
businesses, trades, undertakings or concerns
which do not directly or indirectly compete
with the company which have been disclosed
to the company in writing and/or after
disclosing his intention to do so to the
company in writing by accepting appointment
as a non-executive director of such
businesses, trades, undertaking or concerns
and devoting a reasonable amount of time to
such financial interest and directorships,
provided that no such interest of or
activities by the employee are prejudicial
to or adversely affect the performance of
his duties hereunder; and/or
6.1.4. his holding shares in any company the shares
of which are listed on a recognised stock
exchange if the shares owned by him and the
persons, companies and trusts referred to in
clause 11.3.4. do not in the aggregate
constitute more than 5% (five percent) of
any class of the issued share capital of
such company; and/or
6.1.5. he being an officer of or holding shares in
the company;
6.2. obey the orders and directions of the board, any
managing director and any properly authorised officer or
official of the company, shall carry out such functions
and duties as are from time to time assigned to him and
are consistent with his status and use his
<PAGE>
utmost endeavours to protect and promote the business
and interest of the company and to preserve its
reputation and goodwill;
6.3. not, during the operation of this agreement or
thereafter, regardless of the reason for termination of
his employment, use for his own benefit or for the
benefit of any other person or divulge or communicate to
any person or person's except to those of the officials
of the company whose province it is to know the same,
any of the company's secrets or any other information
which he may receive or obtain in relation to the
company's affairs or its customers or to the working of
any process or invention or to any marketing technique
which is carried on or used by the company;
6.4. be true and faithful to the company in all dealings and
transactions whatsoever relating to its business and
interests;
6.5. submit to the board or to any person nominated by it,
such information and reports as may be required of him
in connection with the performance of his duties and the
business of the company;
6.6. not, at any time during the operation of this agreement,
directly or indirectly, act in the manner referred to in
clause 11.3. and 11.4. or attempt to do so;
6.7. disclose to the board forthwith all acts and omissions
known to him of any other employee of the company which
constitute a breach of his or her obligations to the
company from whatsoever cause arising;
7. REMUNERATION
7.1. As remuneration for his services hereunder the company
shall pay the employee a salary at the rate of R13,000
(Thirteen Thousand Rand) per month which shall be
payable on the last business day of each month and which
shall be subject to review but not reduction, by the
company from time to time. The package may be structured
in such a manner as may lawfully achieve the optimum for
efficiency for the benefit of the employee.
<PAGE>
7.2. The company shall pay the employee a performance-based
bonus at the end of each financial year in accordance
with the criteria to be agreed upon between the company
and the employee within a reasonable period after the
commencement of his employment, and such bonus shall be
based upon the performance of The Virtual Colour Group.
8. INVENTIONS, DISCOVERIES AND COPYRIGHT
8.1. Any discovery or invention or secret process or
improvement in procedure made or discovered by the
employee in the course and scope of his employment by
the company in connection with or in any way affecting
or relating to the business of the company or capable of
being used or adapted for use by the company or in
connection with its business shall be disclosed to the
company any shall belong to and be the absolute property
of the company.
8.2. The employee shall, if and when required by the company,
apply or join with the company at its expense in
applying for Letters Patent or other equivalent
protection in the Republic of South Africa or in any
other part of the world for such discovery, invention,
process or improvement and shall at the company's
expense execute all instruments and do all things
necessary for vesting the said Letters Patent or other
equivalent protection in the name of the company as sole
beneficial owner or in the name of such other person as
the company may nominate.
8.3. Insofar as may be necessary the employee assigns to the
company the copyright in all present and future works
eligible for copyright, including, without limitation,
literary or artistic works or software programmes of
which he may be the author, which works were or are
created, compiled, devised or brought into being during
the course and scope of the employment by the company.
No consideration shall be payable by the company to the
employee in respect of this assignment.
8.4. All reports, manuals, financial statements, budgets,
indices, research papers, letters or other similar
documents (the nature of which is not limited by the
specific reference to the foregoing items) which are
created, compiled or devised or brought into being by
the employee or come into the employee's possession
during the course and scope of his
<PAGE>
employment by the company and all copies thereof will be
the property of the company and, upon the termination
date or earlier if required by the company, such
documents and all copies shall be returned to the
company.
9. LEAVE
The employee shall be entitled to 20 (twenty) days leave on full pay
in respect of each 12 (twelve) months' cycle of employment, to be
taken at such time or times as are convenient to the company. Leave
not taken when it is due otherwise than at the instance of the
company may not be accumulated.
10. OUT OF POCKET EXPENSES
The company shall refund to the employee the out-of-pocket expenses
incurred by him on behalf of the company which are substantiated by
vouchers therefor and which have been approved by the board or are
incurred in accordance with the principles determined by it from
time to time.
11. RESTRAINT OF TRADE
11.1. It is agreed that in the course of his duties the
employee:
11.1.1. has acquired and/or will acquire
considerable know-how in and will learn of
the company's techniques and/or business
methods relating to the provision of and
other related services;
11.1.2 will have access to names of clients and
suppliers with whom the company does
business whether embodied in written form or
otherwise;
11.1.3. will have the opportunity of forging
personal links with clients and suppliers of
the company; and
11.1.4. generally will have the opportunity of
learning and acquiring the trade secrets,
business connections and other confidential
information appertaining to the company's
business.
<PAGE>
11.2. Without derogating from the employee's obligations under
clause 6.1. the employee shall not, for 2 (two) years
from the termination date, whether as proprietor,
partner, director, shareholder, member, employee,
consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise and whether for reward or not,
directly or indirectly:
11.2.1. carry on; or
11.2.2. be interested or engaged in or concerned
with or employed by any company, close
corporation, firm, undertaking or concern
which carries on,
In any of the prescribed areas any business which sells
prescribed goods or renders prescribed services or
competing services or in the course of which prescribed
goods are sold or prescribed services or competing
services are rendered; provided that the employee shall
not be deemed to have breached his undertaking by reason
of his:
11.2.3. holding share in the company; or
11.2.4. holding shares in any company the shares of
which are listed on a recognised stock
exchange if the shares owned by -
<PAGE>
11.2.4.1. him;
11.2.4.2. his ascendants and descendants;
11.2.4.3. his spouse;
11.2.4.4. any person related to him or his
spouse within the third degree
of consanguinity;
11.2.4.5. any trust created primarily for
the benefit of one or more of
the persons referred to in
clauses 11.3.4.1. to 11.3.4.5.;
and
11.2.4.6. any company effectively
controlled by one or more of the
persons and trusts referred to
in clauses 11.3.4.1. to
11.3.4.5.
do not in the aggregate constitute more than
5% (five percent) of any class of the issued
share capital of such company.
11.3. The employee undertakes that neither he nor any company,
close corporation, firm, undertaking or concern in or by
which he is directly or indirectly interested of
employed will within 2 (two) years after the termination
date and whether for reward or not, directly or
indirectly --
11.3.2. encourage or entice or incite or persuade or
induce any other employee of the company,
who was employed whilst the employee was
employed by the company and who is engaged
or participates in the sale or other
marketing by the company of the prescribed
goods, or in a material respect in the
rendering or in the marketing of the
prescribed services, to terminate his
employment by the company; or
11.3.3. furnish any information or advice to any
employee to whom clause 11.4.1. applies or
to any prospective employer of such employee
or use any other means which are directly or
indirectly designed, or in the
<PAGE>
ordinary course of events calculated, to
result in any such employee terminating his
employment by the company and/or becoming
employed by or directly or indirectly in any
way interested in or associated with any
other company, close corporation, firm,
undertaking or concern; or
11.3.4. furnish any information or advice (whether
oral or written) to any prescribed client
that the employee intends to or will
(whether as proprietor, partner, director,
shareholder, member employee, consultant,
contractor, financier, agent, representative
or otherwise) directly or indirectly, be
interested or engaged in or concerned with
or employed by any company, close
corporation, firm, undertaking or concern
carried on in any of the prescribed areas
which sells prescribed goods or competing
goods or renders prescribed services or
competing services or in the course of which
prescribed goods or competing goods are sold
or prescribed services or competing services
are rendered after the expiry of 2 (two)
years after the termination date; or
11.3.5. furnish any information or advice (whether
oral or written) to any prescribed client or
use any other means or take any other action
which is directly or indirectly designed, or
in the ordinary course of events calculated,
to result in any such prescribed client
terminating its associating with the company
and/or transferring its business to or
purchasing any prescribed goods or competing
goods or accepting the rendering of any
prescribed services or competing services
from any person other than the company, or
attempt to do so.
11.4. Without derogating from the obligations imposed by this
clause 11 the employee undertakes that neither he nor
any company, firm, undertaking or concern in or by which
he is directly or indirectly interested, engaged,
concerned or employed will for a period of 2 (two) years
after the termination date directly or indirectly,
whether as proprietor, partner, director, shareholder,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise in any part of the prescribed areas
and whether for reward or not:
<PAGE>
11.4.2. solicit orders from prescribed clients for
the prescribed services or any competing
services;
11.4.3. canvass business in respect of the
prescribed services from prescribed clients;
11.4.4. sell or otherwise supply to any prescribed
client;
11.4.5. render any competing service to any
prescribed client;
11.4.6. purchase from any prescribed supplier or
accept the rendering of any prescribed
services from it;
11.4.7. solicit appointment as a distributor,
licensee, agent or representative of any
prescribed supplier in respect of prescribed
services
including on behalf of or for the benefit of a
prescribed supplier.
11.5. Each of the undertakings set out in this clause 11
(including those appearing in a single clause) is
severable inter alia as to:
11.5.2. nature of interest, act or activity;
11.5.3. the categories of persons falling within the
definition of prescribed clients;
11.5.4. the categories of goods falling within the
definition of he competing goods;
11.5.5. the categories of services falling within
the definition of services and competing
services;
11.5.6. the categories of persons falling within the
definition of prescribed supplier;
<PAGE>
11.5.7. the individual magisterial districts and
areas which are defined as the prescribed
areas
and are acknowledged to be reasonably required for the
protection of the Company and are generally fair an
reasonable.
11.6. The employee acknowledges that the Company will suffer
financial harm and loss if he breaches any provision of
this clause 11. Upon the breach of any of the provisions
of clause 11.3. the company shall be entitled to enforce
the restraint in question and, in addition or
alternatively thereto, as the company may elect, be
entitled to claim and recover from the employee the sum
of ten thousand rand per month during the period of the
breach, and to the extent that it is not prohibited from
doing so by any law, to set off its claim against any
amount due by it to the employee (and he authorises the
company to do so) and to recover its claim from any
benefits due to the employee from any pension funds due
to the employee and, to the extent not precluded by law,
he cedes his right to those benefits to the company
accordingly.
12. GENERAL
12.1. No remedy granted by this agreement shall exclude any
other remedy available at law.
12.2. No amendment of this agreement or any consensual
cancellation thereof or any part thereof shall be
binding on the parties unless reduced to a written
document and signed by them.
12.3. If any of the terms of this agreement, such as the rate
of remuneration payable to the employee, are varied, the
other terms shall, unless otherwise agreed in writing,
remain of full force and effect.
12.4. No relaxation or indulgence which the company may show
to the employee shall in any way prejudice or be deemed
to be a waiver of its rights hereunder nor shall such
relaxation or indulgence preclude or estop the company
from exercising its rights in terms of this agreement in
respect of any further breach.
<PAGE>
12.5. This agreement constitutes the whole agreement between
the parties and no warranties or representation whether
express or implied have been given or made by the
company to the employee.
12.6. Subject to the provisions of clause 3 the employee's
employment by the company shall be governed by the
provisions of any applicable agreement or determination
concluded in terms of the Act and/or the Wage Act of
1957, and/or the provisions of any applicable law.
12.7. Any term of this agreement which conflicts with the
provisions of any agreement or determination referred to
in this agreement, or any applicable law shall be
treated as pro non scripto and shall be severed from the
balance of this agreement, which shall continue to be of
full force and effect.
12.8. The company shall be entitled to cede and delegate all
or any of its rights and obligations under this
agreement to the successor in title of the undertakings
of the company or any member thereof, whether such
cession and delegation takes place before or after the
termination date.
<PAGE>
13. DOMICILIUM CITANDI ET EXECUTANDI
13.1. The parties choose as their domicilia citandi et
executandi for all purposes under this agreement,
whether in respect of court process, notices or other
documents or communications of whatsoever nature, the
following addresses:
13.1.1. The company: Colorsmart.Com Inc
Physical: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Postal: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Telefax: 9091 615 612 4005
13.1.2. The employee: Virtual Colour
Physical: 2nd Floor Castle Mews
16A New Market Street,
WOODSTOCK, 8001
Postal: P 0 Box 1212,
WOODSTOCK, 7915
Telefax: (021) 462 1660
13.2. Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent
to give notice by telefax.
13.3. Either party may by notice to the other party change the
physical address chosen as its domicilia citandi et
executandi to another physical address where postal
delivery occurs in South Africa or its postal address or
its telefax number, provided that the change shall
become effective on the 7th business day from the deemed
receipt of the notice by the other party.
13.4. Any notice to a party:
13.4.1. sent by prepaid registered post (by airmail
if appropriate) in a correctly addressed
envelope to it at an address chosen as its
domicilia citandi et executandi to which
post is delivered shall be deemed to have
been
<PAGE>
received on the 7th business day after
posting (unless the contrary is proved);
13.4.2. delivered by hand to a responsible person
during ordinary business hours at the
physical address chosen as its domicilum
citandi et executandi shall be deemed to
have been received on the day of delivery;
or
13.4.3. sent by telefax to its chosen telefax number
stipulated in clause 13.1., shall be deemed
to have been received on the date of
despatch (unless the contrary is proved).
13.5. Notwithstanding anything to the contrary herein
contained a written notice or communication actually
received by a party shall be an adequate written notice
or communication to it notwithstanding that it was not
sent to or delivered at its chosen domicilium citandi et
executandi.
14. RESIGNATION
14.1. If the employee is a Director of the company on
termination date the employee will ipso facto resign as
a Director of the company.
14.2. The employee hereby irrevocably appoints the then
auditors of the company as his agent in dem suam to sign
all such documents and to do all such acts as may be
necessary to effect and implement such resignation.
15. COSTS
The costs of and incidental to the drawing of this agreement and the
stamp duty hereon shall be paid by the company.
<PAGE>
16. SMOKING POLICY
It is the policy of the company not to permit smoking in the
premises from which the company conducts its business.
17. SAFETY AND HEALTH
The employee acknowledges that he is aware of the dangers to his
safety and health attached to the work be has to perform, any
article or substance he has to produce, process, use, handle, store
or transport and any plant and machinery, which he is required or
permitted to use, and also with the precautionary measures to be
taken and observed with respect of those dangers.
18. COUNTERPARTS
This agreement may be entered into in any number of counterparts and
by the parties to this agreement on separate counterparts, each of
which when so executed and delivered shall be an original, but all
the counterparts shall together constitute one and the same
instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. /s/ [ILLEGIBLE] For:
-----------------
18 November 99, Cape Town 2. /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ----------------- ----------------------
1. /s/ Roger Finchum
-----------------
Colorsmart.com Inc.
18 November 99, Madison, TN 2. /s/ S. Finchum /s/ Roger D. Finchum Snr
- --------------------------- ----------------- ------------------------
CEO
<PAGE>
Exhibit 10.23
AGREEMENT
entered into and between
COLORSMART.COM INC.
and
KEITH REDMAN
(Identity Number: 591120 5006 00 3)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ........................................ 2
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES .......................... 6
3. PERIOD OF EMPLOYMENT .................................................. 6
4. EFFECT OF TERMINATION OF EMPLOYMENT ................................... 7
5. SUSPENSION OF EMPLOYMENT .............................................. 8
6. DUTIES OF EMPLOYEE .................................................... 8
7. REMUNERATION .......................................................... 10
8. INVENTIONS, DISCOVERIES AND COPYRIGHT ................................. 10
9. LEAVE ................................................................. 11
10. OUT OF POCKET EXPENSES ................................................ 12
11. RESTRAINT OF TRADE .................................................... 12
12. GENERAL ............................................................... 17
13. DOMICILIUM CITANDI ET EXECUTANDI ...................................... 18
14. RESIGNATION ........................................................... 19
15. COSTS ................................................................. 19
16. SMOKING POLICY ........................................................ 19
17. SAFETY AND HEALTH ..................................................... 20
18. COUNTERPARTS .......................................................... 20
<PAGE>
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. word importing --
1.1.1. any one gender include the other two
genders;
1.1.2. the singular include the plural and vice
versa; and
1.1.3. natural persons include created entities
(corporate or unincorporate) and the state
and vice versa;
1.2. the following terms shall have the meanings assigned to
them hereunder and cognate expressions shall have
corresponding meanings, namely --
1.2.1. "Act" means the Labour Relations Act, 1995;
1.2.2. "board" means the board of directors of the
Colorsmart.com USA Inc. from time to time;
1.2.3. "competing services" means any services
rendered in competition with the prescribed
services;
1.2.4. "company" means Colorsmart.Com Inc. with
limited liability incorporated in terms of
the laws of the State of Nevada per
contract;
1.2.5. "employee" means Keith Redman;
1.2.6. "effective date" means 31 January 2000;
<PAGE>
1.2.7. "prescribed areas" means each magisterial
district in the Western Cape;
1.2.8. "prescribed clients" means any person --
1.2.8.1.1. who is or was a client of the
company at the termination date
or of the effective date; or
1.2.8.2. who is or was a prospective
client of the company at the
termination date or of at the
effective date whom the employee
had approached to do business
with the company within the
period of 1 (one) year preceding
the termination date or whom the
employee had approached to do
business with within the period
of one year preceding the
effective date; or
1.2.8.3. to whom prescribed services were
rendered by the company within
the period of 1 (one) year
preceding the termination date
or by Virtual Colour within the
period of one year preceding the
effective date;
1.2.9. "prescribed services" means any services
rendered by the company in the ordinary
course of business;
1.2.10. "prescribed suppliers" means any person who
--
1.2.10.1. is or was a supplier of
prescribed services to the
company at the termination date
or at the effective date; or
1.2.10.2. was a prospective supplier of
prescribed services to the
company at the termination date
or the effective date whom the
employee had approached to do
business with the company within
the period of 1 (one) year
preceding the termination date
or within the period of one year
of the effective date;
<PAGE>
1.2.10.3. supplied prescribed services to
the company within the period of
1 (one) year preceding the
termination date or to the
company within the period of 1
(one) year preceding the
effective date;
1.2.11. "the Virtual Colour Group" means the
business of copying and specialist printing
and bureau digital printing presently
conducted by Virtual Colour Group under the
name Virtual Colour as sold in terms of an
agreement of sale between the company and
Virtual Colour CC dated 8th November 1999;
1.2 any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date
of the last signature of this agreement;
1.3 any reference to an enactment is to that enactment as at
the date of signature hereof and as amended or
re-enacted from time to time;
1.4 if any provision in a definition is a substantive
provision conferring rights or imposing obligations on
any party, notwithstanding that it is only in the
definition clause, effect shall be given to it as if it
were a substantive provision in the body of the
agreement;
1.5 when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on
a Saturday, Sunday or public holiday, in which case the
last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.6 where figures are referred to in numerals and in words,
if there is any conflict between the two, the words
shall prevail;
1.7 expressions defined in this agreement shall bear the
same meanings in schedules or annexures to this
agreement which do not themselves contain their own
definitions;
1.8 reference to day/s, month/s or year/s shall be construed
as Gregorian calendar day/s month/s or year/s;
<PAGE>
1.9 the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation eiusdem generis) shall,
if any of the parties to this agreement is subject to
the law of any other jurisdiction, be construed as
including any equivalent or analogous proceedings under
the law of such defined jurisdiction;
1.10 where any term is defined within the context of any
particular clause in this agreement, the term so
defined, unless it is clear from the clause in question
that the term so defined has limited application to the
relevant clause, shall bear the meaning ascribed to it
for all purposes in terms of this agreement,
notwithstanding that that term has not been defined in
this interpretation clause;
1.11 the expiration for termination of this agreement shall
not affect such of the provisions of this agreement as
expressly provide that they will operate after any such
expiration or termination or which of necessity must
continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves
do not expressly provide for this;
1.12 the rule of construction that the contract shall be
interpreted against the party responsible for the
drafting or preparation of the agreement, shall not
apply.
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES
2.1 The company appoints the employee as Keith Redman,
Sales Director of Virtual Colour Group.
The employee accepts such appointment;
<PAGE>
3. PERIOD OF EMPLOYMENT
The employee's employment shall commence on 1st February 2000 until
31st January 2002 hereafter it shall be terminable on not less than
1 (one) calendar months' written notice given by the company or the
employee to the other, provided that:
3.1. the company shall be entitled to terminate the
employee's employment summarily (or on such other basis
as it considers appropriate) if the employee:
3.1.1. is guilty of conduct justifying a summary
dismissal according to the common law;
and/or
3.1.2. is guilty of conduct which is likely to
bring himself or the company into disrepute
or is convicted of an offence involving
dishonesty; and or
3.1.3. commits a breach of any of the terms of this
agreement; and/or
3.1.4. becomes incapacitated, which shall mean
that --
3.1.4.1. he is precluded in terms of any
statute from holding office as a
director; or
3.1.4.2. he has suffered some illness or
disability which has precluded
him from providing his services
hereunder for a period in excess
of 28 (twenty eight) days in the
determination of which
intermittent returns to work or
service which do not constitute
a bona fide resumption of duties
shall be disregarded;
<PAGE>
Any termination in terms of this clause 3 will not be or
deemed to be unlawful, unfair or an unfair labour practice as
defined in the Act. To the extent that such termination may
otherwise have accorded the employee the right to seek
reinstatement by, or any other form of redress against the
company whether under the Act or otherwise, such right is
hereby waived by the employee.
4. EFFECT OF TERMINATION OF EMPLOYMENT
The termination of the employee's employment for any reason
whatsoever shall not affect the operation of any provisions of this
agreement to the extent to which they confer rights or impose
obligations upon the parties which are exercisable or enforceable
after the termination date, and such provisions shall to that extent
continue to be of full force and effect. The termination of the
employee's employment shall furthermore not prejudice any rights
which have accrued to the parties as at the termination date.
5. SUSPENSION OF EMPLOYMENT
If the company suspects that the employee is guilty of the conduct
referred to in clause 3.1 and/or clause 3.1.1, or any other conduct
which may, if proved, justify his dismissal, or has committed a
breach of any of the terms of this agreement, it may, pending a duly
constituted enquiry into the alleged conduct in question, but
without prejudice to its right of summary dismissal in terms of
clause 3.1 and without giving rise to any claim for damages or
otherwise against it, suspend the employee for a period not
exceeding 30 days during which the employee shall:
5.1. not be entitled to attend work at the premises of the
company;
5.2 be entitled to his normal salary.
6. DUTIES OF EMPLOYEE
The employee shall:
6.1 devote the whole of his time and attention during the
company's normal business hours, and such reasonable
amount of additional time as may be necessary on an
unpaid basis, having regard to the exigencies of the
business of the company, to the business and
<PAGE>
affairs of the company and shall not, before the
termination of this agreement or during any period after
such date in which he is employed by the company,
without the company's prior written consent, whether as
proprietor, partner, director, shareholder, member,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise, and whether for reward or not,
directly or indirectly be interested or engaged in or
concerned with or employed by any business, trade,
undertaking or concern:
6.1.1. other than that of the company; or
6.1.2. which competes with any business carried on
by the company,
the undertakings in clause 6.1.1. and 6.1.2. being
separate, provided that he shall not be deemed to have
breached his undertakings by reason of:
6.1.3. his having bona fide financial interest in
businesses, trades, undertakings or concerns
which do not directly or indirectly compete
with the company which have been disclosed
to the company in writing and/or after
disclosing his intention to do so to the
company in writing by accepting appointment
as a non-executive director of such
businesses, trades, undertaking or concerns
and devoting a reasonable amount of time to
such financial interest and directorships,
provided that no such interest of or
activities by the employee are prejudicial
to or adversely affect the performance of
his duties hereunder; and/or
6.1.4. his holding shares in any company the shares
of which are listed on a recognised stock
exchange if the shares owned by him and the
persons, companies and trusts referred to in
clause 11.3.4. do not in the aggregate
constitute more than 5% (five percent) of
any class of the issued share capital of
such company; and/or
6.1.5. he being an officer of or holding shares in
the company;
6.2. obey the orders and directions of the board, any
managing director and any properly authorised officer or
official of the company, shall carry out such functions
and duties as are from time to time assigned to him and
are consistent with his status and use his
<PAGE>
utmost endeavours to protect and promote the business
and interest of the company and to preserve its
reputation and goodwill;
6.3. not, during the operation of this agreement or
thereafter, regardless of the reason for termination of
his employment, use for his own benefit or for the
benefit of any other person or divulge or communicate to
any person or person's except to those of the officials
of the company whose province it is to know the same,
any of the company's secrets or any other information
which he may receive or obtain in relation to the
company's affairs or its customers or to the working of
any process or invention or to any marketing technique
which is carried on or used by the company;
6.4. be true and faithful to the company in all dealings and
transactions whatsoever relating to its business and
interests;
6.5. submit to the board or to any person nominated by it,
such information and reports as may be required of him
in connection with the performance of his duties and the
business of the company;
6.6. not, at any time during the operation of this agreement,
directly or indirectly, act in the manner referred to in
clause 11.3. and 11.4. or attempt to do so;
6.7. disclose to the board forthwith all acts and omissions
known to him of any other employee of the company which
constitute a breach of his or her obligations to the
company from whatsoever cause arising;
7. REMUNERATION
7.1. As remuneration for his services hereunder the company
shall pay the employee a salary at the rate of R20,000
(Twenty Thousand Rand) per month which shall be payable
on the last business day of each month and which shall
be subject to review, but not reduction, by the company
from time to time. The package may be structured in such
a manner as may lawfully achieve the optimum for
efficiency for the benefit of the employee.
<PAGE>
7.2. The company shall pay the employee a performance-based
bonus at the end of each financial year in accordance
with the criteria to be agreed upon between the company
and the employee within a reasonable period after the
commencement of his employment, and such bonus shall be
based upon the performance of The Virtual Colour Group.
8. INVENTIONS, DISCOVERIES AND COPYRIGHT
8.1. Any discovery or invention or secret process or
improvement in procedure made or discovered by the
employee in the course and scope of his employment by
the company in connection with or in any way affecting
or relating to the business of the company or capable of
being used or adapted for use by the company or in
connection with its business shall be disclosed to the
company any shall belong to and be the absolute property
of the company.
8.2. The employee shall, if and when required by the company,
apply or join with the company at its expense in
applying for Letters Patent or other equivalent
protection in the Republic of South Africa or in any
other part of the world for such discovery, invention,
process or improvement and shall at the company's
expense execute all instruments and do all things
necessary for vesting the said Letters Patent or other
equivalent protection in the name of the company as sole
beneficial owner or in the name of such other person as
the company may nominate.
8.3. Insofar as may be necessary the employee assigns to the
company the copyright in all present and future works
eligible for copyright, including, without limitation,
literary or artistic works or software programmes of
which he may be the author, which works were or are
created, compiled, devised or brought into being during
the course and scope of the employment by the company.
No consideration shall be payable by the company to the
employee in respect of this assignment.
8.4. All reports, manuals, financial statements, budgets,
indices, research papers, letters or other similar
documents (the nature of which is not limited by the
specific reference to the foregoing items) which are
created, compiled or devised or brought into being by
the employee or come into the employee's possession
during the course and scope of his
<PAGE>
employment by the company and all copies thereof will be
the property of the company and, upon the termination
date or earlier if required by the company, such
documents and all copies shall be returned to the
company.
9. LEAVE
The employee shall be entitled to 20 (twenty) days leave on full pay
in respect of each 12 (twelve) months' cycle of employment, to be
taken at such time or times as are convenient to the company. Leave
not taken when it is due otherwise than at the instance of the
company may not be accumulated.
10. OUT OF POCKET EXPENSES
The company shall refund to the employee the out-of-pocket expenses
incurred by him on behalf of the company which are substantiated by
vouchers therefor and which have been approved by the board or are
incurred in accordance with the principles determined by it from
time to time.
11. RESTRAINT OF TRADE
11.1. It is agreed that in the course of his duties the
employee:
11.1.1. has acquired and/or will acquire
considerable know-how in and will learn of
the company's techniques and/or business
methods relating to the provision of and
other related services;
11.1.2 will have access to names of clients and
suppliers with whom the company does
business whether embodied in written form or
otherwise;
11.1.3. will have the opportunity of forging
personal links with clients and suppliers of
the company; and
11.1.4. generally will have the opportunity of
learning and acquiring the trade secrets,
business connections and other confidential
information appertaining to the company's
business.
<PAGE>
11.2. It is acknowledged that the only effective and
reasonable manner in which the company's rights in
respect of its business secrets and client connection
can be protected is the restraint imposed upon the
employee in terms of this clause 11, subject to the
payment by the company to the employee of the amount of
R168,000 (One Hundred and Sixty Eight Rand) which said
amount shall be payable by the company to the employee
in 2 (two) equal annual payments of R84,000 (Eighty Four
Thousand Rand) each, the first whereof shall be due and
payable by the company to the employee on 1st February
2001.
11.3. Without derogating from the employee's obligations under
clause 6.1. the employee shall not, for 2 (two) years
from the termination date, whether as proprietor,
partner, director, shareholder, member, employee,
consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise and whether for reward or not,
directly or indirectly:
11.3.1. carry on; or
11.3.2. be interested or engaged in or concerned
with or employed by any company, close
corporation, firm, undertaking or concern
which carries on,
In any of the prescribed areas any business which sells
prescribed goods or renders prescribed services or
competing services or in the course of which prescribed
goods are sold or prescribed services or competing
services are rendered; provided that the employee shall
not be deemed to have breached his undertaking by reason
of his:
11.3.3. holding share in the company; or
11.3.4. holding shares in any company the shares of
which are listed on a recognised stock
exchange if the shares owned by -
<PAGE>
11.3.4.1. him;
1.3.4.2. his ascendants and descendants;
11.3.4.3. his spouse;
11.3.4.4. any person related to him or his
spouse within the third degree
of consanguinity;
11.3.4.5. any trust created primarily for
the benefit of one or more of
the persons referred to in
clauses 11.3.4.1. to 11.3.4.5.;
and
11.3.4.6. any company effectively
controlled by one or more of the
persons and trusts referred to
in clauses 11.3.4.1. to
11.3.4.5.
do not in the aggregate constitute more than
5% (five percent) of any class of the issued
share capital of such company.
11.4. The employee undertakes that neither he nor any company,
close corporation, firm, undertaking or concern in or by
which he is directly or indirectly interested of
employed will within 2 (two) years after the termination
date and whether for reward or not, directly or
indirectly --
11.4.1. encourage or entice or incite or persuade or
induce any other employee of the company,
who was employed whilst the employee was
employed by the company and who is engaged
or participates in the sale or other
marketing by the company of the prescribed
goods, or in a material respect in the
rendering or in the marketing of the
prescribed services, to terminate his
employment by the company; or
11.4.2. furnish any information or advice to any
employee to whom clause 11.4.1. applies or
to any prospective employer of such employee
or use any other means which are directly or
indirectly designed, or in the
<PAGE>
ordinary course of events calculated, to
result in any such employee terminating his
employment by the company and/or becoming
employed by or directly or indirectly in any
way interested in or associated with any
other company, close corporation, firm,
undertaking or concern; or
11.4.3. furnish any information or advice (whether
oral or written) to any prescribed client
that the employee intends to or will
(whether as proprietor, partner, director,
shareholder, member employee, consultant,
contractor, financier, agent, representative
or otherwise) directly or indirectly, be
interested or engaged in or concerned with
or employed by any company, close
corporation, firm, undertaking or concern
carried on in any of the prescribed areas
which sells prescribed goods or competing
goods or renders prescribed services or
competing services or in the course of which
prescribed goods or competing goods are sold
or prescribed services or competing services
are rendered after the expiry of 2 (two)
years after the termination date; or
11.1.4. furnish any information or advice (whether
oral or written) to any prescribed client or
use any other means or take any other action
which is directly or indirectly designed, or
in the ordinary course of events calculated,
to result in any such prescribed client
terminating its associating with the company
and/or transferring its business to or
purchasing any prescribed goods or competing
goods or accepting the rendering of any
prescribed services or competing services
from any person other than the company, or
attempt to do so.
11.5. Without derogating from the obligations imposed by this
clause 11 the employee undertakes that neither he nor
any company, firm, undertaking or concern in or by which
he is directly or indirectly interested, engaged,
concerned or employed will for a period of 2 (two) years
after the termination date directly or indirectly,
whether as proprietor, partner, director, shareholder,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise in any part of the prescribed areas
and whether for reward or not:
<PAGE>
11.5.1. solicit orders from prescribed clients for
the prescribed services or any competing
services;
11.5.2. canvass business in respect of the
prescribed services from prescribed clients;
11.5.3. sell or otherwise supply to any prescribed
client;
11.5.4. render any competing service to any
prescribed client;
11.5.5. purchase from any prescribed supplier or
accept the rendering of any prescribed
services from it;
11.5.6. solicit appointment as a distributor,
licensee, agent or representative of any
prescribed supplier in respect of prescribed
services'
including on behalf of or for the benefit of a
prescribed supplier.
11.6. Each of the undertakings set out in this clause 11
(including those appearing in a single clause) is
severable inter alia as to:
11.6.1. nature of interest, act or activity;
11.6.2. the categories of persons falling within the
definition of prescribed clients;
11.6.3. the categories of goods falling within the
definition of he competing goods;
11.6.4. the categories of services falling within
the definition of services and competing
services;
11.6.5. the categories of persons falling within the
definition of prescribed supplier;
<PAGE>
11.6.6. the individual magisterial districts and
areas which are defined as the prescribed
areas
and are acknowledged to be reasonably required for the
protection of the Company and are generally fair an
reasonable.
11.7. The employee acknowledges that the Company will suffer
financial harm and loss if he breaches any provision of
this clause 11. Upon the breach of any of the provisions
of clause 11.3. the company shall be entitled to enforce
the restraint in question and, in addition or
alternatively thereto, as the company may elect, be
entitled to claim and recover from the employee the sum
of ten thousand rand per month during the period of the
breach, and to the extent that it is not prohibited from
doing so by any law, to set off its claim against any
amount due by it to the employee (and he authorises the
company to do so) and to recover its claim from any
benefits due to the employee from any pension funds due
to the employee and, to the extent not precluded by law,
he cedes his right to those benefits to the company
accordingly.
12. GENERAL
12.1. No remedy granted by this agreement shall exclude any
other remedy available at law.
12.2. No amendment of this agreement or any consensual
cancellation thereof or any part thereof shall be
binding on the parties unless reduced to a written
document and signed by them.
12.3. If any of the terms of this agreement, such as the rate
of remuneration payable to the employee, are varied, the
other terms shall, unless otherwise agreed in writing,
remain of full force and effect.
12.4. No relaxation or indulgence which the company may show
to the employee shall in any way prejudice or be deemed
to be a waiver of its rights hereunder nor shall such
relaxation or indulgence preclude or estop the company
from exercising its rights in terms of this agreement in
respect of any further breach.
<PAGE>
12.5. This agreement constitutes the whole agreement between
the parties and no warranties or representation whether
express or implied have been given or made by the
company to the employee.
12.6. Subject to the provisions of clause 3 the employee's
employment by the company shall be governed by the
provisions of any applicable agreement or determination
concluded in terms of the Act and/or the Wage Act of
1957, and/or the provisions of any applicable law.
12.7. Any term of this agreement which conflicts with the
provisions of any agreement or determination referred to
in this agreement, or any applicable law shall be
treated as pro non scripto and shall be severed from the
balance of this agreement, which shall continue to be of
full force and effect.
12.8. The company shall be entitled to cede and delegate all
or any of its rights and obligations under this
agreement to the successor in title of the undertakings
of the company or any member thereof, whether such
cession and delegation takes place before or after the
termination date.
<PAGE>
13. DOMICILIUM CITANDI ET EXECUTANDI
13.1. The parties choose as their domicilia citandi et
executandi for all purposes under this agreement,
whether in respect of court process, notices or other
documents or communications of whatsoever nature, the
following addresses:
13.1.1. The company: Colorsmart.Com Inc
Physical: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Postal: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Telefax: 9091 615 612 4005
13.1.2. The employee: Virtual Colour
Physical: 2nd Floor Castle Mews
16A New Market Street,
WOODSTOCK, 8001
Postal: P O Box 1212,
WOODSTOCK, 7915
Telefax: (021) 462 1660
13.2. Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent
to give notice by telefax.
13.3. Either party may by notice to the other party change the
physical address chosen as its domicilium citandi et
executandi to another physical address where postal
delivery occurs in South Africa or its postal address or
its telefax number, provided that the change shall
become effective on the 7th business day from the deemed
receipt of the notice by the other party.
13.4. Any notice to a party:
13.4.1. sent by prepaid registered post (by airmail
if appropriate) in a correctly addressed
envelope to it at an address chosen as its
domicilium citandi et executandi to which
post is delivered shall be deemed to have
been
<PAGE>
received on the 7th business day after
posting (unless the contrary is proved);
13.4.2. delivered by hand to a responsible person
during ordinary business hours at the
physical address chosen as its domicilum
citandi et executandi shall be deemed to
have been received on the day of delivery;
or
13.4.3. sent by telefax to its chosen telefax number
stipulated in clause 13.1., shall be deemed
to have been received on the date of
despatch (unless the contrary is proved).
13.5. Notwithstanding anything to the contrary herein
contained a written notice or communication actually
received by a party shall be an adequate written notice
or communication to it notwithstanding that it was not
sent to or delivered at its chosen domicilium citandi et
executandi.
14. RESIGNATION
14.1. If the employee is a Director of the company on
termination date the employee will ipso facto resign as
a Director of the company.
14.2. The employee hereby irrevocably appoints the then
auditors of the company as his agent in dem suam to sign
all such documents and to do all such acts as may be
necessary to effect and implement such resignation.
15. COSTS
The costs of and incidental to the drawing of this agreement and the
stamp duty hereon shall be paid by the company.
<PAGE>
16. SMOKING POLICY
It is the policy of the company not to permit smoking in the
premises from which the company conducts its business.
17. SAFETY AND HEALTH
The employee acknowledges that he is aware of the dangers to his
safety and health attached to the work be has to perform, any
article or substance he has to produce, process, use, handle, store
or transport and any plant and machinery, which he is required or
permitted to use, and also with the precautionary measures to be
taken and observed with respect of those dangers.
18. COUNTERPARTS
This agreement may be entered into in any number of counterparts and
by the parties to this agreement on separate counterparts, each of
which when so executed and delivered shall be an original, but all
the counterparts shall together constitute one and the same
instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. /s/ [ILLEGIBLE] For:
-----------------
18 November 99 Cape Town 2. /s/ [ILLEGIBLE] /s/ Wheelman
- -------------- ----------- ----------------- ----------------------
1. /s/ Roger Finchum Jr.
-----------------
Colorsmart.com Inc.
18 November 99 Madison, TN 2. /s/ S. Finchum /s/ Roger D. Finchum Sr.
- -------------- ----------- ----------------- ------------------------
CEO
<PAGE>
Exhibit 10.24
AGREEMENT
entered into and between
COLORSMART.COM INC.
and
HERBERT TRISCHLER
(Identity Number: 540828 5210 10 0)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
CLAUSE NO. DESCRIPTION PAGE
- --------------------------------------------------------------------------------
1. INTERPRETATION AND PRELIMINARY ........................................ 2
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES .......................... 6
3. PERIOD OF EMPLOYMENT .................................................. 6
4. EFFECT OF TERMINATION OF EMPLOYMENT ................................... 7
5. SUSPENSION OF EMPLOYMENT .............................................. 8
6. DUTIES OF EMPLOYEE .................................................... 8
7. REMUNERATION .......................................................... 10
8. INVENTIONS, DISCOVERIES AND COPYRIGHT ................................. 10
9. LEAVE ................................................................. 11
10. OUT OF POCKET EXPENSES ................................................ 12
11. RESTRAINT OF TRADE .................................................... 12
12. GENERAL ............................................................... 17
13. DOMICILIUM CITANDI ET EXECUTANDI ...................................... 18
14. RESIGNATION ........................................................... 19
15. COSTS ................................................................. 19
16. SMOKING POLICY ........................................................ 19
17. SAFETY AND HEALTH ..................................................... 20
18. COUNTERPARTS .......................................................... 20
<PAGE>
WHEREBY IT IS AGREED AS FOLLOWS:
1. INTERPRETATION AND PRELIMINARY
The headings of the clauses in this agreement are for the purpose of
convenience and reference only and shall not be used in the
interpretation of nor modify nor amplify the terms of this agreement
nor any clause hereof. Unless a contrary intention clearly appears -
1.1. word importing --
1.1.1. any one gender include the other two
genders;
1.1.2. the singular include the plural and vice
versa; and
1.1.3. natural persons include created entities
(corporate or unincorporate) and the state
and vice versa;
1.2. the following terms shall have the meanings assigned to
them hereunder and cognate expressions shall have
corresponding meanings, namely --
1.2.1. "Act" means the Labour Relations Act, 1995;
1.2.2. "board" means the board of directors of the
Colorsmart.com USA Inc. from time to time;
1.2.3. "competing services" means any services
rendered in competition with the prescribed
services;
1.2.4. "company" means Colorsmart.Com Inc. with
limited liability incorporated in terms of
the laws of the State of Nevada per
contract;
1.2.5. "employee" means Herbert Trischler;
1.2.6. "effective date" means 31 January 2000;
<PAGE>
1.2.7. "prescribed areas" means each magisterial
district in the Western Cape;
1.2.8. "prescribed clients" means any person --
1.2.8.1.1. who is or was a client of the
company at the termination date
or of the effective date; or
1.2.8.2. who is or was a prospective
client of the company at the
termination date or of at the
effective date whom the employee
had approached to do business
with the company within the
period of 1 (one) year preceding
the termination date or whom the
employee had approached to do
business with within the period
of one year preceding the
effective date; or
1.2.8.3. to whom prescribed services were
rendered by the company within
the period of 1 (one) year
preceding the termination date
or by Virtual Colour within the
period of one year preceding the
effective date;
1.2.9. "prescribed services" means any services
rendered by the company in the ordinary
course of business;
1.2.10. "prescribed suppliers" means any person who
--
1.2.10.1. is or was a supplier of
prescribed services to the
company at the termination date
or at the effective date; or
1.2.10.2. was a prospective supplier of
prescribed services to the
company at the termination date
or the effective date whom the
employee had approached to do
business with the company within
the period of 1 (one) year
preceding the termination date
or within the period of one year
of the effective date;
<PAGE>
1.2.10.3. supplied prescribed services to
the company within the period of
1 (one) year preceding the
termination date or to the
company within the period of 1
(one) year preceding the
effective date;
1.2.11. "the Virtual Colour Group" means the
business of copying and specialist printing
and bureau digital printing presently
conducted by Virtual Colour Group under the
name Virtual Colour as sold in terms of an
agreement of sale between the company and
Virtual Colour CC dated 8th November 1999;
1.2 any reference in this agreement to "date of signature
hereof" shall be read as meaning a reference to the date
of the last signature of this agreement;
1.3 any reference to an enactment is to that enactment as at
the date of signature hereof and as amended or
re-enacted from time to time;
1.4 if any provision in a definition is a substantive
provision conferring rights or imposing obligations on
any party, notwithstanding that it is only in the
definition clause, effect shall be given to it as if it
were a substantive provision in the body of the
agreement;
1.5 when any number of days is prescribed in this agreement,
same shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on
a Saturday, Sunday or public holiday, in which case the
last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
1.6 where figures are referred to in numerals and in words,
if there is any conflict between the two, the words
shall prevail;
1.7 expressions defined in this agreement shall bear the
same meanings in schedules or annexures to this
agreement which do not themselves contain their own
definitions;
1.8 reference to day/s, month/s or year/s shall be construed
as Gregorian calendar day/s month/s or year/s;
<PAGE>
1.9 the use of any expression in this agreement covering a
process available under South African law such as a
winding-up (without limitation eiusdem generis) shall,
if any of the parties to this agreement is subject to
the law of any other jurisdiction, be construed as
including any equivalent or analogous proceedings under
the law of such defined jurisdiction;
1.10 where any term is defined within the context of any
particular clause in this agreement, the term so
defined, unless it is clear from the clause in question
that the term so defined has limited application to the
relevant clause, shall bear the meaning ascribed to it
for all purposes in terms of this agreement,
notwithstanding that that term has not been defined in
this interpretation clause;
1.11 the expiration for termination of this agreement shall
not affect such of the provisions of this agreement as
expressly provide that they will operate after any such
expiration or termination or which of necessity must
continue to have effect after such expiration or
termination, notwithstanding that the clauses themselves
do not expressly provide for this;
1.12 the rule of construction that the contract shall be
interpreted against the party responsible for the
drafting or preparation of the agreement, shall not
apply.
2. APPOINTMENT OF EMPLOYEE AND FURTHER BRANCHES
2.1 The company appoints the employee as Herbert Trischler,
Technical Director Pre-Press of Virtual Colour Group.
The employee accepts such appointment;
<PAGE>
3. PERIOD OF EMPLOYMENT
The employee's employment shall commence on 1st February 2000 until
31st January 2002 hereafter it shall be terminable on not less than
1 (one) calendar months' written notice given by the company or the
employee to the other, provided that:
3.1. the company shall be entitled to terminate the
employee's employment summarily (or on such other basis
as it considers appropriate) if the employee:
3.1.1. is guilty of conduct justifying a summary
dismissal according to the common law;
and/or
3.1.2. is guilty of conduct which is likely to
bring himself or the company into disrepute
or is convicted of an offence involving
dishonesty; and or
3.1.3. commits a breach of any of the terms of this
agreement; and/or
3.1.4. becomes incapacitated, which shall mean
that --
3.1.4.1. he is precluded in terms of any
statute from holding office as a
director; or
3.1.4.2. he has suffered some illness or
disability which has precluded
him from providing his services
hereunder for a period in excess
of 28 (twenty eight) days in the
determination of which
intermittent returns to work or
service which do not constitute
a bona fide resumption of duties
shall be disregarded;
<PAGE>
Any termination in terms of this clause 3 will not be or
deemed to be unlawful, unfair or an unfair labour practice as
defined in the Act. To the extent that such termination may
otherwise have accorded the employee the right to seek
reinstatement by, or any other form of redress against the
company whether under the Act or otherwise, such right is
hereby waived by the employee.
4. EFFECT OF TERMINATION OF EMPLOYMENT
The termination of the employee's employment for any reason
whatsoever shall not affect the operation of any provisions of this
agreement to the extent to which they confer rights or impose
obligations upon the parties which are exercisable or enforceable
after the termination date, and such provisions shall to that extent
continue to be of full force and effect. The termination of the
employee's employment shall furthermore not prejudice any rights
which have accrued to the parties as at the termination date.
5. SUSPENSION OF EMPLOYMENT
If the company suspects that the employee is guilty of the conduct
referred to in clause 3.1 and/or clause 3.1.1, or any other conduct
which may, if proved, justify his dismissal, or has committed a
breach of any of the terms of this agreement, it may, pending a duly
constituted enquiry into the alleged conduct in question, but
without prejudice to its right of summary dismissal in terms of
clause 3.1 and without giving rise to any claim for damages or
otherwise against it, suspend the employee for a period not
exceeding 30 days during which the employee shall:
5.1. not be entitled to attend work at the premises of the
company;
5.2 be entitled to his normal salary.
6. DUTIES OF EMPLOYEE
The employee shall:
6.1 devote the whole of his time and attention during the
company's normal business hours, and such reasonable
amount of additional time as may be necessary on an
unpaid basis, having regard to the exigencies of the
business of the company, to the business and
<PAGE>
affairs of the company and shall not, before the
termination of this agreement or during any period after
such date in which he is employed by the company,
without the company's prior written consent, whether as
proprietor, partner, director, shareholder, member,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise, and whether for reward or not,
directly or indirectly be interested or engaged in or
concerned with or employed by any business, trade,
undertaking or concern:
6.1.1. other than that of the company; or
6.1.2. which competes with any business carried on
by the company,
the undertakings in clause 6.1.1. and 6.1.2. being
separate, provided that he shall not be deemed to have
breached his undertakings by reason of:
6.1.3. his having bona fide financial interest in
businesses, trades, undertakings or concerns
which do not directly or indirectly compete
with the company which have been disclosed
to the company in writing and/or after
disclosing his intention to do so to the
company in writing by accepting appointment
as a non-executive director of such
businesses, trades, undertaking or concerns
and devoting a reasonable amount of time to
such financial interest and directorships,
provided that no such interest of or
activities by the employee are prejudicial
to or adversely affect the performance of
his duties hereunder; and/or
6.1.4. his holding shares in any company the shares
of which are listed on a recognised stock
exchange if the shares owned by him and the
persons, companies and trusts referred to in
clause 11.3.4. do not in the aggregate
constitute more than 5% (five percent) of
any class of the issued share capital of
such company; and/or
6.1.5. he being an officer of or holding shares in
the company;
6.2. obey the orders and directions of the board, any
managing director and any properly authorised officer or
official of the company, shall carry out such functions
and duties as are from time to time assigned to him and
are consistent with his status and use his
<PAGE>
utmost endeavours to protect and promote the business
and interest of the company and to preserve its
reputation and goodwill;
6.3. not, during the operation of this agreement or
thereafter, regardless of the reason for termination of
his employment, use for his own benefit or for the
benefit of any other person or divulge or communicate to
any person or person's except to those of the officials
of the company whose province it is to know the same,
any of the company's secrets or any other information
which he may receive or obtain in relation to the
company's affairs or its customers or to the working of
any process or invention or to any marketing technique
which is carried on or used by the company;
6.4. be true and faithful to the company in all dealings and
transactions whatsoever relating to its business and
interests;
6.5. submit to the board or to any person nominated by it,
such information and reports as may be required of him
in connection with the performance of his duties and the
business of the company;
6.6. not, at any time during the operation of this agreement,
directly or indirectly, act in the manner referred to in
clause 11.3. and 11.4. or attempt to do so;
6.7. disclose to the board forthwith all acts and omissions
known to him of any other employee of the company which
constitute a breach of his or her obligations to the
company from whatsoever cause arising;
7. REMUNERATION
7.1. As remuneration for his services hereunder the company
shall pay the employee a salary at the rate of R20,000
(Twenty Thousand Rand) per month which shall be payable
on the last business day of each month and which shall
be subject to review, but not reduction, by the company
from time to time. The package may be structured in such
a manner as may lawfully achieve the optimum for
efficiency for the benefit of the employee.
<PAGE>
7.2. The company shall pay the employee a performance-based
bonus at the end of each financial year in accordance
with the criteria to be agreed upon between the company
and the employee within a reasonable period after the
commencement of his employment, and such bonus shall be
based upon the performance of The Virtual Colour Group.
8. INVENTIONS, DISCOVERIES AND COPYRIGHT
8.1. Any discovery or invention or secret process or
improvement in procedure made or discovered by the
employee in the course and scope of his employment by
the company in connection with or in any way affecting
or relating to the business of the company or capable of
being used or adapted for use by the company or in
connection with its business shall be disclosed to the
company any shall belong to and be the absolute property
of the company.
8.2. The employee shall, if and when required by the company,
apply or join with the company at its expense in
applying for Letters Patent or other equivalent
protection in the Republic of South Africa or in any
other part of the world for such discovery, invention,
process or improvement and shall at the company's
expense execute all instruments and do all things
necessary for vesting the said Letters Patent or other
equivalent protection in the name of the company as sole
beneficial owner or in the name of such other person as
the company may nominate.
8.3. Insofar as may be necessary the employee assigns to the
company the copyright in all present and future works
eligible for copyright, including, without limitation,
literary or artistic works or software programmes of
which he may be the author, which works were or are
created, compiled, devised or brought into being during
the course and scope of the employment by the company.
No consideration shall be payable by the company to the
employee in respect of this assignment.
8.4. All reports, manuals, financial statements, budgets,
indices, research papers, letters or other similar
documents (the nature of which is not limited by the
specific reference to the foregoing items) which are
created, compiled or devised or brought into being by
the employee or come into the employee's possession
during the course and scope of his
<PAGE>
employment by the company and all copies thereof will be
the property of the company and, upon the termination
date or earlier if required by the company, such
documents and all copies shall be returned to the
company.
9. LEAVE
The employee shall be entitled to 20 (twenty) days leave on full pay
in respect of each 12 (twelve) months' cycle of employment, to be
taken at such time or times as are convenient to the company. Leave
not taken when it is due otherwise than at the instance of the
company may not be accumulated.
10. OUT OF POCKET EXPENSES
The company shall refund to the employee the out-of-pocket expenses
incurred by him on behalf of the company which are substantiated by
vouchers therefor and which have been approved by the board or are
incurred in accordance with the principles determined by it from
time to rime.
11. RESTRAINT OF TRADE
11.1. It is agreed that in the course of his duties the
employee:
11.1.1. has acquired and/or will acquire
considerable know-how in and will learn of
the company's techniques and/or business
methods relating to the provision of and
other related services;
11.1.2 will have access to names of clients and
suppliers with whom the company does
business whether embodied in written form or
otherwise;
11.1.3. will have the opportunity of forging
personal links with clients and suppliers of
the company; and
11.1.4. generally will have the opportunity of
learning and acquiring the trade secrets,
business connections and other confidential
information appertaining to the company's
business.
<PAGE>
11.2. It is acknowledged that the only effective and
reasonable manner in which the company's rights in
respect of its business secrets and client connection
can be protected is the restraint imposed upon the
employee in terms of this clause 11, subject to the
payment by the company to the employee of the amount of
R168,000 (One Hundred and Sixty Eight Rand) which said
amount shall be payable by the company to the employee
in 2 (two) equal annual payments of R84,000 (Eighty Four
Thousand Rand) each, the first whereof shall be due and
payable by the company to the employee on 1st February
2001.
11.3. Without derogating from the employee's obligations under
clause 6.1. the employee shall not, for 2 (two) years
from the termination date, whether as proprietor,
partner, director, shareholder, member, employee,
consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise and whether for reward or not,
directly or indirectly:
11.3.1. carry on; or
11.3.2. be interested or engaged in or concerned
with or employed by any company, close
corporation, firm, undertaking or concern
which carries on,
In any of the prescribed areas any business which sells
prescribed goods or renders prescribed services or
competing services or in the course of which prescribed
goods are sold or prescribed services or competing
services are rendered; provided that the employee shall
not be deemed to have breached his undertaking by reason
of his:
11.3.3. holding share in the company; or
11.3.4. holding shares in any company the shares of
which are listed on a recognised stock
exchange if the shares owned by -
<PAGE>
11.3.4.1. him;
1.3.4.2. his ascendants and descendants;
11.3.4.3. his spouse;
11.3.4.4. any person related to him or his
spouse within the third degree
of consanguinity;
11.3.4.5. any trust created primarily for
the benefit of one or more of
the persons referred to in
clauses 11.3.4.1. to 11.3.4.5.;
and
11.3.4.6. any company effectively
controlled by one or more of the
persons and trusts referred to
in clauses 11.3.4.1. to
11.3.4.5.
do not in the aggregate constitute more than
5% (five percent) of any class of the issued
share capital of such company.
11.4. The employee undertakes that neither he nor any company,
close corporation, firm, undertaking or concern in or by
which he is directly or indirectly interested of
employed will within 2 (two) years after the termination
date and whether for reward or not, directly or
indirectly --
11.4.1. encourage or entice or incite or persuade or
induce any other employee of the company,
who was employed whilst the employee was
employed by the company and who is engaged
or participates in the sale or other
marketing by the company of the prescribed
goods, or in a material respect in the
rendering or in the marketing of the
prescribed services, to terminate his
employment by the company; or
11.4.2. furnish any information or advice to any
employee to whom clause 11.4.1. applies or
to any prospective employer of such employee
or use any other means which are directly or
indirectly designed, or in the
<PAGE>
ordinary course of events calculated, to
result in any such employee terminating his
employment by the company and/or becoming
employed by or directly or indirectly in any
way interested in or associated with any
other company, close corporation, firm,
undertaking or concern; or
11.4.3. furnish any information or advice (whether
oral or written) to any prescribed client
that the employee intends to or will
(whether as proprietor, partner, director,
shareholder, member employee, consultant,
contractor, financier, agent, representative
or otherwise) directly or indirectly, be
interested or engaged in or concerned with
or employed by any company, close
corporation, firm, undertaking or concern
carried on in any of the prescribed areas
which sells prescribed goods or competing
goods or renders prescribed services or
competing services or in the course of which
prescribed goods or competing goods are sold
or prescribed services or competing services
are rendered after the expiry of 2 (two)
years after the termination date; or
11.1.4. furnish any information or advice (whether
oral or written) to any prescribed client or
use any other means or take any other action
which is directly or indirectly designed, or
in the ordinary course of events calculated,
to result in any such prescribed client
terminating its associating with the company
and/or transferring its business to or
purchasing any prescribed goods or competing
goods or accepting the rendering of any
prescribed services or competing services
from any person other than the company, or
attempt to do so.
11.5. Without derogating from the obligations imposed by this
clause 11 the employee undertakes that neither he nor
any company, firm, undertaking or concern in or by which
he is directly or indirectly interested, engaged,
concerned or employed will for a period of 2 (two) years
after the termination date directly or indirectly,
whether as proprietor, partner, director, shareholder,
employee, consultant, contractor, financier, agent,
representative, assistant, trustee or beneficiary of a
trust or otherwise in any part of the prescribed areas
and whether for reward or not:
<PAGE>
11.5.1. solicit orders from prescribed clients for
the prescribed services or any competing
services;
11.5.2. canvass business in respect of the
prescribed services from prescribed clients;
11.5.3. sell or otherwise supply to any prescribed
client;
11.5.4. render any competing service to any
prescribed client;
11.5.5. purchase from any prescribed supplier or
accept the rendering of any prescribed
services from it;
11.5.6. solicit appointment as a distributor,
licensee, agent or representative of any
prescribed supplier in respect of prescribed
services'
including on behalf of or for the benefit of a
prescribed supplier.
11.6. Each of the undertakings set out in this clause 11
(including those appearing in a single clause) is
severable inter alia as to:
11.6.1. nature of interest, act or activity;
11.6.2. the categories of persons falling within the
definition of prescribed clients;
11.6.3. the categories of goods falling within the
definition of he competing goods;
11.6.4. the categories of services falling within
the definition of services and competing
services;
11.6.5. the categories of persons falling within the
definition of prescribed supplier;
<PAGE>
11.6.6. the individual magisterial districts and
areas which are defined as the prescribed
areas
and are acknowledged to be reasonably required for the
protection of the Company and are generally fair an
reasonable.
11.7. The employee acknowledges that the Company will suffer
financial harm and loss if he breaches any provision of
this clause 11. Upon the breach of any of the provisions
of clause 11.3. the company shall be entitled to enforce
the restraint in question and, in addition or
alternatively thereto, as the company may elect, be
entitled to claim and recover from the employee the sum
of ten thousand rand per month during the period of the
breach, and to the extent that it is not prohibited from
doing so by any law, to set off its claim against any
amount due by it to the employee (and he authorises the
company to do so) and to recover its claim from any
benefits due to the employee from any pension funds due
to the employee and, to the extent not precluded by law,
he cedes his right to those benefits to the company
accordingly.
12. GENERAL
12.1. No remedy granted by this agreement shall exclude any
other remedy available at law.
12.2. No amendment of this agreement or any consensual
cancellation thereof or any part thereof shall be
binding on the parties unless reduced to a written
document and signed by them.
12.3. If any of the terms of this agreement, such as the rate
of remuneration payable to the employee, are varied, the
other terms shall, unless otherwise agreed in writing,
remain of full force and effect.
12.4. No relaxation or indulgence which the company may show
to the employee shall in any way prejudice or be deemed
to be a waiver of its rights hereunder nor shall such
relaxation or indulgence preclude or estop the company
from exercising its rights in terms of this agreement in
respect of any further breach.
<PAGE>
12.5. This agreement constitutes the whole agreement between
the parties and no warranties or representation whether
express or implied have been given or made by the
company to the employee.
12.6. Subject to the provisions of clause 3 the employee's
employment by the company shall be governed by the
provisions of any applicable agreement or determination
concluded in terms of the Act and/or the Wage Act of
1957, and/or the provisions of any applicable law.
12.7. Any term of this agreement which conflicts with the
provisions of any agreement or determination referred to
in this agreement, or any applicable law shall be
treated as pro non scripto and shall be severed from the
balance of this agreement, which shall continue to be of
full force and effect.
12.8. The company shall be entitled to cede and delegate all
or any of its rights and obligations under this
agreement to the successor in title of the undertakings
of the company or any member thereof, whether such
cession and delegation takes place before or after the
termination date.
<PAGE>
13. DOMICILIUM CITANDI ET EXECUTANDI
13.1. The parties choose as their domicilia citandi et
executandi for all purposes under this agreement,
whether in respect of court process, notices or other
documents or communications of whatsoever nature, the
following addresses:
13.1.1. The company: Colorsmart.Com Inc
Physical: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Postal: 537 Myatt Drive, Madison,
Tennessee 37115 USA
Telefax: 9091 615 612 4005
13.1.2. The employee: Virtual Colour
Physical: 2nd Floor Castle Mews
16A New Market Street,
WOODSTOCK, 8001
Postal: P 0 Box 1212,
WOODSTOCK, 7915
Telefax: (021) 462 1660
13.2. Any notice or communication required or permitted to be
given in terms of this agreement shall be valid and
effective only if in writing but it shall be competent
to give notice by telefax.
13.3. Either party may by notice to the other party change the
physical address chosen as its domicilia citandi et
executandi to another physical address where postal
delivery occurs in South Africa or its postal address or
its telefax number, provided that the change shall
become effective on the 7th business day from the deemed
receipt of the notice by the other party.
13.4. Any notice to a party:
13.4.1. sent by prepaid registered post (by airmail
if appropriate) in a correctly addressed
envelope to it at an address chosen as its
domicilia citandi et executandi to which
post is delivered shall be deemed to have
been
<PAGE>
received on the 7th business day after
posting (unless the contrary is proved);
13.4.2. delivered by hand to a responsible person
during ordinary business hours at the
physical address chosen as its domicilum
citandi et executandi shall be deemed to
have been received on the day of delivery;
or
13.4.3. sent by telefax to its chosen telefax number
stipulated in clause 13.1., shall be deemed
to have been received on the date of
despatch (unless the contrary is proved).
13.5. Notwithstanding anything to the contrary herein
contained a written notice or communication actually
received by a party shall be an adequate written notice
or communication to it notwithstanding that it was not
sent to or delivered at its chosen domicilium citandi et
executandi.
14. RESIGNATION
14.1. If the employee is a Director of the company on
termination date the employee will ipso facto resign as
a Director of the company.
14.2. The employee hereby irrevocably appoints the then
auditors of the company as his agent in dem suam to sign
all such documents and to do all such acts as may be
necessary to effect and implement such resignation.
15. COSTS
The costs of and incidental to the drawing of this agreement and the
stamp duty hereon shall be paid by the company.
<PAGE>
16. SMOKING POLICY
It is the policy of the company not to permit smoking in the
premises from which the company conducts its business.
17. SAFETY AND HEALTH
The employee acknowledges that he is aware of the dangers to his
safety and health attached to the work be has to perform, any
article or substance he has to produce, process, use, handle, store
or transport and any plant and machinery, which he is required or
permitted to use, and also with the precautionary measures to be
taken and observed with respect of those dangers.
18. COUNTERPARTS
This agreement may be entered into in any number of counterparts and
by the parties to this agreement on separate counterparts, each of
which when so executed and delivered shall be an original, but all
the counterparts shall together constitute one and the same
instrument.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
1. /s/ [ILLEGIBLE] For:
-----------------
18 November 99, Cape Town 2. /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------- ----------------- ----------------------
1. /s/ Roger Finchum
-----------------
Colorsmart.com Inc.
18 November 99, Madison, TN 2. /s/ S. Finchum /s/ Roger D. Finchum Snr
- --------------------------- ----------------- ------------------------
CEO
<PAGE>
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
COLORSMART.COM, INC., a Nevada Corporation (the "Company") and GREG E.
DUKOFF (the "Employee") hereby enter into this EMPLOYMENT AGREEMENT (the
"Agreement") dated as of December ___, 1999, as follows:
1. EMPLOYMENT.
The Company shall employ Employee, and Employee shall be employed by the
Company upon the terms and subject to the conditions set forth in this
Agreement.
2. TERM OF EMPLOYMENT.
The period of Employee's employment under this Agreement shall begin as of
the Closing Date of the Company's Initial Public Offering (the "Employment
Commencement Date"), and shall continue for a period of three (3) years
thereafter (the "Initial Term") and shall be automatically renewed for
successive one (1) year terms thereafter, unless Employee's employment is
terminated in accordance with Section 5 below.
3. DUTIES AND RESPONSIBILITIES
(a) Employee shall serve as President of Jamberry Lake Digital Media, Inc.
("Jamberry"), a wholly-owned subsidiary of the Company. In such
capacity, Employee shall perform such duties and/or accept such
assignments as may be required of Employee by the Company.
(b) Employee shall faithfully serve the Company and/or its affiliated
corporations, devote Employee's full working time, attention and
energies to the business of the business of the Company and/or its
affiliated corporations, and perform the duties under this Agreement to
the best of Employee's abilities.
(c) Employee shall (i) comply with all applicable laws, rules and
regulations, and all requirements of all applicable regulatory,
self-regulatory, and administrative bodies; (ii) comply with the
Company's rules, procedures, policies, requirements, and directions; and
(iii) not engage in any other business or employment without the written
consent of the Company, except as otherwise specifically provided herein.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Initial Term, the Company shall pay Employee a
base salary at the rate of One Hundred Twenty Thousand and 00/100
Dollars ($120,000.00) dollars per year ("Base Salary"). Thereafter, in
any renewal period, Employee's Base Salary shall be increased by no less
than fifteen percent (15%) per year, beginning on the first year of the
renewal period. Such Base Salary shall be paid in accordance with the
Company's standard payroll practice for employees.
1
<PAGE>
(b) BONUS. Employee shall be entitled to receive a minimum bonus (the
"Minimum Bonus") of Thirty Thousand Dollars ($30,000.00) for each fiscal
year, or in the case of a fiscal year of less than twelve (12) months, on
a pro rata basis, in which the gross revenues of Jamberry, as determined
in accordance with generally accepted accounting principals, exceed Two
Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) (the
"Minimum Gross Revenue"). The Minimum Bonus, or any amount in excess
thereof paid to Employee as a result of Jamberry having exceeded the
Minimum Gross Revenue (the "Bonus"), shall be paid to Employee in a lump
sum within thirty (30) days of the end of the fiscal year in which
Employee becomes entitled to the Bonus.
(c) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Employee for
the ordinary and necessary business expensed incurred by Employee in the
performance of Employee's duties hereunder in accordance with the
Company's customary practices applicable to employees, provided that
such expenses are incurred and accounted for in accordance with the
Company's policy.
(d) BENEFIT PLANS. Employee shall be eligible to participate in or receive
benefits under any pension plan, profit sharing plan, medical and dental
benefits plan, life insurance plan, short-term and long-term disability
plans, supplemental and/or incentive compensation plans, or any other
benefit plan or arrangement generally made available by the Company to
employees of similar status and responsibilities (hereinafter referred
to as "similarly situated employees").
(e) STOCK OPTIONS. Employee shall, on each one (1) year anniversary of the
Employment Commencement Date ("Anniversary Date"), have the cumulative
option to purchase from the Company shares of the Company's common stock
(the "Option Shares") at a price equal to eighty-five percent (85%) of
the Initial Public Offering price of the Company's common stock (the
"Option Price"), provided that in that year, or in the case of a
partial year, on a pro rata basis, the gross revenues of Jamberry, as
determined in accordance with generally accepted accounting principals,
exceed Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00). Employee shall, at each Anniversary Date, be entitled to
purchase a number of Option Shares having a cumulative value, which value
shall be determined based upon the Initial Public Offering price of the
common stock of the Company, equal to Three Hundred Thousand and 00/100
Dollars ($300,000.00) or two (2) times Employee's than current Base
Salary, whichever is greater. This annual option to purchase the number
of Option Shares per year of employment pursuant to the formula set
forth herein (an "Annual Purchase Option"). shall vest in Employee on
each Anniversary Date. Each Annual Purchase Option, once and to the
extent vested, may be exercised by Employee at any time up to thirty
(30) days after the end of Employee's employment hereunder.
(f) PLACE OF EMPLOYMENT. The Company shall not cause the Employee to
relocate his principal place of employment outside the States of New
York or New Jersey.
2
<PAGE>
5. TERMINATION OF EMPLOYMENT.
Employee's employment hereunder may be terminated under the following
circumstances:
(a) DEATH. Employee's employment hereunder shall terminate upon Employee's
death.
(b) TOTAL DISABILITY. The Company may terminate Employee's employment
hereunder upon Employee's becoming "Totally Disabled". For purposes of
this Agreement, Employee shall be "Totally Disabled" if Employee is
physically or mentally incapacitated so as to render Employee incapable
of performing Employee's usual and customary duties under this
Agreement. Employee's receipt of disability benefits under the Company's
long-term disability plan, or receipt of Social Security disability
benefits, shall be deemed conclusive evidence of Total Disability for
purpose of this Agreement; provided, however, that in the absence of
Employee's receipt of such long-term disability benefits or Social
Security benefits, the Company may, in its reasonable discretion (but
based upon appropriate medical evidence), determine that Employee is
Totally Disabled.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
Employee's employment hereunder for "Cause" at any time after providing
written notice to Employee.
(i) For purposes of this Agreement, the term "Cause" shall mean any of
the following: (A) conviction of a crime (including conviction on
a NOLO CONTENDERE plea) involving a felony; (B) deliberate and
continual refusal to perform employment duties reasonable
requested by the Company or an affiliate after thirty (30) days'
written notice by certified mail of such failure to perform,
specifying that the failure constitutes cause (other than as a
result of vacation, sickness, illness or injury); (C) fraud or
embezzlement determined in accordance with the Company's normal,
internal investigative procedures consistently applied in
comparable circumstances; or (D) gross misconduct or gross
negligence in connection with the business of the Company or an
affiliate which has substantial effect on the Company or the
affiliate.
(ii) Any determination of Cause under this Agreement shall be made by
the Company after giving Employee a reasonable opportunity to
be heard.
(d) VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate employment
hereunder at any time after the first Anniversary Date of this Agreement
after providing thirty (30) days' written notice to the Company.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate
Employee's employment hereunder, and this Employment Agreement, for any
reason, provided Employee is given written notice to terminate, received
ninety (90) days prior to the expiration of the current term of this
Agreement.
3
<PAGE>
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
In the event that Employee's employment hereunder is terminated, Employee
shall be entitled to the following compensation and benefits upon such
termination:
(a) TERMINATION BY REASON OF DEATH. In the event that Employee's employment
is terminated by reason of Employee's death, the Company shall pay the
following amounts to Employee's beneficiary or estate:
(i) Any accrued but unpaid Base Salary for services rendered to the
date of death, any accrued but unpaid expenses required to be
reimbursed under this Agreement, and any vacation accrued to the
date of death.
(ii) Any benefits to which Employee may be entitled pursuant to the
plans, policies and arrangements referred to in Section 4(d)
hereof as determined and paid in accordance with the terms of such
plans, policies and arrangements.
(iii) An amount equal to the Base Salary (at the rate in effect as of
the date of Employee's death) which would have been payable to
Employee if Employee had continued in employment until the end of
the twelve (12) month period beginning on the date of Employee's
death. Such amount shall be paid in a single lump sum cash payment
within thirty (30) days after Employee's death.
(iv) An amount equal to the Bonus which would have been payable to
Employee if Employee had continued in employment until the end of
the twelve (12) month period beginning on the date of Employee's
death.
(v) Employee's estate shall be entitled to exercise any vested Annual
Purchase Options and any Annual Purchase Options that would have
vested in Employee if Employee had continued in employment until
the end of the twelve (12) month period beginning on the date of
Employee's death.
(b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that Employee's
employment is terminated by reason of Employee's Total Disability as
determined in accordance with Section 5(b), the Company shall pay the
following amounts to Employee:
(i) Any accrued but unpaid Base Salary for services rendered to the
date of termination any accrued but unpaid expenses required to be
reimbursed under this Agreement, any vacation accrued to the date
of termination.
(ii) Any benefits to which Employee may be entitled pursuant to the
plans, policies and arrangements referred to in Section 4(d)
hereof shall be determined and paid in accordance with the terms
of such plans, policies and arrangements.
(iii) An amount equal to
(A) the Base Salary (at the rate in effect as of the date of
Employee's Total Disability) which would have been
payable to Employee if
4
<PAGE>
Employee had continued in active employment until the
end of the 12-month period beginning on the date of
Employee's termination; reduced by
(B) the maximum annual amount of the long term disability
benefits payable to Employee under the Company's
long-term disability plan as determined prior to the
reduction of such benefits under the terms of the plan
for other disability income. Payment shall be made at
the same time and in the same manner as such
compensation would have been paid if Employee had
remained in active employment until the end of such
period.
(iv) An amount equal to the Bonus which would have been payable to
Employee if Employee had continued in employment until the end of
the twelve (12) month period beginning on the date of Employee's
termination.
(v) Employee or Employee's guardian, if appropriate, shall be entitled
to exercise any vested Annual Purchase Options and any Annual
Purchase Options that would have vested in Employee if Employee
had continued in employment until the end of the twelve (12) month
period beginning on the date of Employee's termination.
(c) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION BY EMPLOYEE. In the event
that Employee's employment is terminated by the Company for Cause
pursuant to Section 5(c) or Employee terminates employment pursuant to
Section 5(d), the Company shall pay the following amounts to Employee:
(i) Any accrued but unpaid Base Salary for services rendered to the
date of termination, any accrued but unpaid expensed required to
be reimbursed under this Agreement, any vacation accrued to the
date of termination.
(ii) Any benefits to which Employee may be entitled pursuant to the
plans, policies and arrangements referred to in Section 4(d)
hereof shall be determined and paid in accordance with the terms
of such plans, policies and arrangements.
(iii) Employee shall, within 30 days of Employee's termination, be
entitled to exercise any Annual Purchase Options which have vested
at the time of termination.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event that Employee's
employment is terminated by the Company pursuant to Section 5(c) for
reasons other than death, Total Disability or Cause, the Company shall
pay the following amounts to Employee:
(i) Any accrued but unpaid Base Salary for services rendered to the
date of termination, any accrued but unpaid expenses required to
be reimbursed under this Agreement, and any vacation accrued to the
date of termination.
5
<PAGE>
(ii) Any benefits to which Employee may be entitled pursuant to the
plans, policies and arrangements referred to in Section 4(d)
hereof shall be determined and paid in accordance with the terms
of such plans, policies and arrangements.
(iii) The Base Salary (at the rate in effect as of the date of
Employee's termination) which would have been payable to Employee
if Employee had continued in active employment for either (A) the
period ending on the last day of the current term; or (B) twelve
(12) months, whichever is greater. Payment shall be made in a lump
sum within thirty (30) days of such termination. The Employee
shall also be eligible for a bonus or incentive compensation
payment, to the extent bonuses are paid to similarly situated
employees, pro-rated for the year in which the Employee is
terminated, and paid at the same time as similarly situated
employees are paid.
(iv) The Company, completely at its expense, will continue for employee
and Employee's spouse and dependents, group health plans, programs
or arrangements, in which Employee was entitled to participate at
any time during the twelve-month period prior to the date of
termination, until the earlier of: (A) the last day of the period
during which Employee receives payment in accordance with clause
(iii) above; (B) Employee's death (provided that benefits payable
to Employee's beneficiaries shall not terminate upon Employee's
death); or (C) with respect to any particular plan, program or
arrangement, the date Employee becomes covered by a comparable
benefit provided by a subsequent employer.
(v) An amount equal to any Bonus which would have been payable to
Employee if Employee had continued in active employment for either
(A) the period ending on the last day of the current term; or (B)
twelve (12) months, whichever is greater.
(vi) Employee shall be entitled to exercise any Annual Purchase Options
which were vested at the time of termination and which would have
vested if Employee had continued in active employment for either
(A) the period ending on the last day of the current term; or (B)
twelve (12) months, whichever is greater.
(e) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Employee at the time of
Employee's termination or resignation of employment, Employee shall have
no right to receive any other compensation, or to participate in any
other plan, arrangement or benefit, with respect to future periods after
such termination or resignation.
7. WITHHOLDING OF TAXES.
The Company may withhold from any compensation and benefits payable under
this Agreement all applicable federal, state, local or other taxes.
6
<PAGE>
8. NON-DISCLOSURE OF AGREEMENT TERMS.
Employee agrees that Employee will not disclose the terms of this Agreement
to any third party other than Employee's immediate family, attorney,
accountants, or other consultants or advisors or except as may be required by
any governmental authority.
9. ASSIGNMENT.
Except as otherwise provided in this Agreement, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, representatives, successors and assigns. This Agreement shall not be
assignable by Employee.
10. ENTIRE AGREEMENT; AMENDMENT.
This Agreement shall supersede any and all existing oral or written
agreements, representations, or warranties between Employee and the Company or
any of its subsidiaries or affiliated entities relating to the terms of
Employee's employment by the Company. It may not be amended except by a
written agreement signed by both parties.
11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Tennessee applicable to agreements made and to be performed
in that State, without regard to its conflict of laws provisions.
12. NOTICES.
Any notice, consent, request or other communication made or given in
connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed registered or certified mail,
return receipt requested, or by facsimile or by hand delivery, to those
listed below at their following respective addresses or at such other address
as each may specify by notice to the others:
To the Company:
Colorsmart.com, Inc.
537 Myatt Drive
Madison, Tennessee 37115
Attention: Roger Finchum, Sr., Chairman
with a copy to:
Lynch, Rowin, Novack, Burnbaum & Crystal
300 East 42nd Street, 10th Floor
New York, New York 10017
Attn: Edward Burnbaum
7
<PAGE>
To Employee:
Greg E. Dukoff
1756-A Springfield Avenue
New Providence, New Jersey 07974
with a copy to:
Durkin & Durkin
1120 Bloomfield Avenue
P.O. Box 1289
West Caldwell, New Jersey 07007-8452
Attention:: David D.F. Lawrence
13. MISCELLANEOUS.
(a) WAIVER. The failure of a party to insist upon strict adherence to any
item of this Agreement on any occasion shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(b) SEPARABILITY. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and
cannot be modified to be enforceable, such term or provision shall
immediately become null and void, leaving the remainder of this
Agreement in full force and effect.
(c) HEADINGS. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.
(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts will together constitute but one
Agreement.
IN WITNESS WHEREOF, the parties herein have duly executed this Agreement
as of the day and year first above written.
ATTEST: COLORSMART.COM, INC.
By: /s/ Roger Finchum, Sr.
- ------------------------------- -------------------------------
Roger Finchum, Sr.,
Chairman
WITNESS:
/s/ Greg E. Dukoff
- ------------------------------- -------------------------------
Greg E. Dukoff
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ATTEST Colorsmart.Com, Inc.
/s/ Roger Finchum, Jr. By: /s/ Roger Finchum, Sr.
- ------------------------------- -------------------------------
Roger Finchum, Sr.
Chairman
ATTEST Jamberry Lake, LLC
/s/ [Illegible] By: /s/ Greg E. Dukoff
- ------------------------------- -------------------------------
Greg E. Dukoff,
Managing Member
ATTEST Jamberry Lake Digital Media, Inc.
/s/ [Illegible] By: /s/ Greg E. Dukoff
- ------------------------------- -------------------------------
Greg E. Dukoff,
President
32
<PAGE>
Exhibit 10.26
FREEDOM LEASE(R)
Closed End Vehicle Lease Agreement
Consumer Paper
[LOGO] BANK ONE(R)
AGREEMENT TO LEASE
You agree to lease the Vehicle from us subject to the terms and conditions of
this Lease. The terms and conditions of your Lease are stated below and on the
reverse side. This Agreement ("Lease") covers your lease from us of the motor
vehicle ("Vehicle") described on the reverse side with all equipment, parts and
accessories. The words "you" and "your" mean each Lessee who signs the Lease,
jointly and severally; the words "we," "us" and "our" mean the Lessor who signs
this Lease. The Vehicle you selected for this Lease has been (or will be)
purchased by the Lessor from the Seller who arranged for this Lease.
VEHICLE USE AND AUTHORITY TO OPERATE
Unless otherwise provided in this Lease, you agree that the Vehicle will be used
primarily for personal, family or household use. You further agree that you: (1)
will comply with, and will not violate, nor permit anyone else to violate, the
applicable laws and regulations of local, state and federal governments
concerning the operation of motor vehicles; and (2) will not use, or permit
anyone else to use the Vehicle for unlawful purposes. You agree to pay when due
all parking, traffic, or other fines and penalties that are imposed on the
Vehicle or on any driver of the Vehicle during the lease term or until the
Vehicle is returned to the Lessor.
In addition, the Vehicle will: (1) not be used or operated by persons other than
your employees, agents and members of your immediate family, all of whom (i)
must be properly authorized and licensed to operate the Vehicle; and (ii) will
not be under the influence of alcohol or drugs while operating the Vehicle; (2)
not be used for drivers' training purposes or to transport passengers for hire;
(3) not be used, or permitted to be used for any purpose which would cause any
required insurance coverage to be suspended or canceled; (4) not be used in a
reckless or negligent manner, nor in excess of its rated capacity; (5) not be
relocated from the continental Untied States; and (6) be subject to the
restrictions in the TRANSFER OF INTERESTS section.
o Notice to Lessor Required. In addition to the above promises, you represent
that you are currently licensed to drive the Vehicle (or vehicles of its
classification) in the state where you live. As a condition of this Lease, you
must maintain your license at all times during the lease term. You agree to
notify us in writing immediately if: (1) your driver's license authority is
suspended, revoked, canceled, expired, or is limited in any way; (2) the Vehicle
is taken or held by any government authority for any reason; and (3) you are
charged with a crime, driving violation or other violation that could result in
the restriction of your authority to drive or in the Vehicle being taken or held
by any government authority. Failure to notify us is an event of default under
this Lease. These requirements and your promises also apply to each driver who
regularly drives the Vehicle.
REFUNDABLE SECURITY DEPOSIT
The refundable Security Deposit, if required (1) shall not be considered as
rent; (2) must be paid when you sign this Lease; and (3) shall be held by us as
security without interest thereon accruing to your benefit, unless otherwise
required by law. Refund of any amount remaining after all of your obligations
and liabilities under this Lease have been satisfied will be made at the
termination of this Lease, and is subject to offset of any amount that you still
owe us.
TITLE AND REGISTRATION
The Vehicle is duly owned by us and will be titled and registered in our name,
duly recorded, and will bear valid license plates. You do not acquire any right,
title or interest in or to the Vehicle except the right of use, subject to the
terms and conditions of this Lease.
TAXES AND FEES
Unless specifically included in the Monthly Lease Payments and subject to
adjustments made because of changes in laws or regulations, you will pay when
due: (1) all sales, use, excise, personal property, ad valorem or other taxes,
except our income taxes; (2) all assessments, fees and charges payable with
respect to the ownership, possession, rental, transportation or delivery of the
Vehicle; (3) all fees and expenses resulting from licensing, registration,
inspection or other governmental requirements, now or hereafter existing; and
(4) all fees, assessments and charges resulting from you moving to another
location within the continental United States.
INSURANCE
a. You shall be responsible for obtaining and maintaining insurance coverage
with a duly licensed insurer acceptable to us. All insurance shall be in force
continuously during the lease term from the time the Vehicle is delivered to you
until the Vehicle is returned to us. Such [ILLEGIBLE]. If the Lease is
terminated under this section and we do not receive insurance proceeds to
compensate for the total loss of the Vehicle, then the charges described in the
EARLY TERMINATION AND DEFAULT CHARGES section will apply.
INDEMNITY
To the fullest extent permitted by law, you will indemnify and hold us free and
harmless from any liability, judgment, loss, cost, theft, damage or expense,
including reasonable attorneys' fees which we may suffer or incur as a result of
any claim by any person(s), including, but not limited to, you or your agents or
employees, arising out of, or resulting from, the manufacture, delivery, actual
or alleged ownership, performance, use, operation, possession, selection,
leasing or return of the Vehicle and the cargo or contents thereof, whether such
claim is based on negligence, breach of contract, breach of warranty, absolute
liability or otherwise.
CONFISCATION
Upon the confiscation of the Vehicle by a governmental agency as a result of the
alleged illegal use of such Vehicle, or for any other reason, you agree to
reimburse us as described in the EARLY TERMINATION AND DEFAULT CHARGES section,
and for such other expenses as we may incur as a result of such confiscation.
TRANSFER OF INTERESTS
YOU AGREE TO DEFEND OUR TITLE TO THE VEHICLE. YOU PROMISE NOT TO ASSIGN,
TRANSFER, SUBLEASE OR PLEDGE YOUR RIGHTS UNDER THIS LEASE TO ANY OTHER PERSON OR
ENTITY, OR TO GIVE ANYONE OR ALLOW ANYONE TO OBTAIN A SECURITY INTEREST OR LIEN
IN THE VEHICLE UNDER THIS LEASE.
You understand and agree that we may assign or transfer our rights under this
Lease and upon notification to you of such action, you agree to make payments as
due to the Assignee.
GOVERNING LAW
THIS LEASE AND ANY AGREEMENT CREATED IN CONNECTION WITH THIS LEASE WILL BE
CONSTITUTED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE YOU
RESIDE AT THE TIME THIS LEASE IS SIGNED.
NOTICE TO MOTOR VEHICLE LESSEE
Federal Law requires that you disclose the mileage to us in connection with the
transfer of ownership. Failure to complete an odometer disclosure statement and
return it to us or making a false statement may result in fines and/or
imprisonment. Therefore, it is important that you complete and return to us the
odometer disclosure statement when the Lease terminates.
You will be provided an odometer disclosure statement to complete prior to the
termination of the Lease.
LATE CHARGES
Unless prohibited by law, you agree to pay a Late Charge on any Monthly Lease
Payment which is overdue by more than 10 days equal to 5% of the amount of the
later payment or $25, whichever is less. If this Lease is governed by North
Carolina law, you agree to pay a Late Charge on any Monthly Lease Payment which
is overdue by more than 15 days equal to 4% of the amount of the payment that is
past due. If your delinquency requires additional collection costs or activity,
we may also collect a charge based on the costs we incurred (and on any
applicable state law), unless prohibited by law.
DEFAULT
At our option, we may terminate this Lease before the end of its term under any
of the conditions listed below. These conditions are also conditions of default.
(1) You do not make a payment when it is due;
(2) You fail to keep any promises you make in connection with this
Lease;
(3) You are the subject of a proceeding in bankruptcy, dissolution,
receivership, or insolvency against you or your property, or you
[ILLEGIBLE]
<PAGE>
FREEDOM LEASE(R) Closed End Vehicle Lease Agreement Consumer Paper
- --------------------------------------------------------------------------------
VEHICLE DESCRIPTION
- --------------------------------------------------------------------------------
MODEL YEAR 97
MAKE TOYOTA
MODEL 4RUNNER
PRIMARY DRIVER DISPLAY ARTS INC
VIN NO. JT3HN86RXV0129335
BEGINNING MILEAGE 5
- --------------------------------------------------------------------------------
ACCOUNT NUMBER _________________________
OPTIONAL MECHANICAL BREAKDOWN PROTECTION
By initialing below, you have decided to purchase optional Mechanical Breakdown
Protection ("MBP") coverage. You understand that this coverage is NOT required
under the Lease. MBP covers the repair of certain major mechanical breakdowns of
the Vehicle. This protection ends N.A. months from the date of delivery or when
the Vehicle's odometer shows N.A. miles, whichever occurs first. You have
reviewed a copy of the contract, describing the terms and protections of the
MBP. A copy of the completed contract will be sent to you as soon as
practicable.
---------------- -------------------
---------------- -------------------
MONTHLY LEASE PAYMENT
EACH MONTHLY LEASE PAYMENT CONSISTS OF:
a. Monthly Rental ...................................... $ 331.87
-------------
b Sales/Use Tax ....................................... $ 19.91
-------------
c. ______________ ...................................... $ N/A
-------------
d. ______________ ...................................... $ N/A
-------------
Total Monthly Lease Payment (a + b + c + d) ................... $ 351.78
-------------
AMOUNT DUE WHEN YOU SIGN
BASIC AMOUNT DUE WHEN YOU SIGN:
e. First Monthly Lease Payment ......................... $ 351.78
-------------
f. Refundable Security Deposit ......................... $ N/A
-------------
g. Subtotal (e + f) .................................... $ 351.78
-------------
OTHER CHARGES PAYABLE WHEN YOU SIGN (If Applicable)
h. Capitalized Cost Reduction (Cash) ................... $ 2800.00
-------------
i. Capitalized Cost Reduction (Trade) .................. $ N/A
-------------
j. Tax on Capitalized Cost Reduction ................... $ 168.00
-------------
k. Sales Tax ........................................... $ N/A
-------------
l. Registration Fees ................................... $ 104.00
-------------
m. TN LOCAL TAXES ...................................... $ 96.99
-------------
n. Other MISC UPFRONT FEES ............................. $ N/A
-------------
o Subtotal (h + i + j + k + l + m + n) ................ $ 3168.99
-------------
TOTAL AMOUNT DUE WHEN YOU SIGN (g + o) ........................ $ 3520.77
-------------
TERM
The term of this Lease is for 39 months. You agree that the first monthly
payment is due the day this Lease is signed and that all subsequent payments are
due on the 30TH day of each month thereafter.
- --------------------------------------------------------------------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------
By signing this Lease, you acknowledge and accept delivery of the Vehicle
described in this Lease. You acknowledge having a reasonable opportunity to
inspect the Vehicle, that it is in acceptable condition, and that it has all of
the options and features that you requested.
LEASE DATE (DELIVERY DATE) 08/30/97
- --------------------------------------------------------------------------------
(2) It is your obligation to repair any damage resulting from the removal of a
cellular phone or radar detector or other similar type of equipment. Repairs of
such damage are subject to our approval and acceptance.
(3) The amount of your Monthly Lease Payment was determined by us, in part, on
your using the Vehicle within the permitted mileage limitations as set forth in
the PERMITTED AVERAGE MONTHLY MILEAGE section. For excess mileage you agree to
pay us $.14 per mile.
- --------------------------------------------------------------------------------
ENTIRE AGREEMENT
- --------------------------------------------------------------------------------
This Lease constitutes the entire agreement between you and us, and no other
agreement on any way modifying any of the terms hereof will be binding upon us
unless made in writing and signed by us. All prior proposals, negotiations and
representations, if any, made with reference hereto are merged herein. If any of
the provisions hereof are determined to be unenforceable, invalid or illegal,
the remaining provisions of this Lease will not be affected.
/s/ Display Arts /s/ [ILLEGIBLE]
- --------------------------- ----------------------------
Signature of Lessee Signature of Co-Lessee
By: By:
----------------------- -------------------------
Title: President Title:
-------------------- ----------------------
NOTICE TO MICHIGAN LESSEES - EARLY TERMINATION CHARGE
In the event this Lease is terminated prior to the end of its term, the charge
for early termination determined by us may be different than the actual cash
value of the Vehicle which may be determined by the insurer of the Vehicle. You
will be required to pay the difference between our charges on early termination
and the insurer's actual cash value.
By your initials, you acknowledge and agree that you have read and understand
this notice.
---------------- -------------------
---------------- -------------------
- --------------------------------------------------------------------------------
LESSEE'S INSURANCE
- --------------------------------------------------------------------------------
<PAGE>
any exclusions, must be reasonably acceptable to us. You shall bear the cost of
the insurance with at least the following minimum insurance coverage limits:
(1) Liability for bodily injury or death of (i) $100,000 each person and
$300,000 each accident, or (ii) $300,000 combined single limit
coverage;
(2) Liability for property damage of $50,000 for each accident;
(3) Collision and upset, subject to a maximum $500 deductible;
(4) Fire, theft and comprehensive (for passenger cars), or fire, theft
and combined additional insurance (for trucks); and
(5) Uninsured motorist coverage and/or personal injury protection as
required by the law in the state where the Vehicle is kept.
b. You shall furnish us a certificate of insurance, evidencing the issuance of a
policy or policies for the Vehicle which complies with the terms of this Lease.
You shall at all times comply with all of the conditions of the insurance
policy. In the event that the insurance coverage is not obtained, the Vehicle
shall not be used by you and will be returned to and stored by us at your
expense, until the proper coverage is obtained, or, at our option, we may obtain
coverage to protect the Vehicle at your expense.
c. We shall be named as Additional Insured and as Loss Payee in all policies
covering the Vehicle.
d. You shall: (1) promptly report to us in writing (i) all accidents, damage to
the Vehicle and collisions, irrespective of fault, injury, loss or damage and
(ii) any suit, demand or claim, whether or not justified; and (2) cooperate
fully with us and the insurer in all accident investigations, claim and
litigation procedures.
e. You will release to us all insurance proceeds for loss or damage to the
Vehicle. You will pay for all repairs that are not covered by Insurance
proceeds. In the event of a total loss, your responsibility will be determined
as agreed in the VEHICLE THEFT, LOSS OR DESTRUCTION section.
f. You shall pay us upon demand any disbursement we make on your behalf under
this section.
PRESUMPTION OF GOOD CONDITION
It shall be conclusively presumed that the Vehicle, upon the delivery and
acceptance by you, is in good order and repair for all purposes in your dealings
with us.
WARRANTIES
The Vehicle is subject to the manufacturer's standard written new vehicle
warranty. This Lease does not impair your rights under that warranty.
You expressly agree and understand that you have selected and agreed to lease
the Vehicle "AS IS." Even though the Vehicle is subject to the manufacturer's
warranty, WE, THE LESSOR, MAKE NO WARRANTY EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION OF THE VEHICLE OR ANY PART OR ACCESSORY OF THE VEHICLE, ITS
MERCHANTABILITY OR FITNESS OR ANY PARTICULAR PURPOSE, or as to any obvious or
hidden defects in material, workmanship or otherwise. No such defect or
unfitness shall in any way affect your obligations to comply with the terms of
this Lease.
MAINTENANCE, REPAIRS AND OPERATING EXPENSES
You, at your sole cost and expense, will: (1) maintain the Vehicle in accordance
with the manufacturer's maintenance schedule and have documentation as proof;
(2) immediately make all necessary and required repairs and purchase only
manufacturer approved parts which will accrue to our benefit and become our
property; (3) pay all costs and expenses of whatever nature resulting from the
use and operation of the Vehicle, including, but not limited to, expenses for
gasoline, oil, lubrication, antifreeze, adjustments, tune-ups, repairs, tires,
tubes, storage, parking, washing, tools, tolls, fines, towing and servicing of
any kind; and (4) comply with all recall notices.
VEHICLE THEFT, LOSS OR DESTRUCTION
If the Vehicle is stolen and not recovered, lost or otherwise totally destroyed,
this Lease will, at our option: (1) terminate, subject to the special Early
Termination liability provisions in this section; or (2) continue with a
substitute Vehicle of equal value and comparable condition, mileage and
accessories.
If the Lease is terminated under this section and we receive the insurance
proceeds to compensate for the total loss of the Vehicle, then you agree to pay
the following Early Termination charges rather than the charges in the EARLY
TERMINATION AND DEFAULT CHARGES section: (1) You will immediately pay us all
Monthly Lease Payments that are past due at the time of early termination, plus
any other amounts that are past due under this Lease; and (2) you will also
immediately pay us the amount of any deductible that was subtracted from the
insurance proceeds we received for the total loss of the Vehicle.
[ILLEGIBLE] Lease, or the insurance company refuses to insure you or
others operating the Vehicle;
(5) You have made any material misrepresentations on your Lease
Application concerning credit or insurance information;
(6) Your driver's license is suspended, revoked, canceled, or is
otherwise restricted;
(7) YOU ASSIGN, TRANSFER, OR SUBLEASE THE VEHICLE;
(8) You fail to return the Vehicle at the end of the lease term or
earlier as agreed in this Lease;
(9) You die or are declared incompetent;
(10) You fail to notify us in writing within thirty days after you move.
If you default, we will have all the rights and remedies provided by law. We
will have the right to sue you for damages, terminate the Lease and take the
Vehicle without prior demand unless otherwise provided by law. We may require
you to return the Vehicle or make it available to us at a location that is
reasonably convenient for both of us. If we take the Vehicle, we may enter the
premises where the Vehicle is stored and remove it. However, we may not breach
the peace or unlawfully enter onto your premises in doing so. We may take any
property in the Vehicle at the time of retaking and hold it for you. Our
retaking of the Vehicle does not release you from any obligation under the
Lease.
EARLY TERMINATION AND DEFAULT CHARGES
a. We may terminate this Lease at any time if you are in default. If you are not
in default, you can terminate this Lease at any time. Unless otherwise provided
in the VEHICLE THEFT, LOSS OR DESTRUCTION section, the following charges apply
if this Lease is terminated (by you or by us) before the end of the scheduled
lease term.
On early termination you will pay the sum of:
(1) A $250 Administration Fee;
(2) All Monthly Lease Payments and any other amounts that are due or
past due at the time of early termination;
(3) Any official fees and taxes imposed in connection with the Lease;
(4) The remaining Lease payments plus the estimated value of the Vehicle
at the end of the scheduled lease term, discounted by the present
value of the original yield of the Lease;
(5) Any reasonable court costs, attorneys' fees and other collection
costs that we pay to recover and/or sell the Vehicle, unless
prohibited by law. (We will not collect attorneys' fees if this
Lease is governed by North Dakota law.);
(6) An ET Charge equal to the number of Monthly Rental payments is shown
in the chart below, which is based on the percentage of months in
the lease term which have expired (this percentage is calculated by
dividing the number of months expired in the Lease term by the total
number of months in the Lease term).
- --------------------------------------------------------------------------------
% of Months in Leased ET Charge = Monthly Rental
Term Expired amount X this Number
If the original term is 0-36 months:
0 - 50% 1.00
51 - 75% 0.75
76 - 89% 0.50
90 - 100% 0.00
If the original term is 37-48 months:
0 - 50% 1.50
51 - 75% 1.25
76 - 89% 1.00
90 - 100% 0.00
If the original term is 49-60 months:
0 - 50% 1.75
51 - 75% 1.50
76 - 89% 1.25
90 - 100% 0.00
- --------------------------------------------------------------------------------
Once the Vehicle is returned or recovered, we will sell it in a commercially
reasonable manner. We will compare the sale price with the sum of items (1)
through (8) above. If the sale price is less than the sum of items (1) through
(8), you will pay us the difference. You agree that we may use your refundable
Security Deposit to help pay this amount.
b. The charges in this section take into account the value of the Vehicle. If
you do not agree with the value we assign to it, you may get a professional
appraisal of its wholesale fair market value at the time of sale. We must both
agree to the neutral third party appraiser that you use. You agree to pay for
the appraisal. If you get an appraisal, we will use the appraised value as the
Vehicle's "sale price" to figure your total charges for early termination.
<PAGE>
FEES AND TAXES
Total estimated amount you will pay during the lease term for official fees,
registration, certificate of title, license fees and taxes $1379.48
OPTIONS TO PURCHASE
You have the following options to purchase the Vehicle:
- - Option One - Before the End of the Lease Term. You may purchase the Vehicle at
any time during the lease term if at the time: (1) the Lease has not already
been terminated; (2) all payments and monies then due have been paid; and (3)
you are not otherwise in default on the Lease. The purchase price of the Vehicle
may be obtained by calling us. The purchase price will be the sum of items (1)
through (6) in the EARLY TERMINATION AND DEFAULT CHARGES section, subsection a.
You also agree to pay any sales and any other taxes, official fees and the
amounts necessary to prepare the Vehicle to conform with any legal requirements
for sale.
Option Two - End of the Lease Term. If the Lease has not been terminated and all
payments and monies due under the terms of the Lease have been paid, you will
have the option to purchase the Vehicle at the end of the lease term for
$22228.00. In addition to this purchase price, you will pay any sales and any
other taxes, official fees and the amounts necessary to prepare the Vehicle to
conform with the legal requirements for sale. In order to exercise this option,
you must notify us in writing at least 60 days before the end of lease term.
OPTIONS AT END OF THE LEASE TERM
You have the following options at the end of the scheduled Lease term:
- - Option One - Purchase the Vehicle. If the Lease has not been terminated and
all payments and monies due under the terms of the Lease have been paid, you
will have the option to purchase the Vehicle at the end of the lease term as
described in the OPTIONS TO PURCHASE section, Option Two - End of the Lease
Term.
- - Option Two - Return the Vehicle. If you have not terminated early, or chosen
to purchase the Vehicle, you agree to return it on the last day of the scheduled
lease term. You agree to return the Vehicle to a location acceptable to us. For
your convenience, you may return the Vehicle up to 7 days before the end of the
scheduled lease term. Returning the Vehicle during this convenience period will
not result in any early termination credits or charges.
At the time you return the Vehicle, or as soon as the charges can reasonably be
determined, you agree to pay: (i) a $350.00 Vehicle Return Charge; (2) the costs
we incur to make any necessary repairs, replacements and other charges so that
the Vehicle meets the standards in the STANDARDS OF WEAR AND TEAR section
(below); (3) any excess mileage charges due under the STANDARDS OF WEAR AND TEAR
section; and (4) any other amounts due and payable under this Lease.
STANDARDS OF WEAR AND TEAR
If you return the Vehicle at the end of the scheduled lease term (see OPTIONS AT
END OF THE LEASE TERM, Option Two - Return the Vehicle), we will apply the
following standards and charges for excess wear and use:
(1) Except for reasonable wear and use, the Vehicle will be in good condition
together with all original accessories and options when returned. The Vehicle
must pass any inspection then required by law. The odometer must reflect the
actual mileage. In the event (i) the Vehicle shows any evidence that the
odometer has been adjusted, altered, disconnected or otherwise tampered with or
(ii) the actual mileage cannot be determined due to the mechanical failure of
the odometer, the Vehicle's actual mileage (used to figure excess mileage
charges) shall be determined by adding 100,000 miles to the mileage then showing
on the odometer. The Vehicle will have a matching set of tires with at least 25%
of the tread remaining. The engine, drive train and other mechanical and
electrical parts shall operate properly and not be damaged. There will be no
scratches, dents, pits, rust areas, mismatches of paint or cracks in the
fenders, bumpers, grill, hood, trunk or roof. There will be no cracks in the
windshield or windows and the interior will not be damaged. No special
identification will appear on the Vehicle.
[ILLEGIBLE]
Insurance is provided by:
Insurance Company: AllState
Policy Number 03003 6646
Agent's Name Paul Jones
Agent's Tel. Number 755-4100
Name of Lessee Insured DISPLAY ARTS INC
- --------------------------------------------------------------------------------
You acknowledge that the above information is true and correct. You authorize
the Lessor, its Assignee, and their agents to verify this information with the
above insurance company at any time during the Lease term. You also agree to
notify us in writing if any of this information changes.
/s/ Display Arts /s/ [ILLEGIBLE]
- --------------------------- ----------------------------
Lessee Co-Lesse
By: /s/ [ILLEGIBLE] By:
----------------------- -------------------------
Title: Title:
-------------------- ----------------------
- --------------------------------------------------------------------------------
INITIAL FOR BUSINESS PURPOSE LEASE
By initialing below, you represent that the Vehicle will be used primarily for
BUSINESS purposes. This representation replaces all promises in this Lease that
the Vehicle is used primarily for personal, family or household use. (See
VEHICLE USE AND AUTHORITY TO OPERATE section.) You understand that we are
relying on your representation to create the terms of this Lease.
---------------- -------------------
---------------- -------------------
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
YOU AGREE TO ALL THE PROVISIONS ON BOTH SIDES OF THIS LEASE AND YOU REPRESENT
THAT YOU HAVE READ BOTH SIDES OF THIS LEASE. DO NOT SIGN THIS AGREEMENT UNLESS
ALL BLANK SPACES ARE COMPLETED. YOU ALSO ACKNOWLEDGE THAT YOU HAVE RECEIVED A
COMPLETED COPY OF THIS AGREEMENT. THIS AGREEMENT IS NOT VALID UNLESS SIGNED BY
BOTH LESSOR AND LESSEE. IF THERE ARE TWO OR MORE LESSEES, YOU ARE JOINTLY AND
SEVERALLY LIABLE FOR THE OBLIGATIONS UNDER THIS LEASE.
- --------------------------------------------------------------------------------
LESSEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME DISPLAY ARTS INC
STREET 30 S. MAIN ST
CITY MEMPHIS STATE TN ZIP 38103
/s/ Display Arts Inc
- -----------------------------------
Signature of Lessee
By: [ILLEGIBLE] Title:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CO-LESSEE
- --------------------------------------------------------------------------------
NAME WILLIAM G. WATTERS
STREET 109 N. MAIN
CITY MEMPHIS STATE TN ZIP 38103
/s/ [ILLEGIBLE]
- -----------------------------------
Signature of Co-Lessee
By: Title:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LESSOR
- --------------------------------------------------------------------------------
NAME BANK ONE KENTUCKY VEH LEASING
STREET P.O. BOX 37363
CITY LOUISVILLE STATE KY ZIP 40232-7363
- -----------------------------------
Signature
BY: /s/ Darlene F. Mays
TITLE: [ILLEGIBLE]
BANK ONE is an affiliate of BANC ONE CORPORATION, Columbus, OH
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 10.27
Memorandum
To: Donovan McNamee Sr.
CC: Donovan McNamee Jr.
From: Donald Schmelhaus
Date: 04/26/99
Re: Dolphin Capital Lease Agreements
- --------------------------------------------------------------------------------
After contacting Dolphin capital the only problem was that on the 2nd lease
(Contract # 15188) they had been charging us sales tax. They have corrected
this. The POC at Dolphin is Patty Sullivan 1-800-426-2626.
We have 2 contracts with Dolphin Capital:
1. 12980 dated 12/21/98, for the 5 iMac's, 1 super stack Hub, 1 Epson
Stylus Photo Printer.
o $289.35 Monthly for 36 months
2. 15188 dated 01/15/99, for the G3 (Design station) & NEC Monitor
o $165.26 Monthly for 36 months
We can make 1 payment per month the only thing that they ask is that we
reference both contracts numbers on the check.
- ----------------------
DISPLAY ARTS-KNOXVILLE
- ----------------------
<PAGE>
Dolphin Capital Corporation 2061 N. Morley, Moberly, MO 65270 (Leasing
Company/Lessor)
PLAIN LANGUAGE EQUIPMENT LEASE A subsidiary of Atlantic Bank
- --------------------------------------------------------------------------------
Lessee: DISPLAY ARTS INC
- --------------------------------------------------------------------------------
Payments, Equipment, Purchase Option and Guaranty - See Schedule "A" attached
and made a part hereof.
Terms and Conditions
1. LEASE CHARGES. You (the leasing customer, or lessee) agree to lease from us
(the above leasing company) the equipment listed on attached Schedule "A" for
the periodic payment amount and for the full term stated on Schedule "A". If any
payment is late, we may charge you a late fee of $25.00 or 15% of the amount
that is late, whichever is greater, unless otherwise limited by law. We may also
charge $25.00 for each NSF check and $10.00 for each collection call. You agree
to return the equipment to us at your cost at the end of the lease unless we
have given you a written purchase option and you exercise the option at that
time. If you don't return the equipment, this lease will continue for the same
terms on a monthly basis. If the cost or tax varies from the estimate, you
authorize us to adjust the payments/or (Purchase) Option price proportionately,
up or down, net to exceed twenty percent (20%). You may authorize auto check
payment by marking the checkbox "ACH" on Schedule "A".
2. OTHER IMPORTANT TERMS. THIS LEASE CANNOT BE CANCELED OR MODIFIED BY YOU FOR
ANY REASON, INCLUDING EQUIPMENT FAILURE, LOSS OR DAMAGE. YOU MAY NOT REVOKE
ACCEPTANCE OF THE EQUIPMENT. YOU, NOT WE, SELECTED THE EQUIPMENT AND THE VENDOR.
WE ARE NOT RESPONSIBLE FOR EQUIPMENT FAILURE OR THE VENDOR'S ACTS. YOU ARE
LEASING THE EQUIPMENT "AS IS", and we disclaim all warranties, express or
implied. We are not responsible for service or repairs. Any warranties the
vendor gave to us, if any, we hereby assign (pass) to you. You may contact the
vendor for a statement of such warranties, if any. You certify to us that the
equipment will be used by you solely for business purposes and not for personal
or household purposes.
3. TITLE. We will have title to the equipment during this lease. You agree this
is a "true lease", not a sale or a loan. However, if this lease is determined
not to be a "true lease", you hereby grant us a security interest in the
equipment. You also agree this is a "finance lease" under Article 2A of the
Uniform Commercial Code, and you waive your rights and remedies conferred upon
you by Article 2A. You hereby give us power of attorney to sign and file
financing statements in order to perfect this security interest in our favor.
You also agree to pay our filing and other administrative and processing fees.
4. LOSS; DAMAGE; INSURANCE. You are responsible for and accept the risk of loss
or damage to the equipment. You agree to keep the equipment insured against all
risks of loss in an amount at least equal to the replacement cost, and you will
list us as loss payee and give us written proof of this insurance. IF YOU DO NOT
GIVE US SUCH PROOF, WE MAY (BUT WILL NOT BE OBLIGATED TO) OBTAIN OTHER INSURANCE
AND CHARGE YOU A FEE FOR IT, OR WE MAY CHARGE YOU A MONTHLY RISK CHARGE EQUAL TO
0.25% OF THE ORIGINAL EQUIPMENT COST.
5. TAXES AND OTHER FEES; INDEMNIFICATION. You agree to reimburse us for all
taxes (such as sales, use and property taxes) and charges in connection with the
ownership and use of the equipment. UNLESS WE HAVE GIVEN YOU A WRITTEN OPTION TO
PURCHASE THE EQUIPMENT FOR $1.00 AT THE END OF THE LEASE, YOU AGREE THAT WE ARE
ENTITLED TO ANY AND ALL TAX BENEFITS (SUCH AS DEPRECIATION AND TAX CREDITS), AND
YOU WILL NOT DO ANYTHING INCONSISTENT WITH THIS UNDERSTANDING. IF YOU DO, YOU
WILL INDEMNIFY (REIMBURSE) US FOR ALL LOSSES AND LIABILITIES ARISING OUT OF THE
OWNERSHIP OR YOUR USE OF THE EQUIPMENT. THESE PROMISES WILL CONTINUE AFTER THIS
LEASE ENDS.
6. DEFAULT. If you fail to pay us as agreed, we will have the right to (I)
charge your checking or credit card account and/or sue you for all past due
payments AND ALL PAYMENTS TO BECOME DUE IN THE FUTURE FOR THE UNEXPIRED TERM,
plus the residual value we have placed on the equipment and other charges you
owe us, and (II) repossess the equipment. You will also pay for our reasonable
collection and legal costs. THIS LEASE IS GOVERNED BY MISSOURI LAW, AND YOU
AGREE IN THE EVENT OF YOUR DEFAULT OR ANY DISPUTE YOU MAY HAVE CONCERNING THIS
LEASE THAT THE EXCLUSIVE JURISDICTION IN DETERMINING SUCH DISPUTES SHALL BE THE
RESPECTIVE STATE COURTS OF RANDOLPH COUNTY, MISSOURI.
7. ASSIGNMENT. YOU AGREE THAT YOU MAY NOT ASSIGN (TRANSFER) THIS LEASE OR
SUBLEASE THE EQUIPMENT TO ANYONE ELSE. YOU AGREE THAT WE MAY SELL OR ASSIGN ANY
OF OUR INTERESTS TO A NEW OWNER OR A SECURED PARTY ("Third Person") WITHOUT
NOTICE TO YOU. In that event, the Third Person will have such rights as we
assign to them but none of our obligations (we will keep these obligations), and
the rights of the Third Person will not be subject to any claims, defenses or
set-offs that you may have against us or another person.
8. MISCELLANEOUS. You authorize us to share credit and other information about
you and your company with our affiliates. For your convenience, we may accept a
facsimile copy of this lease with facsimile signatures. You agree a facsimile
copy will be treated as an original and will be admissible as evidence of this
lease.
NOTICE: THIS IS A NON-CANCELABLE, BINDING CONTRACT.
Lessee: DISPLAY ARTS INC Lessor: DOLPHIN CAPITAL CORPORATION
Signature: /s/ Donovan McNamee Signature:
------------------------- -------------------------
Title: CEO Title:
------------------------- -------------------------
Date: 12-21-98 Date:
------------------------- -------------------------
LGI Reference #: 10280314
<PAGE>
[LOGO]
DOLPHIN
CAPITAL
ADDENDUM
- --------------------------------------------------------------------------------
AMENDMENT TO LEASE: 26000-B-388
LESSEE NAME: DISPLAY ARTS
Lessee hereby agrees that this instrument is an amendment to said Lease and
acknowledges receipt of a copy of said amendment.
The "Schedule of Equipment" shall be amended by deleting:
QUANTITY, and DESCRIPTION MODEL #
1 SUPER STACK.
and by substituting Additional equipment therefore the following:
QUANTITY, and DESCRIPTION MODEL #
1 WEBONLY: SUPER STACK II DUAL.
The "Schedule of Payment" shall be amended by deleting said "Schedule of
Payment" as it appears in said Lease and by substituting therefore the
following:
Original Total # of Amount of Security
Term of Lease Rental Payments Each Payment Deposit
- ------------- --------------- ------------ -------
36 36 1@$290.42
35@ 289.34
(Applicable Taxes to be Billed)
Purchase Option at Lease end: 10%.
All other terms and conditions of the Lease Agreement shall continue in full
force and effect.
PROPOSED BY LESSEE ON: ACCEPTED BY LESSOR ON:
January 18, 1999
- --------------------------- -----------------------------
(DATE) (DATE)
Lessee: (DISPLAY ARTS) Lessor: DOLPHIN CAPITAL CORP.
BY: /s/ Pamela M. McNamee BY:
------------------------- -------------------------
TITLE: President TITLE:
---------------------- ----------------------
<PAGE>
SCHEDULE A,
ATTACHED TO AND MADE A PART OF THAT CERTAIN LEASE AGREEMENT
WITH LGI REFERENCE # 10280314 BETWEEN Dolphin Capital Corporation AS LESSOR
AND Display Arts Inc AS LESSEE
- --------------------------------------------------------------------------------
Lessee: DISPLAY ARTS INC
Billing Address: 1425 ELM HILL PIKE NASHVILLE, TN 37210
Equipment Address: 1425 ELM HILL PIKE NASHVILLE, TN 37210
Telephone Number: (615)742-1425
SUPPLIER: MICROWAREHOUSE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Term of Lease Number of Payments: Payment Amount: Security Deposit: Documentation Fee:
<S> <C> <C> <C> <C>
36 36 $292.04 $584.08 $35.00
(months) Plus applicable taxes Due and Payable with
the first monthly
payment
</TABLE>
I accept that Dolphin Capital Corporation debit my account directly (ACH) |_|
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUIPMENT
Description of Leased Equipment:
5 APPLE IMAC COMPUTER
1 SUPERSTACK HUB
1 EPSON STYLUS PHOTO PRN
- --------------------------------------------------------------------------------
PURCHASE OPTION
Lessor hereby grants to the above named Lessee, the option to purchase the
Equipment ("Option") covered by the aforesaid Lease OPTION PRICE: $ 811.22 plus
applicable sales tax, if any.
- --------------------------------------------------------------------------------
LESSEE: DISPLAY ARTS INC LESSOR: Dolphin Capital Corporation
BY: /s/ Donovan McNamee BY:
---------------------- -----------------------
NAME/TITLE: CEO DATE:
---------------------- -----------------------
DATE: 12/21/98
----------------------
- --------------------------------------------------------------------------------
<PAGE>
Dolphin Capital Corporation 2061 N. Morley, Moberly, MO 65270 (Leasing
Company/Lessor)
PLAIN LANGUAGE EQUIPMENT LEASE A subsidiary of Atlantic Bank
- --------------------------------------------------------------------------------
Lessee: DISPLAY ARTS INC
- --------------------------------------------------------------------------------
Payments, Equipment, Purchase Option and Guaranty - See Schedule "A" attached
and made a part hereof.
Terms and Conditions
1. LEASE CHARGES. You (the leasing customer, or lessee) agree to lease from us
(the above leasing company) the equipment listed on attached Schedule "A" for
the periodic payment amount and for the full term stated on Schedule "A". If any
payment is late, we may charge you a late fee of $25.00 or 15% of the amount
that is late, whichever is greater, unless otherwise limited by law. We may also
charge $25.00 for each NSF check and $10.00 for each collection call. You agree
to return the equipment to us at your cost at the end of the lease unless we
have given you a written purchase option and you exercise the option at that
time. If you don't return the equipment, this lease will continue for the same
terms on a monthly basis. If the cost or tax varies from the estimate, you
authorize us to adjust the payments/or (Purchase) Option price proportionately,
up or down, net to exceed twenty percent (20%). You may authorize auto check
payment by marking the checkbox "ACH" on Schedule "A".
2. OTHER IMPORTANT TERMS. THIS LEASE CANNOT BE CANCELED OR MODIFIED BY YOU FOR
ANY REASON, INCLUDING EQUIPMENT FAILURE, LOSS OR DAMAGE. YOU MAY NOT REVOKE
ACCEPTANCE OF THE EQUIPMENT. YOU, NOT WE, SELECTED THE EQUIPMENT AND THE VENDOR.
WE ARE NOT RESPONSIBLE FOR EQUIPMENT FAILURE OR THE VENDOR'S ACTS. YOU ARE
LEASING THE EQUIPMENT "AS IS", and we disclaim all warranties, express or
implied. We are not responsible for service or repairs. Any warranties the
vendor gave to us, if any, we hereby assign (pass) to you. You may contact the
vendor for a statement of such warranties, if any. You certify to us that the
equipment will be used by you solely for business purposes and not for personal
or household purposes.
3. TITLE. We will have title to the equipment during this lease. You agree this
is a "true lease", not a sale or a loan. However, if this lease is determined
not to be a "true lease", you hereby grant us a security interest in the
equipment. You also agree this is a "finance lease" under Article 2A of the
Uniform Commercial Code, and you waive your rights and remedies conferred upon
you by Article 2A. You hereby give us power of attorney to sign and file
financing statements in order to perfect this security interest in our favor.
You also agree to pay our filing and other administrative and processing fees.
4. LOSS; DAMAGE; INSURANCE. You are responsible for and accept the risk of loss
or damage to the equipment. You agree to keep the equipment insured against all
risks of loss in an amount at least equal to the replacement cost, and you will
list us as loss payee and give us written proof of this insurance. IF YOU DO NOT
GIVE US SUCH PROOF, WE MAY (BUT WILL NOT BE OBLIGATED TO) OBTAIN OTHER INSURANCE
AND CHARGE YOU A FEE FOR IT, OR WE MAY CHARGE YOU A MONTHLY RISK CHARGE EQUAL TO
0.25% OF THE ORIGINAL EQUIPMENT COST.
5. TAXES AND OTHER FEES; INDEMNIFICATION. You agree to reimburse us for all
taxes (such as sales, use and property taxes) and charges in connection with the
ownership and use of the equipment. UNLESS WE HAVE GIVEN YOU A WRITTEN OPTION TO
PURCHASE THE EQUIPMENT FOR $1.00 AT THE END OF THE LEASE, YOU AGREE THAT WE ARE
ENTITLED TO ANY AND ALL TAX BENEFITS (SUCH AS DEPRECIATION AND TAX CREDITS), AND
YOU WILL NOT DO ANYTHING INCONSISTENT WITH THIS UNDERSTANDING. IF YOU DO, YOU
WILL INDEMNIFY (REIMBURSE) US FOR ALL LOSSES AND LIABILITIES ARISING OUT OF THE
OWNERSHIP OR YOUR USE OF THE EQUIPMENT. THESE PROMISES WILL CONTINUE AFTER THIS
LEASE ENDS.
6. DEFAULT. If you fail to pay us as agreed, we will have the right to (I)
charge your checking or credit card account and/or sue you for all past due
payments AND ALL PAYMENTS TO BECOME DUE IN THE FUTURE FOR THE UNEXPIRED TERM,
plus the residual value we have placed on the equipment and other charges you
owe us, and (II) repossess the equipment. You will also pay for our reasonable
collection and legal costs. THIS LEASE IS GOVERNED BY MISSOURI LAW, AND YOU
AGREE IN THE EVENT OF YOUR DEFAULT OR ANY DISPUTE YOU MAY HAVE CONCERNING THIS
LEASE THAT THE EXCLUSIVE JURISDICTION IN DETERMINING SUCH DISPUTES SHALL BE THE
RESPECTIVE STATE COURTS OF RANDOLPH COUNTY, MISSOURI.
7. ASSIGNMENT. YOU AGREE THAT YOU MAY NOT ASSIGN (TRANSFER) THIS LEASE OR
SUBLEASE THE EQUIPMENT TO ANYONE ELSE. YOU AGREE THAT WE MAY SELL OR ASSIGN ANY
OF OUR INTERESTS TO A NEW OWNER OR A SECURED PARTY ("Third Person") WITHOUT
NOTICE TO YOU. In that event, the Third Person will have such rights as we
assign to them but none of our obligations (we will keep these obligations), and
the rights of the Third Person will not be subject to any claims, defenses or
set-offs that you may have against us or another person.
8. MISCELLANEOUS. You authorize us to share credit and other information about
you and your company with our affiliates. For your convenience, we may accept a
facsimile copy of this lease with facsimile signatures. You agree a facsimile
copy will be treated as an original and will be admissible as evidence of this
lease.
NOTICE: THIS IS A NON-CANCELABLE, BINDING CONTRACT.
Lessee: DISPLAY ARTS INC Lessor: DOLPHIN CAPITAL CORPORATION
Signature: /s/ Donovan McNamee Signature:
------------------------- -------------------------
Title: V.P. Title:
------------------------- -------------------------
Date: 1/15/99 Date:
------------------------- -------------------------
LGI Reference #: 10283470
<PAGE>
SCHEDULE A,
ATTACHED TO AND MADE A PART OF THAT CERTAIN LEASE AGREEMENT
WITH LGI REFERENCE # 10283470 BETWEEN Dolphin Capital Corporation AS LESSOR
AND Display Arts Inc AS LESSEE
- --------------------------------------------------------------------------------
Lessee: DISPLAY ARTS INC
Billing Address: 1425 ELM HILL PIKE NASHVILLE, TN 37210
Equipment Address: 1425 ELM HILL PIKE NASHVILLE, TN 37210
Telephone Number: (615)742-1425
SUPPLIER: MICROWAREHOUSE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Term of Lease Number of Payments: Payment Amount: Security Deposit: Documentation Fee:
<S> <C> <C> <C> <C>
36 36 $166.18 $332.36 $49.00
(months) Plus applicable taxes Due and Payable with
the first monthly
payment
</TABLE>
I accept that Dolphin Capital Corporation debit my account directly (ACH) |_|
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUIPMENT
Description of Leased Equipment:
1 APPLE COMPUTER
1 NEC MONITOR
- --------------------------------------------------------------------------------
PURCHASE OPTION
Lessor hereby grants to the above named Lessee, the option to purchase the
Equipment ("Option") covered by the aforesaid Lease for OPTION PRICE $461.61
plus applicable sales tax, if any.
- --------------------------------------------------------------------------------
LESSEE: DISPLAY ARTS INC LESSOR: Dolphin Capital Corporation
BY: /s/ DONOVAN MCNAMEE BY:
---------------------- ------------------------
NAME/TITLE: Donovan McNamee/V.P. DATE:
---------------------- ------------------------
DATE: 1/15/99
----------------------
- --------------------------------------------------------------------------------
<PAGE>
Dolphin Capital Corporation 2061 N. Morley, Moberly, MO 65270 (Leasing
Company/Lessor)
PLAIN LANGUAGE EQUIPMENT LEASE A subsidiary of Atlantic Bank
- --------------------------------------------------------------------------------
Lessee: DISPLAY ARTS INC
- --------------------------------------------------------------------------------
Payments, Equipment, Purchase Option and Guaranty - See Schedule "A" attached
and made a part hereof.
Terms and Conditions
1. LEASE CHARGES. You (the leasing customer, or lessee) agree to lease from us
(the above leasing company) the equipment listed on attached Schedule "A" for
the periodic payment amount and for the full term stated on Schedule "A". If any
payment is late, we may charge you a late fee of $25.00 or 15% of the amount
that is late, whichever is greater, unless otherwise limited by law. We may also
charge $25.00 for each NSF check and $10.00 for each collection call. You agree
to return the equipment to us at your cost at the end of the lease unless we
have given you a written purchase option and you exercise the option at that
time. If you don't return the equipment, this lease will continue for the same
terms on a monthly basis. If the cost or tax varies from the estimate, you
authorize us to adjust the payments/or (Purchase) Option price proportionately,
up or down, net to exceed twenty percent (20%). You may authorize auto check
payment by marking the checkbox "ACH" on Schedule "A".
2. OTHER IMPORTANT TERMS. THIS LEASE CANNOT BE CANCELED OR MODIFIED BY YOU FOR
ANY REASON, INCLUDING EQUIPMENT FAILURE, LOSS OR DAMAGE. YOU MAY NOT REVOKE
ACCEPTANCE OF THE EQUIPMENT. YOU, NOT WE, SELECTED THE EQUIPMENT AND THE VENDOR.
WE ARE NOT RESPONSIBLE FOR EQUIPMENT FAILURE OR THE VENDOR'S ACTS. YOU ARE
LEASING THE EQUIPMENT "AS IS", and we disclaim all warranties, express or
implied. We are not responsible for service or repairs. Any warranties the
vendor gave to us, if any, we hereby assign (pass) to you. You may contact the
vendor for a statement of such warranties, if any. You certify to us that the
equipment will be used by you solely for business purposes and not for personal
or household purposes.
3. TITLE. We will have title to the equipment during this lease. You agree this
is a "true lease", not a sale or a loan. However, if this lease is determined
not to be a "true lease", you hereby grant us a security interest in the
equipment. You also agree this is a "finance lease" under Article 2A of the
Uniform Commercial Code, and you waive your rights and remedies conferred upon
you by Article 2A. You hereby give us power of attorney to sign and file
financing statements in order to perfect this security interest in our favor.
You also agree to pay our filing and other administrative and processing fees.
4. LOSS; DAMAGE; INSURANCE. You are responsible for and accept the risk of loss
or damage to the equipment. You agree to keep the equipment insured against all
risks of loss in an amount at least equal to the replacement cost, and you will
list us as loss payee and give us written proof of this insurance. IF YOU DO NOT
GIVE US SUCH PROOF, WE MAY (BUT WILL NOT BE OBLIGATED TO) OBTAIN OTHER INSURANCE
AND CHARGE YOU A FEE FOR IT, OR WE MAY CHARGE YOU A MONTHLY RISK CHARGE EQUAL TO
0.25% OF THE ORIGINAL EQUIPMENT COST.
5. TAXES AND OTHER FEES; INDEMNIFICATION. You agree to reimburse us for all
taxes (such as sales, use and property taxes) and charges in connection with the
ownership and use of the equipment. UNLESS WE HAVE GIVEN YOU A WRITTEN OPTION TO
PURCHASE THE EQUIPMENT FOR $1.00 AT THE END OF THE LEASE, YOU AGREE THAT WE ARE
ENTITLED TO ANY AND ALL TAX BENEFITS (SUCH AS DEPRECIATION AND TAX CREDITS), AND
YOU WILL NOT DO ANYTHING INCONSISTENT WITH THIS UNDERSTANDING. IF YOU DO, YOU
WILL INDEMNIFY (REIMBURSE) US FOR ALL LOSSES AND LIABILITIES ARISING OUT OF THE
OWNERSHIP OR YOUR USE OF THE EQUIPMENT. THESE PROMISES WILL CONTINUE AFTER THIS
LEASE ENDS.
6. DEFAULT. If you fail to pay us as agreed, we will have the right to (I)
charge your checking or credit card account and/or sue you for all past due
payments AND ALL PAYMENTS TO BECOME DUE IN THE FUTURE FOR THE UNEXPIRED TERM,
plus the residual value we have placed on the equipment and other charges you
owe us, and (II) repossess the equipment. You will also pay for our reasonable
collection and legal costs. THIS LEASE IS GOVERNED BY MISSOURI LAW, AND YOU
AGREE IN THE EVENT OF YOUR DEFAULT OR ANY DISPUTE YOU MAY HAVE CONCERNING THIS
LEASE THAT THE EXCLUSIVE JURISDICTION IN DETERMINING SUCH DISPUTES SHALL BE THE
RESPECTIVE STATE COURTS OF RANDOLPH COUNTY, MISSOURI.
7. ASSIGNMENT. YOU AGREE THAT YOU MAY NOT ASSIGN (TRANSFER) THIS LEASE OR
SUBLEASE THE EQUIPMENT TO ANYONE ELSE. YOU AGREE THAT WE MAY SELL OR ASSIGN ANY
OF OUR INTERESTS TO A NEW OWNER OR A SECURED PARTY ("Third Person") WITHOUT
NOTICE TO YOU. In that event, the Third Person will have such rights as we
assign to them but none of our obligations (we will keep these obligations), and
the rights of the Third Person will not be subject to any claims, defenses or
set-offs that you may have against us or another person.
8. MISCELLANEOUS. You authorize us to share credit and other information about
you and your company with our affiliates. For your convenience, we may accept a
facsimile copy of this lease with facsimile signatures. You agree a facsimile
copy will be treated as an original and will be admissible as evidence of this
lease.
NOTICE: THIS IS A NON-CANCELABLE, BINDING CONTRACT.
Lessee: DISPLAY ARTS INC Lessor: DOLPHIN CAPITAL CORPORATION
Signature: /s/ Donovan McNamee Signature:
------------------------- -------------------------
Title: V.P. Title:
------------------------- -------------------------
Date: 1/15/99 Date:
------------------------- -------------------------
LGI Reference #: 10283470
<PAGE>
Exhibit 10.28
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$32,150.00 05-20-1999 05-20-2002 RNRF3126 RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
Principal Amount: $32,150.00 Interest Rate: 9.500% Date of Note: May 20, 1999
PROMISE TO PAY: DISPLAY ARTS INC. ("Borrower") promises to pay to First American
National Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Thirty Two Thousand One Hundred Fifty & 00/100
Dollars ($32,150.00), together with interest at the rate of 9.500% per annum on
the unpaid principal balance from May 20, 1999, until paid in full.
PAYMENT. Borrower will pay this loan in 36 payments of $1,032.27 each payment.
Borrower's first payment is due June 20, 1999, and all subsequent payments are
due on the same day of each month after that. Borrower's final payment will be
due on May 20,2002, and will be for all principal and all accrued interest not
yet paid. Payments include principal and interest. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result on Borrower
making fewer payments.
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time statement made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrowers property on or
in which Lender has a lien or security interest. This includes a garnishment of
any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the
other events described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the indebtedness is impaired. (h) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the interest rate
on this Note to 24.000% per annum, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate), but in no event at an
effective total interest rate on this Note greater than the rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not here is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgement collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided
by law. This Note has been delivered to Lender and accepted by Lender in the
State of Tennessee. If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Davidson County, the State of
Tennessee. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other. This Note shall be governed by and construed in accordance with the
laws of the state of Tennessee.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment of Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
LOAN CHARGES. Borrower is obligated to Lender for loan charge(s) equaling in the
aggregate 4% (or such lesser amount as is permitted by applicable law) of that
portion of the principal indebtedness evidenced by this Note that is not derived
from a payment, renewal, or refinancing of a prior indebtedness of Borrower to
Lender or an affiliate of Lender, but such loan charges shall be due and owing
only to the extent of (i) actual closing costs, including reasonable attorney's
fees, and Lender's standard document preparation fees for similar extensions of
credit, incurred in connection with this Note and with any extensions, renewals,
and refinancing hereof; and (ii) Lender's then-standard prepayment fee, in the
event this Note or any extension, renewal, or refinancing is prepaid in whole
or in part. Subject to the foregoing limits, Borrower's obligations under this
paragraph shall survive the full payment or satisfaction of this Note by means
of any subsequent extensions of credit from Lender. The Loan charges described
and limited in this paragraph shall not include filing and recording fees and
taxes, costs of collection, delinquency charges, and any credit-related
insurance otherwise required in connection herewith..
RELATED DOCUMENTS. The words "Related Documents", as used herein, shall mean and
include, without limitation, all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with this Note or the
indebtedness evidences thereby, or in connection with any other indebtedness or
obligation of Borrower to Lender.
ADDITIONAL DEFAULT PROVISIONS. The following are hereby added as additional
events of default: (i) any representatives or statement made or furnished to
Lender by Borrower or on Borrower's behalf that is incorrect in any material
respect either now or at the time made or furnished, (ii) any default under a
Related Document, as defined herein. (iii) Any Borrower, endorser, or surety
dies. (iv) Borrower fails to provide timely financial information to Lender when
requested, but in no event less frequently than annually.
ENTIRE AGREEMENT. This Note together with any Related Documents represents the
entire agreement between Borrower and Lender concerning the subject matter and
all prior oral discussions and agreements are merged herein.
SETOFF RIGHTS. In the event of a default under this Note, Lender shall have a
right of setoff against any and all present and future accounts of Borrower held
at Lender, including without limitation joint accounts, to the full extent of
any amount owing by Borrower to Lender.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loam without the consent of or
notice to anyone other than the party with whom the modification is made.
<PAGE>
EXHIBIT 10.29
PROMISSORY NOTE ("NOTE")
November 30, 1997
DUE ON DEMAND US $7,500.00
FOR VALUE RECEIVED, ColorSmart.com, Inc., a Nevada corporation with its
principal office location at 537 Myatt Drive, Madison, Tennessee 37115
("Maker"), promises to pay to the order of Roger D. Finchum, Sr. the
principal sum of Seven Thousand Five-Hundred Dollars (US $7,500.00), together
with interest on the unpaid principal amount hereof from time to time
remaining unpaid at the rate of seven percent (7%) per annum and accuring
from and after the date hereof. Interest accruing on the principal balance
and all principal shall be due on demand.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. A waiver on one occasion shall not be construed as a bar to or
waiver of any right in the future.
The indebtedness evidenced hereby may be prepaid in whole or in part at
any time from time to time without penalty or premium.
In the event this Note is collected by law or through an attorney at
law, after at least five (5) days prior written notice of default is
delivered to the Maker, the Maker agrees to pay all costs of collection,
including reasonable attorneys' fees actually incurred.
The Maker hereby waives presentment, demand for payment, protest and
notice of nonpayment.
Any amount of principal which is not paid when due, shall bear interest
from the day when due until said principal amount is paid in full, at an
interest rate per annum of eight percent (8%). Both principal and interest
are payable in lawful money of the United States of America to Holder, its
successors and/or assigns at the Holdeer's residence located in Madison,
Tennessee, or at such other address as Holder shall designate in writing to
Maker. This Note is not subject to any defenses whatsoever, claims of set-off
or any other claims of any type by Maker.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise),
the balance of all sums due hereunder shall be immediately due and payable:
(a) if the Maker makes an assignment for the benefit of creditors; or
(b) if an order, judgment, or decree is entered adjudicating the Maker
bankrupt or insolvent; or
1
<PAGE>
(c) if the Maker petitions or applies to any tribunal for the
appointment of a trustee, receiver, or liquidator of the Maker, or
commences any proceedings relating to the Maker under any bankruptcy,
reorganization, insolvency, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect; or
(d) if any order, judgment or decree is entered in any proceedings
against the Maker decreeing the dissolution of the Maker, then the Holder
may, at his option, by written notice delivered or mailed (registered or
certified mail, postage prepaid) to the Maker at its principal office,
declare the entire unpaid principal of this Note and all unpaid accured
interest thereon to be, and upon the delivery or mailing (registered or
certified mail, postage prepaid) of such notice by the Holder, the same
shall become, due and payable forthwith.
Time is of the essence of this agreement.
This Note shall be construed and enforced in accordance with the laws of
the State of Nevada.
IN WITNESS WHEREOF, the undersigned Maker has executed and delivered this
Note by its chief executive officer thereunto duly authorized, the day and
year first above written.
COLORSMART, INC. (Maker)
By /s/ Roger D. Finchum, Jr.
-------------------------------------
Roger D. Finchum, Jr., Vice-President
2
<PAGE>
EXHIBIT 10.30
PROMISSORY NOTE ("NOTE")
November 30, 1998
DUE ON DEMAND US $76,005.00
FOR VALUE RECEIVED, ColorSmart.com, Inc., a Nevada corporation with its
principal office location at 537 Myatt Drive, Madison, Tennessee 37115
("Maker"), promises to pay to the order of Roger D. Finchum, Sr. the
principal sum of Seventy-Six Thousand and Five Dollars (US $76,005.00),
together with interest on the unpaid principal amount hereof from time to
time remaining unpaid at the rate of seven percent (7%) per annum and
accuring from and after the date hereof. Interest accruing on the principal
balance and all principal shall be due on demand.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. A waiver on one occasion shall not be construed as a bar to or
waiver of any right in the future.
The indebtedness evidenced hereby may be prepaid in whole or in part at
any time from time to time without penalty or premium.
In the event this Note is collected by law or through an attorney at
law, after at least five (5) days prior written notice of default is
delivered to the Maker, the Maker agrees to pay all costs of collection,
including reasonable attorneys' fees actually incurred.
The Maker hereby waives presentment, demand for payment, protest and
notice of nonpayment.
Any amount of principal which is not paid when due, shall bear interest
from the day when due until said principal amount is paid in full, at an
interest rate per annum of eight percent (8%). Both principal and interest
are payable in lawful money of the United States of America to Holder, its
successors and/or assigns at the Holdeer's residence located in Madison,
Tennessee, or at such other address as Holder shall designate in writing to
Maker. This Note is not subject to any defenses whatsoever, claims of set-off
or any other claims of any type by Maker.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise),
the balance of all sums due hereunder shall be immediately due and payable:
(a) if the Maker makes an assignment for the benefit of creditors; or
(b) if an order, judgment, or decree is entered adjudicating the Maker
bankrupt or insolvent; or
1
<PAGE>
(c) if the Maker petitions or applies to any tribunal for the
appointment of a trustee, receiver, or liquidator of the Maker, or
commences any proceedings relating to the Maker under any bankruptcy,
reorganization, insolvency, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect; or
(d) if any order, judgment or decree is entered in any proceedings
against the Maker decreeing the dissolution of the Maker, then the Holder
may, at his option, by written notice delivered or mailed (registered or
certified mail, postage prepaid) to the Maker at its principal office,
declare the entire unpaid principal of this Note and all unpaid accured
interest thereon to be, and upon the delivery or mailing (registered or
certified mail, postage prepaid) of such notice by the Holder, the same
shall become, due and payable forthwith.
Time is of the essence of this agreement.
This Note shall be construed and enforced in accordance with the laws of
the State of Nevada.
IN WITNESS WHEREOF, the undersigned Maker has executed and delivered this
Note by its chief executive officer thereunto duly authorized, the day and
year first above written.
COLORSMART, INC. (Maker)
By /s/ Roger D. Finchum, Jr.
-------------------------------------
Roger D. Finchum, Jr., Vice-President
2
<PAGE>
Exhibit 10.31
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Guarantor: DONOVAN MCNAMEE SS# ###-##-####
3425 ANDERSON RD. #114
NASHVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, DONOVAN
MCNAMEE SS # ###-##-#### ("Guarantor") absolutely and unconditionally guarantees
and promises to pay to First American National Bank ("Lender") or its order, in
legal tender of the United Stated of America, the indebtedness (as that term is
defined below) of DISPLAY ARTS INC. ("Borrower") to Lender on the terms and
conditions set forth on this Guaranty. Under this Guaranty, the liability of
Guarantor is unlimited and the obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means DISPLAY ARTS INC..
Guarantor. The word "Guarantor" means DONOVAN MCNAMEE SS # ###-##-####.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated May 20, 1999.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them; and whether any such indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether Borrower
may be liable individually or jointly with other, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
indebtedness may be or may become barred or unenforceable against Borrower
for any reason whatsoever; and whether the indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.
Lender. The word "Lender" means First American National Bank, its
successors and assigns.
Related Documents. The word " Related Documents" means and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as the Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all indebtedness.
Accordingly, no payments made upon the indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the indebtedness or any of the indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new indebtedness"
does not include indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the indebtedness. All
renewals, extensions substitutions, and modifications of the indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. It is
anticipated that fluctuations may occur in the aggregate amount of indebtedness
covered by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of indebtedness, even to zero dollars
($0.00), prior to written revocation of this Guaranty by Guarantor shall not
constitute a termination of this Guaranty. This Guaranty is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long as any of the
guaranteed indebtedness remains unpaid and even though the indebtedness
guaranteed may from time to time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the indebtedness or any part of the indebtedness,
including increases and decreases of the rate of interest on the indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
indebtedness, and exchange, enforce, waive, subordinate, fall or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
or payments and credits shall be made on the indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser or other guarantor in
connection with the indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any
<PAGE>
COMMERCIAL GUARANTY
05-20-1999 (Continued) Page 3
Loan No RNRF3126
================================================================================
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED MAY 20, 1999.
GUARANTOR:
/s/ Donovan Mcnamee
- -------------------------------
DONOVAN MCNAMEE SS# ###-##-####
================================================================================
LASER PRO, Reg. U.S. Pal. & T.M. Off., Ver. 3.28c (c) 1999 CFI ProServices, Inc.
All rights reserved. [TN-E20 F3.26b RNRF3126.LN C1.OVL]
<PAGE>
Exhibit 10.32
COMMERCIAL GUARANTY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Guarantor: PAMELA MCNAMEE SS# ###-##-####
3425 ANDERSON RD. #114
NASHVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, DONOVAN
MCNAMEE SS # ###-##-#### ("Guarantor") absolutely and unconditionally guarantees
and promises to pay to First American National Bank ("Lender") or its order, in
legal tender of the United Stated of America, the indebtedness (as that term is
defined below) of DISPLAY ARTS INC. ("Borrower") to Lender on the terms and
conditions set forth on this Guaranty. Under this Guaranty, the liability of
Guarantor is unlimited and the obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means DISPLAY ARTS INC..
Guarantor. The word "Guarantor" means PAMELA MCNAMEE SS# ###-##-####.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated May 20, 1999.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them; and whether any such indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether Borrower
may be liable individually or jointly with other, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
indebtedness may be or may become barred or unenforceable against Borrower
for any reason whatsoever; and whether the indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.
Lender. The word "Lender" means First American National Bank, its
successors and assigns.
Related Documents. The word " Related Documents" means and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as the Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all indebtedness.
Accordingly, no payments made upon the indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the indebtedness or any of the indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new indebtedness"
does not include indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the indebtedness. All
renewals, extensions substitutions, and modifications of the indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. It is
anticipated that fluctuations may occur in the aggregate amount of indebtedness
covered by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of indebtedness, even to zero dollars
($0.00), prior to written revocation of this Guaranty by Guarantor shall not
constitute a termination of this Guaranty. This Guaranty is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long as any of the
guaranteed indebtedness remains unpaid and even though the indebtedness
guaranteed may from time to time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the indebtedness or any part of the indebtedness,
including increases and decreases of the rate of interest on the indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
indebtedness, and exchange, enforce, waive, subordinate, fall or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
or payments and credits shall be made on the indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser or other guarantor in
connection with the indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any
<PAGE>
COMMERCIAL GUARANTY
05-20-1999 (Continued) Page 3
Loan No RNRF3126
================================================================================
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED MAY 20, 1999.
GUARANTOR:
/s/ Pamela Mcnamee
- ------------------------------
PAMELA MCNAMEE SS# ###-##-####
================================================================================
LASER PRO, Reg. U.S. Pal. & T.M. Off., Ver. 3.28c (c) 1999 CFI ProServices, Inc.
All rights reserved. [TN-E20 F3.26b RNRF3126.LN C1.OVL]
<PAGE>
Exhibit 10.33
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$32,150.00 05-20-1999 05-20-2002 RNRF3126 RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between DISPLAY ARTS INC.
(referred to below as "Grantor"); and First American National Bank (referred to
below as "Lender"). For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, accounts and equipment
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising,
and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of and
substitutions for any property described above.
(b) All products and produce of any of the property described in
this Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or
other disposition of any of the property described in this
Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described
in this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together
with all of Grantor's right, title, and interest in and to all
computer software required to utilize, create, maintain, and process
any such records or data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor means DISPLAY ARTS INC., its successors and
assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the
word "indebtedness" includes all other obligations, debts and liabilities,
plus interest thereon, of Grantor, or any one or more of them, to Lender,
as well as all claims by Lender against Grantor, or any one or more of
them, whether existing now or later; whether they are voluntary or
involuntary, due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Grantor may be liable individually or
jointly with others; whether Grantor may be obligated as guarantor,
surety, accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means First American National Bank, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated May 20,
1999, in the principal amount of $32,150.00 from DISPLAY ARTS INC. to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or
credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security interest in
and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's
right, title and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts Grantor may
open in the future, excluding, however, all IRA and Keogh accounts, and all
trust accounts for which the grant of a security interest would be prohibited by
law. Grantor authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR, Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Tennessee.
Grantor has its chief executive office at 1425 ELM HILL PIKE, NAHSVILLE,
TN 37210. Grantor will notify Lender of any change in the location of
Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this Agreement
by Grantor have been duly authorized by all necessary action by Grantor
and do not conflict with, result in a violation of, or constitute a
default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding upon
Grantor or (b) any law, governmental regulation, court decree, or order
applicable to Grantor.
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney--in--fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Grantor, file a carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing statement.
Grantor will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the Indebtedness is paid in full and
even though for a period of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do not
prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral. At the time any account becomes subject to
a security interest in favor of Lender, the account shall be a good and
valid account representing an undisputed, bona fide indebtedness incurred
by the account debtor, for merchandise held subject to delivery
instructions or theretofore shipped or delivered pursuant to a contract of
sale, or for services theretofore performed by Grantor with or for the
account debtor; there shall be no setoffs or counterclaims against any
such account; and no agreement under which any deductions or discounts may
be claimed shall have been made with the account debtor except those
disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties
<PAGE>
COMMERCIAL SECURITY AGREEMENT
05-20-1999 (Continued) Page 3
Loan No RNRF3126
================================================================================
may exercise its rights to collect the accounts and to notify account debtors to
make payments directly to Lender for application to the indebtedness. If Lender
at any time has possession of any Collateral, whether before or after an Event
of Default, Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral if Lender takes such action for that
purpose as Grantor shall request or as Lender, in Lenders sole discretion, shall
deem appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement;
Default on Indebtedness. Failure of Grantor to make any payment when due
on the indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self--help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the indebtedness. This includes a garnishment of any of Grantor's
deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or such Guarantor dies
or becomes incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of
the indebtedness is Impaired.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Tennessee Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its
own name or that of Grantor. Lender may sell the Collateral at public
auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made. The requirements of reasonable notice shall be met if such notice is
given at least ten (10) days before the time of the sale or disposition.
All expenses relating to the disposition of the Collateral, including
without limitation the expenses of retaking, holding, insuring, preparing
for sale and selling the Collateral, shall become a part of the
indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom, and hold the same as
security for the indebtedness or apply it to payment of the indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether
or not indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify
account debtors and obligors on any Collateral to make payments directly
to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement.
Grantor shall be liable for a deficiency even if the transaction described
in this subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the mailers set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Tennessee. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of the
State of Tennessee. Lender and Grantor hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender
or Grantor against the other. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lenders costs and expenses, including attorneys, fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lenders attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post--judgment collection
services. Grantor also shall pay all court costs and such additional fees
as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$32,150.00 05-20-1999 05-20-2002 RNRF3126 RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
LOAN TYPE. This Is a Fixed Rate (9.500%), Installment Loan to a Corporation for
$32,150.00 due on May 20, 2002.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
|_| Personal, Family, or Household Purposes or Personal Investment.
|X| Business (including Real Estate investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: REFINANCE/INCREASE
EXISTING FANB LOAN 1000272928 PAY OFF AND CLOSE.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $32,150.00 as follows:
Amount paid to Borrower directly: $ 6,839.49
$6,839.49 Lender's Check # xxxxxxx
Amount paid on Borrower's account: $25,160.51
$25,180.51 Payment on Loan # lls 1000272928
Total Financed Prepaid Finance Charges: $ 150.00
$150.00 Loan Fees
----------
Note Principal: $32,150.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED MAY 20,1999.
BORROWER:
DISPLAY ARTS INC.
By: /s/ Pamela McNamee By: /s/ Donovan McNamee
---------------------- -----------------------
PAMELA MCNAMEE, President DONOVAN MCNAMEE, CEO
================================================================================
Fixed Rate. Installment. LASER PRO, Reg. U.S. Pal. & T.M. Off., Ver. 3.28c
(c) 1999 CFI ProServices, Inc. All rights reserved.
[TN-120 F3.26b RNRF3126.LN C1.OVL]
<PAGE>
Exhibit 10.34
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$32,150.00 05-20-1999 05-20-2002 RNRF3126 RNRF3126 07672
- ------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------
</TABLE>
Borrower: DISPLAY ARTS INC. (TIN: 631031415)
1425 ELM HILL PIKE
NAHSVILLE, TN 37210
Lender: First American National Bank
Plus Park
Fourth and Union
First American Center
Nashville, TN 37237-4502
================================================================================
INSURANCE REQUIREMENTS. DISPLAY ARTS INC. ("Grantor") understands that insurance
coverage is required in connection with the extending of a loan or the providing
of other financial accommodations to Grantor by Lender. These requirements are
set forth in the security documents. The following minimum insurance coverages
must be provided on the following described collateral (the "Collateral"):
Collateral: All Inventory and Equipment.
Type. All risks, including fire, theft and liability.
Amount. $32,000.00.
Basis. Replacement value.
Endorsements. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum
of thirty (30) days' prior written notice to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Lender.
INSURANCE MAILING ADDRESS. All documents and other materials relating to
insurance for this loan should be mailed, delivered or directed to the following
address:
First American National Bank
550 Metroplex Drive
Insurance Services NA--7241
Nashville, TN 37211--7241
(615) 745--2054
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, thirty (30)
days from the date of this Agreement, evidence of the required insurance as
provided above, with an effective date of May 20, 1999, or earlier. Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Lender may do so at Grantor's
expense as provided in the applicable security document. The cost of any such
insurance, at the option of Lender, shall be payable on demand or shall be
added to the indebtedness as provided in the security document. GRANTOR
ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL
PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE
BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE
INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of Insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all Information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 20, 1999.
GRANTOR:
DISPLAY ARTS INC.
By: /s/ Pamela McNamee By: /s/ Donovan McNamee
---------------------- -----------------------
PAMELA MCNAMEE, President DONOVAN MCNAMEE, CEO
- --------------------------------------------------------------------------------
FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE: __________________ PHONE: ______________________
AGENT'S NAME: _________________________________________________________________
INSURANCE COMPANY: ____________________________________________________________
POLICY NUMBER: ________________________________________________________________
EFFECTIVE DATES: ______________________________________________________________
COMMENTS: _____________________________________________________________________
- --------------------------------------------------------------------------------
================================================================================
LASER PRO, Reg. U.S. Pal. & T.M. Off., Ver. 3.28c (c) 1999 CFI ProServices, Inc.
All rights reserved. [TN-110 F3.26 RNRF3126.LN C1.OVL]
<PAGE>
THIS SPACE FOR USE OF FILING OFFICER
FINANCING STATEMENT - FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform
Commercial Code and will remain effective, with certain exceptions, for 5 years
from date of filing.
- --------------------------------------------------------------------------------
A. NAME & TEL. # OF CONTACT AT FILER (optional)
- --------------------------------------------------------------------------------
B. FILING OFFICE ACCT. # (optional)
- --------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
First American National Bank
First American Ctr -- 315 Deaderick
ATTN: Collateral Operations
Nashville, TN 37237-817537237-0075
- --------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (if applicable): |_| LESSOR/LESSEE
|_| CONSIGNOR/CONSIGNEE |_| NON-UCC FILING
- --------------------------------------------------------------------------------
1. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (1a or 1b)
--------------------------------------------------------------------------
1a. ENTITY'S NAME
DISPLAY ARTS INC.
OR --------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- --------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
1425 ELM HILL PIKE NASHVILLE TN 37210
- --------------------------------------------------------------------------------
1d. S.S. OR OPTIONAL 1e. TYPE 1f. ENTITY'S STATE 2g. ENTITY'S
TAX I.D. # ADD'NL INFO RE OF OR COUNTRY OF ORGANIZATIONAL
ENTITY DEBTOR ENTITY ORGANIZATION I.D. #, if any
631031415 |_| NONE
- --------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name
(2a or 2b)
--------------------------------------------------------------------------
2a. ENTITY'S NAME
OR --------------------------------------------------------------------------
2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- --------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- --------------------------------------------------------------------------------
2d. S.S. OR OPTIONAL 2e. TYPE 2f. ENTITY'S STATE 1g. ENTITY'S
TAX I.D. # ADD'NL INFO RE OF OR COUNTRY OF ORGANIZATIONAL
ENTITY DEBTOR ENTITY ORGANIZATION I.D. #, if any
|_| NONE
- --------------------------------------------------------------------------------
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME -
Insert only one secured party name (3a or 3b)
- --------------------------------------------------------------------------------
3a. ENTITY'S NAME
First American National Bank
OR --------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- --------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
Fourth and Union, Nashville TN 37237-4502
First American Center
- --------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property:
All Inventory, Accounts and Equipment; whether any of the foregoing is owned now
or acquired later; all accessions, additions, replacements, and substitutions
relating to any of the foregoing; all records of any kind relating to any of the
foregoing; all proceeds relating to any of the foregoing (including insurance,
general intangibles and other accounts proceeds).
Maximum Principal Indebtedness for Tennessee Recording Tax Purposes is
$32,000.00.
- --------------------------------------------------------------------------------
5. CHECK BOX |_|
(if applicable)
This FINANCING STATEMENT is signed by the Secured Party instead of the Debtor to
perfect a security interest (a) in collateral already subject to a security
interest in another jurisdiction when it was brought into this state, or when
the debtor's location was changed to this state, or (b) in accordance with other
statutory provisions [additional data may be required]
- --------------------------------------------------------------------------------
6. REQUIRED SIGNATURE(S)
/s/ Pamela McNamee, President
- --------------------------------------------------------------------------------
DISPLAY ARTS INC. BY: PAMELA MCNAMEE, PRESIDENT
- --------------------------------------------------------------------------------
/s/ Timothy McAuley - Vice President
- --------------------------------------------------------------------------------
FIRST AMERICAN NATIONAL BY: TIM MCAULEY, OFFICE
- --------------------------------------------------------------------------------
7. If filed in Florida (check one)
|_| Documentary stamp tax paid
|X| Documentary stamp tax not applicable
- --------------------------------------------------------------------------------
8. |_| This FINANCING STATEMENT is to be filed (for record) (or recorded) in
the REAL ESTATE RECORDS
Attach Addendum [if applicable]
- --------------------------------------------------------------------------------
9. Check to REQUEST SEARCH CERTIFICATE(S) on Debtor(s) [ADDITIONAL FEE]
(optional) |_| All Debtors |_| Debtor 1 |_| Debtor 2
- --------------------------------------------------------------------------------
CFI ProServices, Inc. 400 S.W. 6th Avenue, Portland, Oregon 97204
(2) ACKNOWLEDGEMENT COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) (TRANS)
(REV. 12/18/95)
<PAGE>
Exhibit 10.35
First American First American National Bank
- --------------------------------------------------------------------------------
BUSINESS LINE PLUS AGREEMENT
THIS AGREEMENT is entered into as of AUGUST 15, 1996 by and between DISPLAY ARTS
INC (individually and collectively, "Borrower"), and FIRST AMERICAN NATIONAL
BANK "FANB"), Nashville, Tennessee
1. Definitions. For the purposes of this Agreement:
(a) An "Advance" is any advance of funds or payment by FANB under
this Agreement.
(b) The "Line" is the line of credit granted by FANB to Borrower
under this Agreement.
(c) The "Collateral" is;
S/A COVERING A/R, INV, EQUIP
(d) The "Credit Limit" is the maximum principal balance that may be
outstanding under this Agreement during the Draw Period and is initially
$50,000,00.
(e) The "Line Indebtedness" is the aggregate amount owing hereunder
from time to time, including outstanding principal, accrued interest, and fees.
(f) A "Guarantor" is any person now or hereafter guaranteeing, or
otherwise having or assuming liability (whether as surety, partner, or
otherwise) to FANB for payment of the Line Indebtedness or any portion thereof.
(g) The "Index Rate" is the reference or base rate established by
FANB from time to time and generally utilized in contracting for interest on its
variable rate domestic commercial loans not utilizing an externally established
reference rate.
(h) The "Margin" is 3.000000% per annum.
(i) The "Maximum Rate" is the maximum applicable lawful contract
rate in effect from time to time. If no applicable law restricts the rate of
interest that may be charged hereon, the Maximum Rate shall be the rate of
interest otherwise applicable under this Agreement from time to time, plus 3%
per annum.
(j) The "Draw Period" is that period of time during which Borrower
may, subject to the conditions of this Agreement, obtain advances hereunder.
(k) The "Repayment Period" is that period of time following the
expiration or termination of the Draw Period consisting of 36 consecutive
monthly payment due dates.
(l) "Herein", "hereunder", and words of similar import refer to this
Agreement as a whole. Any term defined elsewhere in this Agreement shall be
accorded the same meaning throughout this Agreement.
2. Security interest. To secure the payment of the Line Indebtedness,
Borrower hereby grants FANB a security interest in the Collateral and any
proceeds thereof. Any security agreement, assignment, deed of trust, or similar
instrument that by its terms, either general or specific, secures the Line
Indebtedness shall be effective according to such terms, whether or not the
property therein described is the Collateral.
3. Advances; Draw Period; Interest.
(a) Borrower shall have the right to obtain an Advance only during
the Draw Period and only if: (1) Borrower's request therefor is received by FANB
in sufficient time reasonably to enable FANB to make the Advance prior to the
expiration of the Draw Period; (2) the resulting principal balance of the Line
Indebtedness will not exceed the Credit Limit; and (3) no Event of Default is in
effect at the time Borrower is otherwise entitled to obtain the Advance.
(b) The Draw Period expires one year from the date of this
Agreement, but FANB may, at its sole discretion, extend the Draw Period for four
consecutive one year extensions. FANB may, from time to time and at its sole
discretion, make Advances (1) requested by Borrower in a circumstance under
which Borrower has no right to obtain Advances, or (2) for the protection and
preservation of any security for the Line Indebtedness. All such Advances shall
be subject to this Agreement and shall be incorporated into the Line
Indebtedness, except that, (a) that portion of the outstanding principal balance
of the Line Indebtedness in excess of the Credit Limit and (b) any Advance made
after the end of the Draw Period or the maturity of the Line Indebtedness, in
either case together with all interest accrued thereon, shall be due and payable
on demand by FANB. No one or more such discretionary Advances shall constitute a
waiver of, or modification to, any condition precedent to further Advances under
this Agreement.
(c) The principal balance of the Line Indebtedness outstanding from
time to time shall bear interest at the Index Rate plus the Margin, except as
otherwise provided herein. The rate of interest hereunder shall be adjusted on
the date that the Index Rate changes, and the interest may at the option of FANB
be computed on the basis of a 360 day or a 365 day year.
4. Payments. Borrower promises, absolutely and unconditionally and without
any setoff, counterclaim, or deduction, to pay to the order of FANB the Line
Indebtedness in accordance with this Agreement and the billing statements
rendered hereunder by FANB. In the event this Agreement does not otherwise
provide either a due date or a means of ascertaining the due date of an amount
owing hereunder or in connection herewith, such amount shall be due and payable
on FANB's demand.
(a) During the Draw Period, each payment shall consist of all
interest accrued hereunder and shall be due and payable 25 days from the date of
each monthly statement rendered by FANB.
(b) During the Repayment Period, the Line Indebtedness shall be due
and payable in consecutive monthly payments of principal and accrued interest on
the same day of each consecutive month. FANB shall select the initial monthly
payment date which shall be not less than 25 days after the conclusion of the
Draw Period and shall give Borrower not less than 30 days notice thereof. The
amount of each monthly payment shall be that amount which, given the rate of
interest in effect hereunder as of the expiration or termination of the Draw
Period, would repay the principal balance then outstanding in equal monthly
installments by the scheduled end of tine Repayment Period. In the event the
Line Indebtedness is not repaid in full by the final scheduled payment date, the
Repayment Period shall be extended, and Borrower shall make additional monthly
payments in the same amount and on the same day of each month until the earlier
of (i) the date the Line Indebtedness in paid in full or (ii) one (1) year from
the originally scheduled end of the Repayment Period, and any remaining Line
Indebtedness shall be due and payable in full no later than the end of the
Repayment Period as extended.
(c) Borrower may prepay the Line Indebtedness in whole or in part at
any time, but no prepayment shall postpone or diminish any required monthly
payment, to the extent of the remaining unpaid balance thereof. All payments
shall be made in collected funds at FANB's main office or at such other location
as FANB directs in writing. and shall be applied to principal, accrued interest,
and charges and expenses owing under or in connection with this Agreement, in
such order as FANB elects, except that payments shall be applied to accrued
interest before principal.
<PAGE>
5. Other Charges.
(a) If any payment is past due by fifteen days or more, Borrower
shall pay FANB a late charge of (i) 5% of such payment amount or (ii) any lesser
maximum amount permitted under applicable law. No late charge, however, shall be
imposed on any payment made on time and in full solely by reason of any
previously accrued and unpaid late charge.
(b) During the initial Draw Period and, unless Borrower terminates
its right to obtain Advances by notice to FANB, during each one-year extension
thereof, Borrower shall pay to FANB an annual fee of $150. In no event, however,
shall this annual fee and all other costs and expenses (exclusive of filing fees
and recording taxes) incurred by Borrower in connection with the establishment
of the Line or the renewal of the Draw Period (collectively, the "Annual
Charges") exceed 4% of the Credit Limit.
6. Additional Covenants. Borrower covenants and agrees as follows:
(a) No deterioration shall occur in any of the following, in
relation to that reflected in the most recent financial information provided to
FANB prior to the inception of this Agreement or pursuant to subparagraph (c) of
this Paragraph 6: (i) the combined adjusted net worth of Borrower and the
Guarantors; (ii) Borrower's cash flow; (iii) the ratio of Borrower's liabilities
to Borrower's net worth; or (iv) the ratio of Borrower's current liabilities to
Borrower's current assets.
(b) No deterioration shall occur in the credit payment history of
Borrower or any Guarantor, in relation to that reflected in information obtained
by FANB prior to the inception of this Agreement.
(c) On an annual basis, Borrower shall provide, and shall cause each
Guarantor to provide, to FANB, such information concerning Borrower's and each
Guarantor's financial condition and income as FANB may request and within 30
days after such request. All financial statements required hereunder shall be
prepared, and all agreements and covenants herein pertaining to Borrower's and
any Guarantor's financial condition or performance shall be construed, in
accordance with generally accepted accounting principles, consistently applied.
(d) Borrower shall: (i) if a partnership or corporation, maintain
its existence and good standing and avoid dissolution in any form; and (ii)
cause each Guarantor constituting a partnership or corporation to do likewise.
(e) Borrower shall utilize Advances solely for business, commercial,
or agricultural purposes.
(f) For not less than 30 days (which need not be consecutive) during
the Draw Period and during each one-year extention thereof (if any), the balance
of the Line Indebtedness shall be zero.
(g) During the Initial Draw Period and during each annual extension
thereof, Borrower shall obtain Advances at least equal to the Annual Charges
then imposed divided by .04, but Borrower's failure to do so shall not subject
Borrower to any interest, penalty, damages, or charges other than such Annual
charges.
7. Events of Default. The Line Indebtedness shall be immediately due and
payable in full, or FANB may terminate the Draw Period, reduce the Credit Limit,
or suspend making Advances, in either case at FANB's option and without prior
notice in any one of the following events (each an "Event of Default"): (a) any
required payment of principal, interest, or any other charge is not made when
due; (b) or Obligor (which term shall include Borrower and any Guarantor) either
dies, becomes the subject of any bankruptcy or insolvency proceeding, makes any
material misrepresentation in any financial information provided hereunder or in
connection herewith or in any way fails to perform in full and on time any
obligations hereunder; (c) any Obligor or other person fails to perform in
accordance with any security agreement or deed of trust securing, or other
agreement pertaining to, this Agreement or the Line Indebtedness; or (d) In
FANB's good faith judgment, there is a material adverse change in the financial
condition of any Obligor or otherwise in FANB's prospects of payment in due
course, without consideration of any collateral securing the Line Indebtedness
or of a legal action by FANB to enforce its rights hereunder.
FANB's rights hereunder are continuing ones, nor subject to waiver by
non-use on its part. After maturity, whether by acceleration or otherwise, the
unpaid Line Indebtedness shall, at FANB's option, bear interest at the Maximum
Rate until paid in full. Borrower agrees to pay FANB's reasonable attorneys'
fees and all other costs of collection incurred by FANB following an Event of
Default.
8. Miscellaneous.
(a) Except as otherwise specified therein, each provision of this
Agreement shall be effective during the Draw Period, the Repayment Period, and
extension of either, and until the Line Indebtedness is paid in full.
(b) FANB may send all notices and statements hereunder to Borrower's
address as shown on FANB's records. Each statement sent by FANB concerning the
outstanding balance of the Line Indebtedness shall, unless contested within a
reasonable time thereafter, constitute an account stated for the period covered
therein, and FANB's records concerning the Line shall constitute prima facie
evidence of the balance of the Line Indebtedness. Any notice from FANB to
Borrower shall be in writing and shall be deemed given (i) when received by
Borrower or (ii) two (2) business days after having been sent by U.S. Mail,
postage prepaid, to the address to which FANB sends periodic statements
concerning the Line. Borrower may change this address by giving FANB 15 day's
notice. Any notice from Borrower to FANB shall be in writing and shall be deemed
given when received by the FANB officer having direct responsibility for the
Line, or as FANB may hereafter direct Borrower in writing:
(c) If FANB notifies Borrower that an extension of the Draw Period
is conditioned upon Borrower's acceptance of one or more amendments hereto set
forth in FANB's notice, Borrower's obtaining of an Advance during such extension
shall constitute Borrower's agreement to such amendment(s). This Agreement may
otherwise be amended only in writing signed by both Borrower and FANB.
(d) This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of Tennessee, without regard to its
conflict of laws rules, subject to any applicable laws of the United States. In
no event shall the rate of interest or any other charge hereunder exceed,
respectively, the Maximum Rate or the maximum of such other charge as is
allowable under applicable law, and any excess shall be deemed applied to the
outstanding principal balance of the Line Indebtedness.
FIRST AMERICAN NATIONAL BANK BORROWER
DISPLAY ARTS INC
BY: /s/ [ILLEGIBLE] BY: /s/ Pamela M. McNamee
----------------------------- ----------------------------------
PAMELA M. MCNAMEE
TITLE: Vice President TITLE: President
-------------------------- -------------------------------
BY: /s/ Kelly M. McNamee
----------------------------------
KELLY M. MCNAMEE
TITLE: Secretary
-------------------------------
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FORM BLP3 REV. 6/95 FOR INTERNAL USE ONLY APPLICATION 010301962251226320
<PAGE>
Exhibit 10.36
U.S. Small Business Administration
NOTE
--------------------
SBA LOAN NUMBER
--------------------
PLP 942-352-3005
--------------------
(City and State) Nashville, Tennessee
--------------------
$ 200,000.00 (Date) August 15, 1996
--------------------
For value received, the undersigned promises to pay to the order of
First American National Bank
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(Payee)
at its office in the city of Nashville, State of Tennessee or at holder's
option, at such other place as may be designated from time to time by the holder
Two Hundred Thousand and no/100 ($200,000.00) dollars,
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(Write out amount)
with interest on unpaid principal computed from the date of each advance to the
undersigned at the rate of 10.00% percent per annum, payment to be made in
installments as follows:
Principal and interest at the rate of ten percent (10%) payable as follows:
interest only payable monthly, beginning one (1) month(s) from date of Note, for
a period of six (6) month(s); thereafter, $3,498,00, including principal and
interest, payable monthly, beginning seven (7) month(s) from date of Note; with
the further provision that each said installment shall be applied first to
interest accrued to date of receipt of said installment, and the balance, if any
to principal, and the balance of principal and interest due and payable on or
before seven (7) years from date of Note,
Borrower agrees to pay a late charge equal to 5% of the payment amount due if
such payment is not received within ten days of the due date. Funds received
from the Borrower will be applied first to interest to the date of receipt, then
to principal and then to the late fee.
IN NO EVENT, HOWEVER, SHALL THE INTEREST RATE PROVIDED HEREIN EXCEED THE MAXIMUM
PERMITTED BY THE STATUTES AND CONSTITUTION OF THE STATE OF TENNESSEE, OR TITLE
12 USC SECTIONS 85 and 86a. If undersigned shall be in default in payment due on
the indebtedness herein and Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both the
guaranteed and unguaranteed portion herein shall become fixed at the rate in
effect as of the initial date of default. If the undersigned shall not be in
default in payment when SBA purchases its guaranteed portion, the rate of
interest on boils the guaranteed and unguaranteed portion herein shall be fixed
at the rate in effect as of the date of purchase by SBA.
If this Note contains a fluctuating interest rate, the notice provision is
not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this Note
may be made prior to the maturity date thereof without penalty. Borrower shall
provide lender with written notice of intent to prepay part or all of this loan
at least three (3) weeks prior to the anticipated prepayment date. A prepayment
is any payment made ahead of schedule that exceeds twenty (20) percent of the
then outstanding principal balance. If borrower makes a prepayment and fails to
give at least three weeks advance notice of intent to prepay, then,
notwithstanding any other provision to the contrary in this note or other
document, borrower shall be required to pay lender three weeks interest on the
unpaid principal as of the date preceding such prepayment.
SBA Form 147 (5-87) Previous edition obsolete Page 1 OMB Approval No 3245-0201
<PAGE>
The term "indebtedness" as used herein shall mean the indebtedness
evidenced by this Note, including principal, interest and expenses, whether
contingent, now due or hereafter to become due and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, guaranties, or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are, or hereafter may be, hypothecated, directly or indirectly by the
undersigned or others, in connection with, or as security for, the Indebtedness
or any part thereof. The Collateral, and each part thereof, shall secure the
Indebtedness and each part thereof. The covenants and conditions set forth or
referred to in any and all instruments of hypothecation constituting the
Collateral are hereby Incorporated in this Note as covenants and conditions of
the undersigned with the same force and effect as though such covenants and
conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without notice
or demand, upon the appointment of a receiver or liquidator, whether voluntary
or involuntary, for the undersigned or for any of its property, or upon the
filing of a petition by or against the undersigned under the provisions of any
State insolvency law or under the provisions of the Bankruptcy Reform Act of
1978, as amended, or upon the making by the undersigned of an assignment for the
benefit of its creditors. Holder is authorized to declare all or any part of the
Indebtedness immediately due and payable upon the happening of any of the
following events: (1) Failure to pay any part of the Indebtedness when due; (2)
nonperformance by the undersigned of any agreement with, or any condition
imposed by, Holder or Small Business Administration (hereinafter called "SBA"),
with respect to the Indebtedness; (3) Holder's discovery of the undersigned's
failure in any application of the undersigned to Holder or SBA to disclose any
fact deemed by Holder to be material or of the making therein or in any of the
said agreements, or in any affidavit or other documents submitted in connection
with said application or the indebtedness, of any misrepresentation by, on
behalf of, or for the benefit of the undersigned; (4) the reorganization (other
than a reorganization pursuant to any of the provisions of the Bankruptcy Reform
Act of 1978, as amended) or merger or consolidation of the undersigned (or the
making of any agreement therefor) without the prior written consent of Holder;
(5) the undersigned's failure duly to account, to Holder's satisfaction, at such
time or times as Holder may require, for any of the Collateral, or proceeds
thereof, coming into the control of the undersigned; or (6) the institution of
any suit affecting the undersigned deemed by Holder to affect adversely its
interest hereunder in the Collateral or otherwise. Holder's failure to exercise
its rights under this paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell assign, and
deliver the whole or any part of the Collateral at public or private sale,
without demand, advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales, Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it shall
deem proper, returning the excess, if any, to the undersigned. The undersigned
hereby waives all right of redemption or appraisement whether before or after
sale.
Holder is further empowered to collect or cause to be collected or
otherwise to be converted into money all or any part of the Collateral, by suit
or otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned, and
without prior notice to or consent of the undersigned or any assignee. Whenever
any item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the indebtedness, or any part thereof, has become due,
Holder shall have the same rights and powers with respect to such item of the
Collateral as are granted in this paragraph in case of nonpayment of the
Indebtedness, or any part thereof, when due. None of the rights, remedies,
privileges, or powers of Holder expressly provided for herein shall be
exclusive, but each of them shall be cumulative with and in addition to every
other right remedy, privilege, and power now or hereafter existing in favor of
Holder, whether at law or equity, by statute or otherwise.
The undersigned agrees to take all necessary steps to administer,
supervise, preserve, and protect the Collateral, and regardless of any action
taken by Holder, there shall be no duty upon Holder in this respect. The
undersigned shall pay all expenses of any nature, whether incurred in or out of
court, and whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable attorney's
fees and costs, which Holder may deem necessary or proper in connection with the
satisfaction of the Indebtedness or the administration, supervision,
preservation, protection of (including, but not limited to, the maintenance of
adequate insurance) or the realization upon the Collateral. Holder is authorized
to pay at any time and from time to time any or all of such expenses, add the
amount of such payment to the amount of the Indebtedness, and charge interest
thereon at the rate specified herein with respect to the principal amount of
this Note.
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including but
not limited to (a) any renewal, extension, or modification which Holder may
grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange, or substitution
which Holder may grant in respect of the Collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee on this Note, the Collateral, and guaranty, and
any other document (or any of them), sold, assigned, transferred, pledged, or
repledged, shall forthwith become vested with and entitled to exercise all the
powers and rights given by this Note and all applications of the undersigned to
Holder or SBA, as if said purchaser, assignee, transferee, or pledgee were
originally named as Payee in this Note and in said application or applications.
SBA Form 147 (5-87) Page 2 OMB Approval No. 3245-0201
<PAGE>
This promissory note is given to secure a loan which SBA is making or in
which it is participating and, pursuant to Part 101 of the Rules and Regulations
of SBA (13 C.F.R. 101.1(d)), this instrument is to be construed and (when SBA is
the Holder or a party in interest) enforced in accordance with applicable
Federal law.
Display Arts Inc.
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/s/ Pamela M. McNamee
--------------------------------------------
Pamela M. McNamee, President
/s/ Kelly M. McNamee
--------------------------------------------
Kelly M. McNamee, Secretary
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Note. -- Corporate applicants must execute Note, in corporate name, by
duly authorized officer, and seal must be affixed and duly attested; partnership
applicants must execute Note in firm name, together with signature of a general
partner.
SBA Form 147 (5-87) Page 3 OMB Approval No. 3245-0201
<PAGE>
Exhibit 10.37
[LOGO] First American Security Agreement FORM [ILLEGIBLE]
Display Arts Inc.
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(hereafter called "Debtor") a (an) Tennessee corporation organized under the
laws of the State of Tennessee whose chief executive office (or, if none,
residence) is located at 1425 Elm Hill Pike, Nashville, Tennessee 37210, hereby
assigns and grants to FIRST AMERICAN National Bank (hereinafter called "Bank"),
a security interest in the following described property and in all proceeds and
products thereof and accessions thereto (all of which is called the
("Collateral"), subject to all applicable conditions, representations,
warranties, and agreements hereinafter set forth:
|X| EQUIPMENT -All equipment of every kind and description
owned by or in the possession of Debtor, whether
now owned, held or hereafter acquired and
wherever located, including but not limited to
any equipment listed below or on Exhibit
_________, together with all parts, accessories
and attachments and all replacements and
additions thereto.
|X| INVENTORY, -All inventory owned by or in the possession of
ACCOUNTS, Debtor, all Debtor's agreements for sale or
AND GENERAL INTANGIBLES lease of same and rentals therefrom, all
Debtor's accounts and general intangibles,
including but not limited to any property listed
below or on Exhibit _____, whether now in
existence, owned, held, or hereafter acquired,
entered into, or created, and wherever located;
and whether held for sale or lease, or furnished
or to be furnished under service contracts.
|X| OTHER PROPERTY Machinery, Furniture, Fixtures used in business
at 1425 Elm Hill Pike, Nashville, Tennessee
37210, and other business location(s) noted in
Section 1 below.
1 Use and Location of Collateral
Debtor will use the Collateral primarily -
|_| for personal, family or household purposes
|_| in farming operations located at ____________________________, which is
owned by ______________________________________
|X| in business and that all of Debtor's places of business are in the County
above set forth except 30 South Main Street, Memphis, Tennessee 38103
|_| as fixtures, to be attached to real estate owned by ______________________
and described as follows __________________________________
2 Debtor's Residence (applicable only in Kentucky).
Debtor's residence, for the purposes of KRS 355.9-401, is different from
the address set forth above.
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Street City County State
3 Secured Obligations.
The indebtedness secured hereby (individually, an "Obligation," and
collectively, the "Obligations") shall include the following indebtednesses and
liabilities of Debtor or ___________________ (hereinafter called Borrower): (1)
loans to be made by Bank concurrently or in connection with this Agreement, all
interest and other charges accrued thereon, and also any renewals, extensions or
refinancings thereof; (2) contingent obligations to Bank, under guaranty
agreements or otherwise, incurred concurrently or in connection with this
Agreement; (3) all expenditures by Bank for taxes, levies, insurance and
preservation of the Collateral and otherwise in performance of any of Debtor's
or Borrower's duties under this Agreement; (4) all other money heretofore or
hereafter advanced by Bank at its option to or for the account of Debtor or
Borrower, and all other present or future, direct or contingent liabilities and
indebtedness of Debtor or Borrower to Bank of any nature whatsoever, and any
extensions or renewals thereof except that the advances, liabilities, and
indebtedness secured by this clause (4) shall not include any debt subject to
the disclosure requirements of the Federal Truth-in-Lending Act if at the time
such debt is created any legally required disclosure of this security interest
respecting such debt shall not have been made; (5) all attorney's fees, court
costs, and expenses of whatever kind incident to the collection of any of the
foregoing Obligations and the enforcement or protection of the security interest
hereby granted.
4 General Representations, Warranties, and Agreements.
Debtor is the sole owner of the Collateral, free and clear of all liens
and security interests, or the Collateral is being acquired solely by Debtor
with the proceeds of the loan(s) described above, and Bank is authorized to
disburse the proceeds of said loan directly to the seller of the Collateral as
shown on Bank's records. Debtor will defend the Collateral against the claims
and demands of all persons. No Debt Collateral, as hereinafter defined, is or
will be subject to any defense or claim of the account debtor, as defined
hereinafter. Except for sales or leases of inventory in the ordinary course of
Debtor's business, Debtor will not sell, transfer, or encumber the Collateral,
or suffer any transfer or encumbrance thereof, or in any way impair the security
afforded by the Collateral, without Bank's prior written consent.
Debtor will promptly notify Bank in writing of any change in Debtor's
residence, as set forth in the introductory paragraph or in paragraph 2. or
chief executive office.
Debtor will at all times keep the Collateral insured against all insurable
hazards in amounts equal to the full cash value of the Collateral. Such
insurance shall be in such companies as may be acceptable to Bank, with
provisions satisfactory to Bank for payment of all losses thereunder to Bank as
its interest may appear, and, if required, Debtor shall deposit the policies
with Bank. Any money received by Bank under said policies may be applied to the
payment of any Obligation, whether or not then due and payable, or at Bank's
option may be delivered by Bank to Debtor or for the purpose of repairing or
restoring the Collateral. Debtor assigns to Bank all rights to receive proceeds
of insurance not exceeding the total amount of the Obligations, directs any
insurer to pay proceeds directly to Bank. If Debtor fails to keep the Collateral
insured as required by Bank, Bank shall have the right to obtain such insurance
at Debtor's and Borrower's expense, which shall be deemed an Obligation.
Debtor and Borrower shall pay all costs of, and taxes imposed upon, the
filing of financing statements and amendments thereto, and continuation and
termination statements with respect to the security interest created thereby,
and Bank is authorized to do all things which it deems necessary to perfect and
maintain perfection and priority of the security interest created hereby, to
preserve the enforceability of any Obligation, and to protect the collateral and
all expenditures for these purposes by Bank shall be deemed Obligations. Any
photographic or other reproduction of (1) this Agreement or (2) any financing
statement or amendment thereto shall be sufficient as the original.
If any provision of this Agreement is held invalid or inapplicable, such
invalidity or inapplicability shall not affect the validity or enforceability of
the remaining provisions of this Agreement. Captions are inserted herein for
convenience only, and have no bearing on the interpretation or construction of
this Agreement. This Agreement shall inure to the benefit of Bank's successors
and assigns and shall bind Debtor's and Borrower's heirs, representatives,
successors and assigns, including any corporation or other legal entity
resulting from a merger, consolidation, or other restructuring of Debtor or
Borrower. Borrower shall be fully liable for all Obligations arising under this
Agreement, whether expressly imposed upon both Debtor and Borrower or on Debtor
alone. This Agreement shall be binding on Debtor even without Borrower's
signature.
Bank shall be deemed to have exercised reasonable care of any Collateral
in its possession if Bank takes such action respecting the Collateral as Debtor
or Borrower may reasonably request in writing; but no noncompliance by Bank with
Debtor's or Borrower's request, written or oral, of failure to give Debtor or
Borrower notice of any decline in the market value of any Collateral, shall be
deemed, or shall give rise to a presumption of a failure to exercise reasonable
care.
Any term used herein that is not otherwise defined shall have the meaning
accorded such term in the Uniform Commercial Code, except that "account debtor"
shall also mean any person obligated on Collateral consisting of: certificates
of deposit; deposit or share accounts or other indebtednesses of financial
institutions; instruments; debt securities; and, without limiting the generality
of the foregoing, any other Collateral consisting of or representing an
indebtedness, direct or contingent, matured or unmatured, of any person to
Debtor. (Any such Collateral, together with any accounts, chattel paper, and
general intangibles constituting indebtedness to Debtor, is hereinafter referred
to as "Debt Collateral.")
<PAGE>
5. Default.
The Obligations shall be in default upon failure to pay when due any
amount payable hereunder, under any promissory note or other agreement
pertaining to an Obligation, or upon any failure to observe or perform any of
Debtor's or Borrower's other agreements contained herein or in any instrument
evidencing or pertaining to an Obligation or the Collateral, or if any warranty
or statement by Debtor herein or furnished in connection herewith is false or
misleading, or if Debtor or Borrower becomes the subject of any bankruptcy or
insolvency proceeding or makes an assignment for the benefit of creditors, or if
Bank in good faith believes the prospect of payment and performance of any
Obligation is impaired
If the promissory note or instrument evidencing, or agreement pertaining
to, an Obligation does not contain specific repayment provisions, or if an
Obligation arises under this Agreement, such Obligation shall be due and payable
on demand by Bank. If such note, instrument, or agreement does not provide for
an interest rate on an Obligation, including any Obligation arising under this
Agreement, the Obligation shall bear interest from its inception on the unpaid
balance at the highest interest rate applicable to any other Obligation then in
existence or, in the absence of such other rate, the Bank's Index Rate, adjusted
daily, plus 3% per annum, but not in excess of any maximum applicable lawful
contract rate
Upon default, all Obligations shall immediately become due and payable at
Bank's option without notice to Debtor or Borrower, and Bank may proceed to
enforce payment of same and to exercise any or all rights and remedies provided
by the Uniform Commercial Code or other applicable law, as well as all other
rights and remedies possessed by Bank, all of which shall be cumulative.
Whenever Debtor or Borrower is in default hereunder, and upon demand by Bank,
Debtor shall assemble the Collateral and make it available to Bank at a place
reasonably convenient to Bank and Debtor, and if Debtor fails to do so in any
respect, Debtor shall be liable for all costs and expenses, including reasonable
attorney's fees, incurred by Bank as a result. Any notice of sale, lease or
other intended disposition of the Collateral by Bank sent to Debtor at the
address specified above, or at such other address of Debtor as may be shown on
Bank's records, at least 5 days prior to such action, shall constitute
reasonable notice to Debtor. If more than one Obligation is outstanding, Bank
may apply all sums realized from the Collateral to the Obligations in such order
as it may choose without thereby releasing Debtor, Borrower, or any other party
liable on an Obligation. Bank may waive any default before or alter the same has
been declared without impairing its right to declare a subsequent default
hereunder and accelerate the maturities of the Obligations, these rights being
continuing ones
6. Collateral Verification.
Bank shall have the right, at any time, by its own auditors, accountants,
or other agents, to examine or audit the Collateral or any of the books and
records of Debtor or any agent of Debtor pertaining to the Collateral, all of
which shall be made available upon request Such accountants or other
representatives of Bank will be permitted to make any verification of the
existence of the Collateral or accuracy of the records which Bank deems
necessary or proper. All reasonable expenses incurred by Bank in making such
examination, inspection, verification or audit shall be deemed an Obligation
7. Termination.
Debtor agrees that, notwithstanding the payment in full of all Obligations
and except as otherwise required by applicable law, Bank shall not be required
to send Debtor a termination statement with respect to any financing statement
filed to perfect Bank's security interest in any of the Collateral or release
any of the Collateral, unless and until Debtor shall have made written demand
therefor. Upon receipt of proper written demand, Bank may, at its option, in
lieu of sending a termination statement to Debtor, cause said termination
statement to be filed with the appropriate filing officer(s). If Bank is, or
reasonably believes itself to be, under a duty to make any future advance that
would constitute an Obligation, Bank shall in no event be required to send or
record such a termination statement or release any of the Collateral.
8. Deposit Accounts, Securities, Instruments.
If the Collateral consists in whole or in part of certificates of deposit;
deposit or share accounts or other indebtednesses of financial institutions
instruments; or securities; then all immediate and remote renewals thereof,
substitutions therefor, and dividends, interest, earnings, and distributions
thereon, of whatever kind or character, shall likewise be subject to the
security interest hereby granted. Debtor shall immediately deliver to Bank any
additional shares received by way of stock split or stock dividend on stock
Collateral or as replacement shares therefor issued in connection with a
corporate merger, acquisition, or reorganization, or any other replacement
shares therefor issued in connection with a corporate merger, acquisition, or
reorganization, or any other replacement or renewal securities, instruments, or
certificates of deposit issued with respect to Collateral, along with all
instruments Bank deems necessary to transfer the same, but may retain cash
dividends paid solely out of the undivided profits of the issuing corporation
absent a default on an Obligation. If the Collateral consists of or includes any
securities, certificated or uncertificated, registered in Debtor's name, at
Bank's request Debtor shall cause the Issuer to register the pledge of such
securities in Bank's name.
9. Equipment and Other Goods.
If any of the Collateral is equipment or other goods, Debtor will
contemporaneously herewith furnish Bank a list of the cities, counties, and
states wherein such equipment or goods are or will be used, and hereafter will
notify Bank in writing of any other states in which the equipment or goods are
so used.
Debtor will not permit any of the Collateral to be removed from the
locations specified herein or disclosed in writing to Bank, except for temporary
periods in the normal and customary use thereof, without prior written consent
of Bank, and will permit Bank to inspect the Collateral at any time.
Debtor will keep the Collateral in good condition and repair, and Debtor
and Borrower will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of same, and
will not permit anything to be done that may impair the value of any of the
Collateral. If Debtor fails to pay such sums, Bank may do so for Debtor's and
Borrower's account, and such expenditure shall be deemed an obligation
Until default in any of the terms hereof or under the terms of any
Obligation, Debtor shall be entitled to possession of the Collateral and to use
the same, in any lawful manner, provided that such use does not cause excessive
wear and tear to the Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
Unless this Agreement states that the Collateral is or is to become a
fixture and describes the property to which it is or will be affixed and the
record owner thereof, Debtor will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real estate
10. Inventory, Accounts or General Intangibles.
So long as Debtor or Borrower is not in default hereunder, Debtor shall
have the right to process and sell Debtor's inventory in the regular course of
business. Bank's security interest hereunder shall attach to all proceeds of all
sales or other dispositions of the Collateral. If at any time any such proceeds
are represented by any instrument, chattel paper or documents of title, then
such instruments, chattel paper, or documents of title shall be promptly
delivered to Bank and included in the security interest granted hereby.
Bank shall not be obligated to do and perform any of the acts or things to
be done or performed by Debtor, under any contract representing any account or
other Debt Collateral, but if there is a default by Debtor with respect to such
contract, then Bank may, at its election, perform some or all of the obligations
of Debtor under such contract, and, if Bank incurs any liability or expenses by
reason thereof, the same shall be deemed an Obligation. Debtor shall not,
without Bank's prior written consent, consent to or make any material amendment
to the terms of (i) any undertaking constituting Debt Collateral or (ii) any
general intangible subject to Bank's security interest.
Debtor will on request from Bank submit to Bank duplicate copies of all
invoices on outstanding accounts subject to Bank's security interest. Bank shall
have the right to notify any account debtor to make payment directly to Bank and
so take control of all proceeds of any Debt Collateral, which right Bank may
exercise at any time whether or not Debtor or Borrower is then in default
hereunder or was previously making collections thereon. Debtor hereby authorizes
any account debtor so make such payment to Bank at Bank's election, whether or
not the applicable Debt Collateral is then matured, and agrees to indemnify such
account debtor from any liability to Debtor for so paying. Until such time as
Bank elects to exercise such right by mailing to Debtor written notice thereof,
Debtor is authorized, as agent of Bank, to collect and enforce such Debt
Collateral. Debtor will forthwith, on receipt of all checks, drafts, cash, and
other remittances in payment either of inventory sold or with respect to any
Debt Collateral, if directed by Bank, deposit the same in a special bank account
maintained with Bank, over which Bank alone has power of withdrawal. The funds
in said account shall be held by Bank as security for all Obligations. Said
proceeds shall be deposited in precisely the form received, except for the
endorsement of Debtor where necessary to permit collection of items, which
endorsement Debtor agrees to make. Pending such deposit, Debtor agrees that it
will not commingle any such checks, drafts, cash and other remittances with any
of Debtor's other funds or property, but will hold them separate and apart
therefrom and in trust for Bank until deposit thereof is made in the special
account. Bank is authorized at least once a week to apply the whole or any part
of the collected funds on deposit in the special account against the
Obligations, the amount, order and method of such application to be in the
discretion of Bank. Any portion of said funds on deposit in the special account
which Bank elects not to so apply may be paid over by Bank to Debtor.
11. Power of Attorney.
Debtor hereby irrevocably constitutes and appoints Bank or any officer,
agent or employee of Bank as Debtor's attorney-in-fact to do any [illegible]
more or all of the following on Debtor's behalf: (a) to execute and record any
financing statement, amendment thereto, or copy thereof or of this Agreement, or
other instrument Bank deems necessary to perfect and maintain the perfection and
priority of the security interest created hereby; (b) to endorse any check,
draft, or other instrument constituting Collateral or proceeds thereof or
representing proceeds of or payments under any insurance policy covering
Collateral; (c) to endorse any security, instrument, document of title, or
chattel paper constituting Collateral for the purpose of transferring,
negotiating, or enforcing the same; (d) to grant releases to account debtors
respecting payments or compromises in Debt Collateral; and (e) without limiting
the generality of the foregoing, to execute any writing or perform any act that
Debtor is obligated to execute or perform hereunder.
EXECUTED this 15th day of August, 1996
Display Arts, Inc. Display Arts, Inc.
- ----------------------------------- -----------------------------------
Debtor/Borrower Debtor/Borrower
By /s/ Pamela M. McNamee By /s/ Kelly M. McNamee
- ----------------------------------- -----------------------------------
Pamela McNamee, President Kelly McNamee, Secretary
<PAGE>
Exhibit 10.38
[LOGO] First American Security Agreement FORM [ILLEGIBLE]
Professional Displays Inc.
(hereafter called Debtor) a (an) Tennessee corporation organized under the laws
of the State of Tennessee whose chief executive office (or, if none, residence)
is located at 1425 Elm Hill Pike, Nashville, Tennessee 37210, hereby assigns and
grants to FIRST AMERICAN National Bank (hereinafter called "Bank") a security
interest in the following described property and in all proceeds and products
thereof and accessions thereto (all of which is called the ("Collateral"),
subject to all applicable conditions, representations, warranties, and
agreements hereinafter set forth:
|_| EQUIPMENT All equipment of every kind and description
owned by or in the possession of Debtor, whether
now owned, held or hereafter acquired and
wherever located, including but not limited to
any equipment listed below or on Exhibit
_________, together with all parts, accessories,
and attachments and all replacements and
additions thereto.
|_| INVENTORY, All inventory owned by or in the possession of
ACCOUNTS, Debtor, all Debtor's agreements for sale or
AND GENERAL INTANGIBLES lease of same and rentals therefrom, all
Debtor's accounts and general intangibles,
including but not limited to any property listed
below or on Exhibit _____, whether now in
existence, owned, held or hereafter acquired,
entered into, or created, and wherever located;
and whether held for sale or lease or furnished
or to be furnished under service contracts.
|X| OTHER PROPERTY Titled Vehicle: 1991 Dodge Dynasty 4-Door
VIN #1B3XC4635MD275961, Title #47050962
Other business location(s) noted in Section 1
below.
1. Use and Location of Collateral
Debtor will use the Collateral primarily -
|_| for personal, family or household purposes
|_| in farming operations located at ____________________________, which is
owned by ______________________________________
|X| in business and that all of Debtor's places of business are in the County
above set forth except 30 South Main Street, Memphis, Tennessee 38103
|_| as fixtures, to be attached to real estate owned by ______________________
and described as follows: __________________________________
2. Debtor's Residence (applicable only in Kentucky).
Debtor's residence, for the purposes of KRS 355 9-401, is different from
the address set forth above.
- --------------------------------------------------------------------------------
Street City County State
3. Secured Obligations.
The indebtedness secured hereby (individually, an "Obligation," and
collectively, the "Obligations") shall include the following indebtednesses and
liabilities of Debtor or Display Arts Inc. (hereinafter called "Borrower"): (1)
loans to be made by Bank concurrently or in connection with this Agreement, all
interest and other charges accrued thereon, and also any renewals, extensions or
refinancings thereof; (2) contingent obligations to Bank, under guaranty
agreements or otherwise, incurred concurrently or in connection with this
Agreement; (3) all expenditures by Bank for taxes, levies, insurance and
preservation of the Collateral and otherwise in performance of any of Debtor's
or Borrower's duties under this Agreement; (4) all other money heretofore or
hereafter advanced by Bank at its option to or for the account of Debtor or
Borrower, and all other present or future, direct or contingent liabilities and
indebtedness of Debtor or Borrower to Bank of any nature whatsoever, and any
extensions or renewals thereof except that the advances, liabilities, and
indebtedness secured by this clause (4) shall not include any debt subject to
the disclosure requirements of the Federal Truth-in-Lending Act if at the time
such debt is created any legally required disclosure of this security interest
respecting such debt shall not have been made; (5) all attorney's fees, court
costs, and expenses of whatever kind incident to the collection of any of the
foregoing Obligations and the enforcement or protection of the security interest
hereby granted.
4. General Representations, Warranties, and Agreements.
Debtor is the sole owner of the Collateral, free and clear of all liens
and security interests, or the Collateral is being acquired solely by Debtor
with the proceeds of the loan(s) described above, and Bank is authorized to
disburse the proceeds of said loan directly to the seller of the Collateral as
shown on Bank's records. Debtor will defend the Collateral against the claims
and demands of all persons. No Debt Collateral, as hereinafter defined, is or
will be subject to any defense or claim of the account debtor, as defined
hereinafter. Except for sales or leases of inventory in the ordinary course of
Debtor's business, Debtor will not sell, transfer, or encumber the Collateral,
or suffer any transfer or encumbrance thereof, or in any way impair the security
afforded by the Collateral, without Bank's prior written consent.
Debtor will promptly notify Bank in writing of any change in Debtor's
residence, as set forth in the introductory paragraph or in paragraph 2, or
chief executive office.
Debtor will at all tames keep the Collateral insured against all insurable
hazards in amounts equal to the full cash value of the Collateral. Such
insurance shall be in such companies as may be acceptable to Bank, with
provisions satisfactory to Bank for payment of all losses thereunder to Bank as
its interest may appear, and, if required, Debtor shall deposit the policies
with Bank. Any money received by Bank under said policies may be applied to the
payment of any Obligation, whether or not then due and payable, or at Bank's
option may be delivered by Bank to Debtor or for the purpose of repairing or
restoring the Collateral. Debtor assigns to Bank all rights to receive proceeds
of insurance not exceeding the total amount of the Obligations, directs any
insurer to pay proceeds directly to Bank. If Debtor fails to keep the Collateral
insured as required by Bank, Bank shall have the right to obtain such insurance
at Debtor's and Borrower's expense, which shall be deemed an Obligation.
Debtor and Borrower shall pay all costs of, and taxes imposed upon, the
filing of financing statements and amendments thereto, and continuation and
termination statements with respect to the security interest created hereby, and
Bank is authorized to do all things which it deems necessary to perfect and
maintain perfection and priority of the security interest created hereby, to
preserve the enforceability of any Obligation, and to protect the Collateral,
and all expenditures for these purposes by Bank shall be deemed Obligations. Any
photographic or other reproduction of (1) this Agreement or (2) any financing
statement or amendment thereto executed pursuant to this Agreement shall be
sufficient as the original.
If any provision of this Agreement is held invalid or inapplicable, such
invalidity or inapplicability shall not affect the validity or enforceability of
the remaining provisions of this Agreement. Captions are inserted herein for
convenience only, and have no bearing on the interpretation or construction of
this Agreement. This Agreement shall inure to the benefit of Bank's successors
and assigns and shall bind Debtor's and Borrower's heirs, representatives,
successors and assigns, including any corporation or other legal entity
resulting from a merger, consolidation, or other restructuring of Debtor or
Borrower. Borrower shall be fully liable for all Obligations arising under this
Agreement, whether expressly imposed upon both Debtor and Borrower or on Debtor
alone. This Agreement shall be binding on Debtor even without Borrower's
signature.
Bank shall be deemed to have exercised reasonable care of any Collateral
in its possession if Bank takes such action respecting the Collateral as Debtor
or Borrower may reasonably request in writing, but no noncompliance by Bank with
Debtor's or Borrower's request, written or oral, of failure to give Debtor or
Borrower notice of any decline in the market value of any Collateral, shall be
deemed, or shall give rise to a presumption of a failure to exercise reasonable
care.
Any term used herein that is not otherwise defined shall have the meaning
accorded such term in the Uniform Commercial Code, except that "account debtor"
shall also mean any person obligated on Collateral consisting of: certificates
of deposit; deposit or share accounts or other indebtednesses of financial
institutions; instruments; debt securities; and, without limiting the generality
of the foregoing, any other Collateral consisting of or representing an
indebtedness, direct or contingent, matured or unmatured, of any person to
Debtor. (Any such Collateral, together with accounts, chattel paper, and general
intangibles consisting indebtedness to Debtor, is hereinafter referred to as
"Debt Collateral").
<PAGE>
5. Default.
The Obligations shall be in default upon failure to pay when due any
amount payable hereunder, under any promissory note or other agreement
pertaining to an Obligation, or upon any failure to observe or perform any of
Debtor's or Borrower's other agreements contained herein or in any instrument
evidencing or pertaining to an Obligation or the Collateral, or if any warranty
or statement by Debtor herein or furnished in connection herewith is false or
misleading, or if Debtor or Borrower becomes the subject of any bankruptcy or
insolvency proceeding or makes an assignment for the benefit of creditors, or if
Bank in good faith believes the prospect of payment and performance of any
Obligation is impaired.
If the promissory note or instrument evidencing, or agreement pertaining
to, an Obligation does not contain specific repayment provisions, or if an
Obligation arises under this Agreement, such Obligation shall be due and payable
on demand by Bank. If such note, instrument, or agreement does not provide for
an interest rate on an Obligation, including any Obligation arising under this
Agreement, the Obligation shall bear interest from its inception on the unpaid
balance at the highest interest rate applicable to any other Obligation then in
existence or, in the absence of such other rate, the Bank's Index Rate, adjusted
daily, plus 3% per annum, but not in excess of any maximum applicable lawful
contract rate.
Upon default, all Obligations shall immediately become due and payable at
Bank's option without notice to Debtor or Borrower, and Bank may proceed to
enforce payment of same and to exercise any or all rights and remedies provided
by the Uniform Commercial Code or other applicable law, as well as all other
rights and remedies possessed by Bank all of which shall be cumulative. Whenever
Debtor or Borrower is in default hereunder, and upon demand by Bank, Debtor
shall assemble the Collateral and make it available to Bank at a place
reasonably convenient to Bank and Debtor, and if Debtor fails to do so in any
respect, Debtor shall be liable for all costs and expenses, including reasonable
attorney's fees, incurred by Bank as a result. Any notice of sale, lease or
other intended disposition of the Collateral by Bank sent to Debtor at the
address specified above, or at such other address of Debtor as may be shown on
Bank's records, at least 5 days prior to such action, shall constitute
reasonable notice to Debtor. If more than one Obligation is outstanding, Bank
may apply all sums realized from the Collateral to the Obligations in such order
as it may choose without thereby releasing Debtor, Borrower, or any other party
liable on an Obligation. Bank may waive any default before or after the same has
been declared without imparting its right to declare a subsequent default
hereunder and accelerate the maturities of the Obligations, these rights being
continuing ones.
6. Collateral Verification.
Bank shall have the right, at any time, by its own auditors, accountants,
or other agents, to examine or audit the Collateral or any of the books and
records of Debtor or any agent of Debtor pertaining to the Collateral, all of
which shall be made available upon request. Such accountants or other
representatives of Bank will be permitted to make any verification of the
existence of the Collateral or accuracy of the records which Bank deems
necessary or proper. All reasonable expenses incurred by Bank in making such
examination, inspection, verification or audit shall be deemed an Obligation.
7. Termination.
Debtor agrees that, notwithstanding the payment in full of all Obligations
and except as otherwise required by applicable law, Bank shall not be required
to send Debtor a termination statement with respect to any financing statement
filed to perfect Bank's security interest in any of the Collateral or release
any of the Collateral, unless and until Debtor shall have made written demand
therefor. Upon receipt of proper written demand, Bank may, at its option, in
lieu of sending a termination statement to Debtor, cause said termination
statement to be filed with the appropriate filing officer(s). If Bank is, or
reasonably believes itself to be, under a duty to make any future advance that
would constitute an Obligation, Bank shall in no event be required to send or
record such a termination statement or release any of the Collateral.
8. Deposit Accounts, Securities, Instruments.
If the Collateral consists in whole or in part of certificates of deposit,
deposit or share accounts or other indebtednesses of financial institutions;
instruments; or securities; then all immediate and remote renewals thereof,
substitutions therefor, and dividends, interest, earnings, and distributions
thereon, of whatever kind or character, shall likewise be subject to the
security interest hereby granted. Debtor shall immediately deliver to Bank any
additional shares received by way of stock split or stock dividend on stock
Collateral or as replacement shares therefor issued in connection with a
corporate merger, acquisition, or reorganization, or any other replacement
shares therefor issued in connection with a corporate merger, acquisition, or
reorganization, or any other replacement or renewal securities, instruments, or
certificates of deposit issued with respect to Collateral, along with all
instruments Bank deems necessary to transfer the same, but may retain cash
dividends paid solely out of the undivided profits of the issuing corporation,
absent a default on an Obligation. If the Collateral consists of or includes any
securities, certificated or uncertificated, registered in Debtor's name, at
Bank's request Debtor shall cause the Issuer to register the pledge of such
securities in Bank's name.
9. Equipment and Other Goods.
If any of the Collateral is equipment or other goods, Debtor will
contemporaneously herewith furnish Bank a list of the cities, counties, and
states wherein such equipment or goods are or will be used, and hereafter will
notify Bank in writing of any other states in which the equipment or goods are
so used.
Debtor will not permit any of the Collateral to be removed from the
locations specified herein or disclosed in writing to Bank, except for temporary
periods in the normal and customary use thereof, without prior written consent
of Bank, and will permit Bank to inspect the Collateral at any time.
Debtor will keep the Collateral in good condition and repair, and Debtor
and Borrower will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of same, and
will not permit anything to be done that may impair the value of any of the
Collateral. If Debtor fails to pay such sums, Bank may do so for Debtor's and
Borrower's account, and such expenditure shall be deemed an Obligation.
Until default in any of the terms hereof or under the terms of any
Obligation, Debtor shall be entitled to possession of the Collateral and to use
the same in any lawful manner, provided that such use does not cause excessive
wear and tear to the Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
Unless this Agreement states that the Collateral is or is to become a
fixture and describes the property to which it is or will be affixed and the
record owner thereof, Debtor will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real estate.
10. Inventory, Accounts or General Intangibles.
So long as Debtor or Borrower is not in default hereunder, Debtor shall
have the right to process and sell Debtor's inventory in the regular course of
business. Bank's security interest hereunder shall attach to all proceeds of all
sales or other dispositions of the Collateral. If at any time any such proceeds
are represented by any instruments, chattel paper or documents of title, then
such instruments, chattel paper, or documents of title shall be promptly
delivered to Bank and included in the security interest granted hereby.
Bank shall not be obligated to do and perform any of the acts or things to
be done or performed by Debtor, under any contract representing any account or
other Debt Collateral, but if there is a default by Debtor with respect to such
contract, then Bank may, at its election, perform some or all of the obligations
of Debtor under such contract, and, if Bank incurs any liability or expenses by
reason thereof, the same shall be deemed an Obligation. Debtor shall not,
without Bank's prior written consent, consent to or make any material amendment
to the terms of (i) any undertaking constituting Debt Collateral or (ii) any
general intangible subject to Bank's security interest.
Debtor will on request from Bank submit to Bank duplicate copies of all
invoices on outstanding accounts subject to Bank's security interest. Bank shall
have the right to notify any account debtor to make payment directly to Bank and
to take control of all proceeds of any Debt Collateral, which right Bank may
exercise at any time whether or not Debtor or Borrower is then in default
hereunder or was previously making collections thereon. Debtor hereby authorizes
any account debtor so make such payment to Bank at Bank's election, whether or
not the applicable Debt Collateral is then matured, and agrees so indemnify such
account debtor from any liability to Debtor for so paying. Until such time as
Bank elects to exercise such right by mailing to Debtor written notice thereof,
Debtor is authorized, as agent of Bank, to collect and enforce such Debt
Collateral. Debtor will forthwith, on receipt of all checks, drafts, cash, and
other remittances in payment either of inventory sold or with respect to any
Debt Collateral, if directed by Bank, deposit the same in a special bank account
maintained with Bank, over which Bank alone has power of withdrawal. The funds
in said account shall be held by Bank as security for all Obligations. Said
proceeds shall be deposited in precisely the form received, except for the
endorsement of Debtor where necessary to permit collection of items, which
endorsement Debtor agrees to make. Pending such deposit, Debtor agrees that it
will not commingle any such checks, drafts, cash and other remittances with any
of Debtor's other funds or property, but will hold them separate and apart
therefrom and in trust for Bank until deposit thereof is made in the special
account. Bank is authorized at least once a week to apply the whole or any part
of the collected funds on deposit in the special account against the
Obligations, the amount, order and method of such application to be in the
discretion of Bank. Any portion of said funds on deposit in the special account
which Bank elects not to so apply may be paid over by Bank to Debtor.
11. Power of Attorney.
Debtor hereby irrevocably constitutes and appoints Bank or any officer,
agent on employee of Bank as Debtor's attorney-in-fact to do any one, more or
all of the following on Debtor's behalf: (a) to execute and record any financing
statement, amendment thereto, or copy thereof or of this Agreement, or other
instrument Bank deems necessary to perfect and maintain the perfection and
priority of the security interest created hereby; (b) to endorse any check,
draft, or other instrument constituting Collateral or proceeds thereof or
representing proceeds of or payments under any insurance policy covering
Collateral; (c) to endorse any security, instrument, document of title, or
chattel paper constituting Collateral for the purpose of transferring,
negotiating, or enforcing the same; (d) to grant releases to account debtors
respecting payments or compromises on Debt Collateral; and (e) without limiting
the generality of the foregoing, to execute any writing or perform any act that
Debtor is obligated to execute or perform hereunder.
EXECUTED this 15th day of August, 1996
Professional Displays Inc. Professional Displays Inc.
- ----------------------------------- -----------------------------------
Debtor/Borrower Debtor/Borrower
By /s/ Pamela McNamee By /s/ Kelly M. McNamee
- ----------------------------------- -----------------------------------
President Secretary/Treasurer
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Exhibit 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
23rd day of June, 1999 by and between COLORSMART.COM, INC. ("Company") and
Donovan J. McNamee, Jr. ("McNamee").
WHEREAS, the Company has entered into an agreement to purchase the stock
of Display Arts Inc., a Tennessee corporation ("Display Arts");
WHEREAS, McNamee is a shareholder and employee of Display Arts;
WHEREAS, the Company desires to employ McNamee following the closing of
such stock purchase as the " " of the Company; and
WHEREAS, McNamee has agreed to provide such services in accordance with
the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises herein made and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Employment. Company shall employ McNamee as the Gen. Mgr. of the
Company's operating subsidiary, Display Arts during the term of this Agreement
and McNamee hereby accepts such employment. McNamee shall be responsible for all
of the day-to-day operational aspects of Display Arts; shall supervise all other
officers and employees of Display Arts; and shall have such other duties
regarding Display Arts and the Company as shall be determined from time to time
by the Chief Executive Officer or the Board of Directors of the Company
("Board"). McNamee agrees to devote his full business time to providing services
to the Company as herein provided and shall perform his duties faithfully and
diligently.
2. Term of Employment. The term of employment of McNamee shall be for a
term of two (2) years from the "Effective Date" of this Agreement (as
hereinafter defined) ("Initial Term") and shall automatically extend for
additional terms of one (1) year ("Renewal Term") unless this Agreement is
terminated as of the last day of the Initial Term or as of the last day of any
Renewal Term, upon not less than ninety (90) days prior written notice by either
party to the other, subject to earlier termination as provided in paragraphs 4,
5, and 6 hereof. The Effective Date of this Agreement and the Initial Term shall
commence upon the closing of the purchase by the Company of the stock of Display
Arts. If for any reason such closing does not occur, this Agreement shall be
null and void in all respects.
3. Compensation.
(a) Base Salary. Commencing on the Effective Date McNamee shall be
paid an initial base salary at the annual rate of $45,000 ("Initial Base
Salary"), payable in equal installments semi-monthly.
(b) Cash Bonus. In addition to the Initial Base Salary, McNamee
shall be paid a cash bonus quarterly during the term of this Agreement equal to
1.5% of the amount of any increase in the gross revenue generated by Display
Arts on a quarterly
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basis as compared with the same quarterly period for the previous year. Each
quarter shall coincide with all calendar quarters, with the bonus to be
calculated and paid no later than 30 days after the end of each quarter wherein
a bonus was earned. Upon request, the Company shall permit McNamee access to its
books, records and financial statements for the purpose of confirming the
Company's calculation of McNamee's bonus for any such quarter.
(c) Vacation. McNamee shall be entitled to paid vacation and paid
Federal and state holidays in accordance with the vacation policy of the Company
then in effect, but no less than three (3) weeks of vacation each year.
(e) Other Benefits. McNamee shall be entitled to participate in all
benefit programs made generally available to other management employees of the
Company, on the same terms and conditions as they are offered to others,
including but not limited to medical, dental, and term life insurance benefits.
McNamee shall also be provided, at the Company's expense, with a vehicle
equipped with a cellular telephone for business use, including all
transportation and insurance costs associated therewith.
(f) Severance Payment. In the event of the termination of McNamee's
employment hereunder prior to the end of the Initial Term, or any Renewal Term,
by the Company without cause including any deemed termination by the Company as
set forth in paragraph 4(b) hereof, the Company shall pay McNamee liquidated
damages equal to the Initial Base Salary (less withholding and payroll taxes)
McNamee would otherwise be entitled to receive for the unexpired term of this
Agreement, or for a period of one year, whichever is the lesser amount, which
sum is payable at the time that McNamee's periodic salary payments would be
made, but reduced from the date of termination by the amounts of other income
received by McNamee from any other employment for that time period. In the event
of McNamee's death or disability during the term hereof, the Company shall pay
to McNamee, or the personal representative of McNamee's estate in the event of
his death, an amount equal to the Initial Base Salary (less withholding and
payroll taxes) McNamee would otherwise be entitled to receive for the unexpired
term of this Agreement, or for a period of one year, whichever is the lesser
amount, which sum is payable in lump sum within 30 days following such death or
disability. Severance Payments under this Section (f) in the event of McNamee's
termination of employment, death or disability shall additionally include
payment of McNamee's bonus described under Subsection (b) hereof. Severance
Payments provided for under this Section (f) shall be in full settlement of any
and all claims that McNamee or McNamee's estate may have against the Company.
(g) Stock Option Grants/Employee Stock Ownership Plan. McNamee shall
be entitled to participate and receive stock option grants from the Company's
Employee Stock Option Plan ("ESOP") during his employment with the Company, at
the discretion of the Board of Directors or committee of the Board responsible
to administer the ESOP, in amounts which are proportional to and at the same
time as option grants are made to other members of the Company's management and
according to terms and conditions which are comparable to such ESOP option
grants received by other members of the Company's management.
4. Termination of Employment.
(a) Termination For Cause. The Company may terminate the employment
of McNamee at any time for cause (as hereinafter defined) upon written notice.
The term "for cause" shall mean:
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(i) the continued failure by McNamee to substantially perform
his primary duties as Gen. Mgr. of Display Arts in a reasonably professional
manner other than due to temporary or total disability or death, after a written
demand for such substantial performance is delivered to McNamee by the Board of
Directors of the Company;
(ii) the unauthorized dissemination of significant trade
secrets or other proprietary property of the Company;
(iii) the commission of a felony or commission of a crime
involving dishonesty or moral turpitude;
(iv) the commission of any act or acts of dishonesty which
acts are intended to result or do result directly or indirectly in gain or
personal enrichment of McNamee or a related person or affiliated company or when
such acts are intended to cause harm or damages to the Company;
(v) the illegal use of controlled substances;
(vi) the continued use of alcohol so as to have an adverse
effect on the performance of his duties;
(vii) the misappropriation or embezzlement of Company assets;
(viii) the knowingly furnishing of material false reports or
information to the directors or officers of the Company; or
(ix) the making of serious disparaging remarks regarding the
Company publicly or to suppliers and/or customers or potential customers of the
Company.
(b) Default. Either party may terminate this Agreement upon the
breach of any material provision of this Agreement by the other party upon
thirty (30) days prior written notice; provided, however, that such termination
notice shall not be effective if the defaulting party corrects such default
prior to the date of termination. Termination by McNamee of his employment
hereunder by reason of the default of the Company shall be deemed for all
purposes of this Agreement a termination by the Company without cause.
5. Disability. The Company may terminate the employment of McNamee under
this Agreement by written notice upon the total and permanent disability of
McNamee. Total and permanent disability shall mean the inability of McNamee to
substantially perform the essential functions of his position, with or without
reasonable accommodations, due to sickness or other physical or mental
disability, for ninety (90) days in any one hundred twenty (120) day period or a
period of time which exceeds the time for medical leave provided by law,
whichever period is longer. The Company shall give McNamee written notice of any
termination hereunder.
6. Death. The employment of McNamee under this Agreement automatically
terminates upon the death of McNamee.
7. Expense Reimbursement. McNamee shall be reimbursed, upon a proper
accounting, for all expenses reasonably incurred in connection with his
employment hereunder, including all reasonable travel and entertainment expenses
pursuant to Company policy.
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8. Confidential Information. During the Initial Term or any Renewal Term
of this Agreement, other than in the performance of his duties hereunder McNamee
shall not use or disclose to others, without the prior written consent of the
Company, any customer lists, trade secrets, secret know-how, or other
confidential information relative to the business of the Company obtained by
McNamee in the course of rendering services pursuant to this Agreement. The
obligation of McNamee with respect to any item of such information shall
terminate if that item of information becomes disclosed in published literature
or otherwise becomes publicly available, provided that such public disclosure
did not result, directly or indirectly, from any act or omission of McNamee.
Upon leaving the employ of the Company for any reason, McNamee shall continue to
be bound by this Paragraph 8 for a period of two (2) years, and shall not take
with him any customer lists, confidential data, or other documents and
instruments which are the property of the Company. All such data, documents and
instruments and all copies thereof shall be surrendered by McNamee to the
Company on or prior to the termination of his employment.
9. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given when delivered by hand or upon delivery to the address set forth
below. If delivered by any other means, addressed to the party, and delivered to
the address set forth below or to such other address as such party gives written
notice in substitution therefor:
(i) if to Company:
Colorsmart.com, Inc.
537 Myatt Drive
Madison, Tennessee 37115
Attention: Roger Finchum, Sr., Chairman and
Chief Executive Officer
(ii) if to McNamee:
Donovan J. McNamee, Jr.
431 Claircrest Drive
Antioch, Tennessee 37013
With Copy to:
D. Jefferson Herring, Esq.
144 Second Avenue North, Suite 200
Nashville, TN 37201
10. Limitations.
(a) Non-Compete. McNamee agrees that during the term of his
employment with the Company hereunder and for a period of two (2) years
thereafter he shall refrain, directly and indirectly, jointly and severally,
from managing, operating, financing, participating in the ownership, management
or operation of or be employed by, consult with, advise or be otherwise engaged
in any manner with any business which is competitive to those provided by
Display Arts and/or the Company in any of the locations where Display Arts
provides its services and products, which locations are defined to include all
areas within a radius of 75 miles from any existing facility utilized in Display
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Arts' business as of the date that McNamee leaves the Company's employment.
Ownership of less than 5% of companies whose securities are publicly traded and
which compete with the Company's business is not prohibited by this Agreement.
(b) Non-solicitation of Customers. McNamee agrees, that during the
term of his employment with the Company hereunder and for a period of two (2)
years thereafter he shall not, on his own behalf, or on behalf of another,
directly or indirectly, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospective customer of Display Arts or the
Company with a view to the providing of services or products which are
competitive with those that are marketed or provided by Display Arts or the
Company as of the date that McNamee leaves the Company's employment, provided
that these restrictions shall apply only to customers or prospects of the
Company which have been customers or prospects with whom McNamee has had
contacts on behalf of the Company.
(c) Non-solicitation of Employees. McNamee agrees that during the
term of his employment hereunder and for a period of two (2) years thereafter,
McNamee will not directly or indirectly solicit or in any other manner encourage
employee of Display Arts or the Company to leave its employ for an engagement in
any capacity with any other company or entity.
(d) Limitations. Notwithstanding the foregoing, the covenants of
McNamee pursuant to this Paragraph 10 shall terminate upon the termination of
McNamee's employment by the Company without cause or by McNamee by reason of the
Company's breach of its obligations hereunder.
11. Dispute Resolution. Any dispute regarding the interpretation, breach,
damages or otherwise, related to the interpretation or construction of this
Agreement shall be resolved by binding arbitration before one or more
arbitrators appointed by the American Arbitration Association ("AAA") in the
city of Nashville, Tennessee, pursuant to the AAA's Commercial Arbitration
Rules. Either party may institute the action by notice to the AAA and to the
other party. Prior to the filing of complaint with the AAA, the parties shall
meet and attempt to resolve the dispute. The cost of such arbitration shall be
borne equally by the parties except that each party shall be responsible for its
own respective advisors' fees including its attorney and accountant fees. Any
decision or award by said arbitrator(s) shall be binding on the parties.
Notwithstanding the foregoing, any party hereto may apply to any court for a
temporary or permanent injunction or restraining order to specifically enforce
any provision hereof
12. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon McNamee and his estate and personal representatives and upon the
Company and its successors and assigns. This Agreement may not be assigned,
pledged or otherwise hypothecated by McNamee.
13. Successors and Assigns. The Company shall cause any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or outstanding securities of the Company, by
written agreement in form and substance reasonably satisfactory to council to
McNamee to perform the obligations of the Company pursuant to this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. In the event the Company has a
parent, the parent shall guarantee the obligations of the Company hereunder.
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14. Severability. In the event of the invalidity, in whole or in part, of
any term or provision of this Agreement, the parties agree that such invalidity
shall not affect the validity of any other term or provision of this Agreement
and that such provision shall be subject to partial enforcement to the extent
permitted under applicable law.
15. Entire Agreement. This Agreement constitutes the entire understandings
of the parties with respect to the employment of McNamee by the Company and
supercedes all prior agreements arid understandings, oral or written.
16. Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
17. Waiver. The failure by a party to insist upon strict performance of
any provision hereof shall not constitute a waiver of such provision. All
waivers must be in writing to be enforceable hereunder.
18. Governing Law. This Agreement shall be made and in all respects shall
be interpreted, construed and governed by and in accordance with the laws of the
State of Tennessee, without giving effect to the rules governing conflicts of
law.
19. Recovery of Cost and Expenses. If either party to this Agreement
breaches any of its obligations hereunder, such party shall pay the costs and
expenses, including reasonable attorneys' fees, that the other party incurs in
enforcing the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COLORSMART.COM, INC.
By: /s/ Roger Finchum, Sr.
------------------------------------
Roger Finchum, Sr., Chairman and
Chief Executive Officer
Donovan J. McNamee, Jr.
/s/ Donovan J. McNamee, Jr.
----------------------------------------
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<PAGE>
Exhibit 10.40
LEASE AGREEMENT
LANDLORD: MICHELE FERRERA, TRUSTEE OF THE MICHELE FERRERA TRUST DATED APRIL 4,
1972 AS AMENDED, MICHAEL J. FERRERA, TRUSTEE OF THE MICHAEL J. FERRERA TRUST
DATED JUNE 15, 1972 AS AMENDED, AUGUSTINE FERRERA, TRUSTEE OF THE AUGUSTINE
FERRERA TRUST DATED MARCH 17, 1972 AS AMENDED, LEE S. LASSER, TRUSTEE OF THE LEE
S. LASSER TRUST DATED AUGUST 25, 1972 AS AMENDED, d/b/a LYONS BUSINESS PARK.
TENANT: Robert L. McDowell
BLDG. C
SUITE 2
DATE November 18, 1994
<PAGE>
INDEX
Page
ARTICLE I GRANT AND TERM
Section 1.01 Leased Premises ......................................... 1
Section 1.02 Length of Term .......................................... 1
Section 1.03 Construction of Leased Premises ......................... 1
Section 1.04 Possession After Completion of Construction ............. 1
Section 1.05 Determination of Availability of Demised Premises ....... 1
ARTICLE II RENT
Section 2.01 Payment ................................................. 2
Section 2.02 Minimum Rent ............................................ 2
Section 2.03 Adjustment of Fixed Minimum Rent ........................ 2
Section 2.04 Real Estate Taxes ....................................... 2
Section 2.05 Additional Rent ......................................... 3
Section 2.06 Past Due Rent ........................................... 3
ARTICLE III OPERATION AND MAINTENANCE OF COMMON AREAS
Section 3.01 Designation of Common Areas ............................. 3
Section 3.02 Construction of Common Areas ............................ 3
Section 3.03 Tenant's Pro Rata Share of Expenses ..................... 3
ARTICLE IV USE OF PREMISES
Section 4.01 Uses of Premises ........................................ 3
Section 4.02 Care of Premises ........................................ 3
ARTICLE V UTILITY SERVICES
Section 5.01 Landlord's Obligation to Make Utility
Services Available and Option to Supply Such Services ... 4
Section 5.02 Tenant's Obligation for Payment ......................... 4
ARTICLE VI MAINTENANCE OF LEASED PREMISES
Section 6.01 Landlord's and Tenant's Obligations for Maintenance ..... 4
Section 6.02 Abuse of Plumbing, Walls, Etc ........................... 4
ARTICLE VII SIGNS
Section 7.01 .......................................................... 5
ARTICLE VIII ALTERATIONS
Section 8.01 .......................................................... 5
ARTICLE IX INSURANCE AND INDEMNITY
Section 9.01 Covenant to Hold Harmless ............................... 5
Section 9.02 Fire Insurance Premium .................................. 5
Section 9.03 Tenant's Obligation to Carry Public Liability Insurance . 5
Section 9.04 Insurance Costs ......................................... 5
ARTICLE X ASSIGNMENT AND SUBLETTING
Section 10.01 ......................................................... 6
ARTICLE XI ACCESS TO PREMISES
Section 11.01 Right of Entry by Landlord .............................. 6
Section 11.02 Landlord's Right to Exhibit Premises .................... 6
ARTICLE XII EMINENT DOMAIN
Section 12.01 Total Condemnation ...................................... 6
Section 12.02 Partial Condemnation .................................... 6
Section 12.03 Landlord's and Tenant's Damages ......................... 6
ARTICLE XIII DESTRUCTION OR DAMAGE TO DEMISED PREMISES
Section 13.01 Reconstruction of Damaged Premises ...................... 6
Section 13.02 .......................................................... 6
Section 13.03 .......................................................... 7
Section 13.04 .......................................................... 7
Section 13.05 .......................................................... 7
Section 13.06 Subrogation ............................................. 7
ARTICLE XIV BANKRUPTCY OR INSOLVENCY
Section 14.01 Landlord's Option to Terminate Upon Insolvency of
Tenant or Guarantor Under State Insolvency Law or
Upon insolvency of Tenant or Guarantor Under Federal
Bankruptcy Act .......................................... 7
ARTICLE XV DEFAULT OF THE TENANT
Section 15.01 Right to Re-enter ....................................... 7
Section 15.02 Legal Expenses .......................................... 8
Section 15.03 Waiver of Jury Trial and Counterclaims .................. 8
Section 15.04 Curing of Tenant's Default .............................. 8
ARTICLE XVI TENANT'S PROPERTY
Section 16.01 Taxes on Leasehold ...................................... 8
Section 16.02 Notice by Tenant ........................................ 8
ARTICLE XVII QUIET ENJOYMENT
Section 17.01 Landlord's Covenant ..................................... 8
ARTICLE XVIII HOLDING OVER, SUCCESSORS
Section 18.01 Holding Over ............................................ 8
Section 18.02 Successors .............................................. 8
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ARTICLE XIX CERTAIN RIGHTS OF LESSOR WITH RESPECT TO THE LAND
Section 19.01 Easements and Utilities ................................. 9
ARTICLE XX MISCELLANEOUS
Section 20.01 Waiver .................................................. 9
Section 20.02 Subordination ........................................... 9
Section 20.03 Notices ................................................. 9
Section 20.04 Construction ............................................ 9
Section 20.05 Non-Liability ........................................... 9
Section 20.06 Net Lease ............................................... 9
Section 20.07 Financing and Tenant's Acknowledgement of Acceptance
of Premises ............................................. 9
Section 20.08 Accord and Satisfaction ................................. 10
Section 20.09 Captions and Section Numbers ............................ 10
Section 20.10 Partial Invalidity ...................................... 10
Section 20.11 No Option ............................................... 10
Section 20.12 Recording ............................................... 10
Section 20.13 Sale or Transfer of the Demised Premises ................ 10
Section 20.14 Liens ................................................... 10
Section 20.15 Attornment .............................................. 10
Section 20.16 Set-Off Statement ....................................... 10
Section 20.17 Entire Agreement ........................................ 10
Section 20.18 Brokerage ............................................... 11
Section 20.19 No Oral Changes ......................................... 11
Section 20.20 No Representations by Landlord .......................... 11
Section 20.21 Corporate or Partnership Tenant ......................... 11
Section 20.22 Damage From Roof Leaks .................................. 11
Section 20.23 Security Deposit ........................................ 11
Section 20.24 Administrative Charge ................................... 11
Section 20.25 Laws of the State of Florida ............................ 11
Section 20.26 Counterparts ............................................ 11
Section 20.27 Right to Plat ........................................... 12
Section 20.28 Radon Gas ............................................... 12
Section 20.29 Rider ................................................... 12
SIGNATURES ................................................................. 12
JURAT ...................................................................... 13
RIDER ...................................................................... 14
EXHIBIT "A" - LEGAL DESCRIPTION
EXHIBIT "B" - SITE PLAN
EXHIBIT "C" - TENANTS CONFIRMATION LETTER
EXHIBIT "D" - DESCRIPTION OF LANDLORD'S WORK
EXHIBIT "E" - SIGN CRITERIA
GUARANTY
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THIS LEASE made and entered into this 18th day of November 1994, by and between
MICHELE FERRERA, TRUSTEE OF THE MICHELE FERRERA TRUST DATED APRIL 4, 1972 AS
AMENDED, MICHAEL J. FERRERA, TRUSTEE OF THE MICHAEL J. FERRERA TRUST DATED JUNE
15, 1972 AS AMENDED, AUGUSTINE FERRERA, TRUSTEE OF THE AUGUSTINE FERRERA TRUST
DATED MARCH 17, 1972 AND LEE S. LASSER, TRUSTEE OF THE LEE S. LASSER TRUST DATED
AUGUST 25, 1972 AS AMENDED, d/b/a LYONS BUSINESS PARK, whose address is 6601 N.
Lyons Road, Coconut Creek, Florida 33073, Party of the First Part (hereinafter
sometimes designated as "Landlord") and
Robert L. McDowell
whose address is 6514 NW 36th Avenue
Coconut Creek, FL 33073
Party for the Second Part, (sometimes hereinafter designated as "Tenant").
W I T N E S S E T H:
ARTICLE I GRANT AND TERM
Section 1.01 Leased Premises
In consideration of the mutual premises, covenants and agreements herein
contained, the adequacy of which consideration is by both parties confessed and
acknowledged, and in further consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the Tenant to be
observed and performed, the Landlord leases to the Tenant, and the Tenant rents
from the Landlord, those certain premises now or hereafter to be erected on the
property hereafter described, located in Broward County, Florida, described as
containing 34 feet of frontage (measured from outside of exterior wall or center
of common partition as the case may be) and having an overall depth of 100 feet
(measured from outside of exterior wall to outside of exterior wall) for a total
of 3,400 square feet of ground floor area, which would include a portion of the
truck well area, designated "Leased or Demised Premises", and the same being
located within the Industrial Park property known and described as:
EXHIBIT "A" attached hereto and made a part hereof, and as more
particularly shown on Exhibit "B", together with the right to use
the areas outlined around said Leased or Demised Premises.
Landlord and Tenant agree that Exhibit "B" shows only the approximate
shape and dimensions of the proposed buildings in the Industrial Park, and
further agree that Tenant's consent shall not be required for any additions,
reductions or modifications thereto.
Section 1.02 Length of Term
To have and to hold, together with appurtenances, for a term of three (3)
years, upon the terms and conditions as herein set forth.
Section 1.03 Construction of Leased Premises
Landlord agrees prior to the commencement of the term of this Lease, at
Landlord's sole cost and expense, to construct on the site a building in which
the Demised Premises are to be located, in accordance with the outline
specification, where applicable, entitled "Description of Landlord's Work"
(Exhibit D) annexed hereto and made a part hereof, and it is understood and
agreed by Tenant that no minor changes from the plans that have been agreed upon
by and between the parties hereto, which may be necessary during the preparation
of the Demised Premises for Tenant or during construction, will affect or change
this Lease or invalidate same.
Section 1.04 Possession After Completion of Construction
Solely for the purpose of computing the term of this Lease, the
commencement date shall be deemed to be the first day of the month next
following the date when the premises are ready for occupancy. Landlord shall
from time to time during the course of construction, provide to Tenant
information concerning the progress of construction of said building and shall,
when construction progress so permits, notify Tenant in advance of the exact or
approximate date by which the Demised Premises will be ready for occupancy. It
is agreed that by occupying said premises as a Tenant, Tenant formally accepts
the same and acknowledges that the Demised Premises are in the condition called
for hereunder. The rentals herein reserved shall commence on the date when the
premises are ready for occupancy.
Tenant, prior to delivery of possession, shall be permitted to install
fixtures and other equipment so long as such activities do not interfere with
construction work, and it is agreed by Tenant that Landlord shall have no
responsibility or liability whatsoever for any loss of, or damage to, any
fixtures or other equipment so installed or left on the premises.
Section 1.05 Determination of Availability of Demised Premises
The Demised Premises shall be deemed as ready for occupancy when Landlord
shall have substantially completed construction of the said premises in
accordance with the Description of Landlord's Work as referred to in Section
1.03 of this Article, in accordance with all lawful statutes or ordinances and
regulations affecting said premises. However it shall not be required for
Landlord and/or Tenant to have obtained a Certificate of Occupancy for the
leased premises for the premises to be deemed substantially completed and ready
for Tenant's occupancy. If any disputes shall arise as to the premises being
ready for Tenant's occupancy, a certificate furnished by the architect in charge
so certifying shall be conclusive and binding of the fact and date upon the
parties.
Notwithstanding anything in the Lease to the contrary, Landlord and Tenant agree
that Tenant accepts the premises in as "AS IS, WHERE IS" condition.
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ARTICLE II RENT
Section 2.01 Payment
All rent and other charges payable to the Landlord under any provision of
this Lease shall be paid to the Landlord, or as the Landlord may otherwise
designate, in lawful money of the United States at the address of the Landlord
or at such other place as the Landlord in writing may designate, without any
set-off or deduction whatsoever, and without any prior demand therefor. In
addition to the payment of the Rent and other charges, the Tenant shall also pay
to the Landlord, at the time of payment of such Rent and other charges, all
sales, use or occupancy taxes payable by virtue of arty of such payments. Rent
for any period during the term hereof which is for less than one (1) month shall
be a prorated portion of the monthly installment.
Section 2.02 Minimum Rent
The fixed minimum annual rent during the term of this Lease shall be
payable by the Tenant in equal monthly installments on or before the first day
of each month in advance without any prior demand therefor and without any
deduction and set-off whatsoever, and shall be as follows:
1. The rent for the first twelve months shall be One thousand five hundred
fifteen and 83/100 (`$1,515.83) Dollars per month for a total of Eighteen
thousand one hundred eighty nine and 96/100 ($18,189.96) Dollars for the
twelve month period.
2. The rent for the next twelve months shall be One thousand six hundred
fifty seven and 50/100 ($1,657.50) Dollars per month for a total of
Nineteen thousand eight hundred ninety and 00/100 ($19,890.00) Dollars for
the twelve month period.
3. The rent for the next twelve months shall be determined by section 2.03
using year two as a base.
Section 2.03 Adjustment of Fixed Minimum Rent
The annual Fixed Minimum Rent shall be subject to periodical adjustment
(but never below the amount specified in the previous lease year) on the first
day of each Lease Period and on each anniversary thereafter. Landlord shall
notify Tenant of the adjustment upon Landlord's calculation of same but the
failure to do so within any specific time shall not be a waiver or release of
Landlord's right to collect/charge the increased minimum rent. The term "Index"
means the South Consumer Price index, All Items, For All Urban Consumers
(1982-84-100) published by the Bureau of Labor Statistics or other governmental
agency then publishing the Index (or if such Index is no longer published, the
Index of Consumer Prices in Miami most closely comparable to the Index). The
term "Base Number" means the Index number immediately preceding the month in
which falls the first day of the prior lease period, for which the rent is being
calculated. The term "Current Number" means the Index number immediately
preceding the month in which falls the date of commencement of the particular
Lease Period. If the latest Current Number exceeds the Base Number, then the
Fixed Minimum Rent for the next Lease Period shall be increased to an amount
which is the product obtained by multiplying the Fixed Minimum Rent set forth in
Section 2.02 of this lease by a fraction, the numerator of which fraction is
such latest Current Number and the denominator of which fraction is the Base
Number. Such increased Fixed Minimum Rent shall be effective throughout the
Lease Period next following such latest Current Number. The basic or minimum
rental for each year of the extended time shall not be less than the amount of
rent being paid during the prior lease year. As used herein, the term "Lease
Period" means the First Lease Period which is 12 months and each consecutive
period, except that if the commencement date of the Lease Term is a day other
than the first day of a calendar month, then the first Lease Period shall
include the number of days beginning with such commencement date and ending on
the last day of such month. This Section 2.03 shall apply to the third lease
period.
Section 2.04 Real Estate Taxes
For the purposes of this Section, the term "taxes" shall include all real
estate taxes, assessments (general and special) and other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen and unforeseen, and each and every installment
thereof, which shall or may during the lease term be levied, assessed, imposed,
become due and payable, or liens upon, or arise in connection with the use,
occupancy or possession of, or grow due or payable out of, or for, the building
or any part thereof, or the land (the "Parcel") upon which the building is
situated or any other improvements thereon. Tenant agrees to pay to Landlord
Tenant's share of taxes, as herein provided. Tenant's proportionate share of
taxes assessed with respect to all buildings in the Industrial Park shall be
determined by multiplying the amount of such taxes by a fraction, the
denominator of which shall be the rentable square foot area of all buildings
constructed in the Industrial Park upon which any such taxes are assessed and
the numerator of which shall be the total number of square feet of ground floor
area contained In the demised premises as set forth in Section 1.01 hereof.
Taxes shall be prorated as of the commencement date of the Lease upon the due
date basis of the appropriate taxing authorities.
In addition to the foregoing, should the State of Florida or any political
subdivision thereof or any governmental authority having jurisdiction thereover,
impose a tax and/or assessment (other than a franchise tax) upon or against the
rentals payable hereunder by Tenant or Landlord, either by way of substitution
for the taxes and assessments levied or assessed against such land and such
buildings, or in addition hereto, such tax and/or assessments shall be paid by
Tenant.
Landlord will estimate the obligations anticipated to be required to be
paid by Tenant to Landlord as provided in this Section 2.04 and Tenant shall pay
1/12 thereof in equal monthly installments, together with the payment of minimum
annual rent. In the event that the aggregate of Tenant's installments during the
year shall be less than the amount of the obligations due from Tenant, such
deficiency shall be paid to Landlord within fifteen (15) days after demand
therefor. If there shall have been an overpayment by Tenant, Tenant shall be
given a credit towards the next due payment of its share of taxes.
Notwithstanding anything in this Section 2.04 to the contrary, all costs
and expenses incurred by Landlord during negotiations for or contests of the
amount of the taxes shall be included with the term "taxes". In the event a
refund is obtained, Landlord shall credit a portion thereof to the next
installment of rent due from the Tenant in proportion to the share of such taxes
originally paid by Tenant from which the refund was derived.
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In addition to the foregoing, Tenant at all times shall be responsible for
and shall pay, before delinquency, all taxes levied, assessed or unpaid on any
leasehold interest, any right of occupancy, any investment of Tenant in the
Demised Premises, or any personal property of any kind owned, installed or used
by Tenant, including Tenant's leasehold improvements or on Tenant's right to
occupy the Demised Premises.
Section 2.05 Additional Rent
The Tenant shall pay as additional rent any money and charges required to
be paid pursuant to the terms of this Lease Agreement, whether or not the same
may be designated "additional rent". If such amounts or charges are not paid at
the time provided in the Lease, they shall nevertheless, if not paid when due,
be collectible as rent thereafter falling due hereunder, but nothing herein
contained shall be deemed to suspend or delay the payment of any amount of money
or charge at the time the same becomes due and payable hereunder, or limit any
other remedy of the Landlord.
Section 2.06 Past Due Rent
If Tenant shall fail to pay any rent or additional rent when the same
shall be due and payable, such unpaid amounts shall bear interest from the date
thereof to the date of payment at the rate of eighteen percent (18%) per annum.
ARTICLE III OPERATION AND MAINTENANCE OF COMMON AREAS
Section 3.01 Designation of Common Areas
For the purpose of this Article and wherever else used in this Lease, the
common area shall be defined as to include, by way of illustration and not
limitation, all parking areas, access roads and facilities which may be
furnished by Landlord in or near the Industrial Park, including the truckway, or
ways, driveways, pedestrian sidewalks, landscaped and planting areas, retaining
walls, fences, lighting facilities, and all other areas and improvements which
may be provided by the Landlord for the general use in common of the Tenants,
their officers, agents, employees and customers.
Section 3.02 Construction of Common Areas
Landlord agrees, at Landlord's sole cost and expense, to hardsurface,
properly drain, adequately light and landscape a parking area, or parking areas,
together with the necessary access roads within the limits of the Industrial
Park. Landlord hereby grants to Tenant and Tenant's employees, agents,
customers, and invitees the right, during the term hereof, to use, in common
with others entitled to the use thereof, the parking area or areas and access
roads within the limits of the Industrial Park. Landlord further agrees to
operate, manage and maintain, during the term of this Lease, all parking areas,
roads, sidewalks, landscaping, drainage and lighting facilities within the
Industrial Park property. The manner in which such areas and facilities shall be
maintained and the expenditures thereof shall be at the sole discretion of the
Landlord, and the use of such areas and facilities shall be subject to such
reasonable regulations as Landlord shall make from time to time.
Section 3.03 Tenant's Pro Rata Share of Expenses
Tenant agrees to pay, in addition to the rental set forth in Article II of
this Lease, a proportionate share of the cost of operation, lighting, cleaning,
line painting, policing and maintenance, including such replacement of paving,
curbs, walkways, landscaping, sprinkler system, and drainage and lighting
facilities as may from time to time be necessary, of all the common areas of the
Industrial Park, to which shall be added an amount equal to ten percent (10%)
thereof in full payment of all administrative costs in relation thereto. The
proportionate share to be paid by Tenant shall be computed on the basis that the
total floor area of the herein Demised Premises bears to the total floor area of
the Industrial Park as determined at the beginning of each calendar quarter.
Landlord will estimate the obligations anticipated to be required to be paid by
Tenant to Landlord as provided in this Section 3.03, and Tenant shall pay 1/12
thereof in equal monthly installments, together with the payment of minimum
annual rent. Landlord shall submit a statement showing in reasonable detail for
the period in question, all disbursements made in connection with the operation
and maintenance herein described. In the event that the aggregate of Tenant's
installments during the year shall be less than the amount of the obligations
due from Tenant, such deficiency shall be paid to Landlord within fifteen (15)
days after demand therefor. If there shall have been an overpayment by Tenant,
Tenant shall be given a credit towards the next due payment of its share of
expenses.
ARTICLE IV USE OF PREMISES
Section 4.01 Use of Premises
It is understood and agreed between the parties hereto that said premises
during the continuance of the Lease may be used and occupied only for
computer imaging and printing and wooden mailbox assembly,
and for no other purpose or purposes without the written consent of Landlord.
Tenant shall promptly comply with all laws, ordinances and lawful orders
and regulations affecting the premises hereby leased, and the cleanliness,
safety, occupation and use of same.
Section 4.02 Care of Premises
A. Tenant shall not perform any acts or carry on any practices which may
injure the building or be a nuisance or menace to other tenants in the
Industrial Park and shall keep the premises under its control, including the
sidewalks and landscaped areas adjacent to the premises, clean and free from
rubbish and dirt at all times, and shall store all trash and garbage within the
leased premises and arrange for the regular pickup of such trash and garbage at
Tenant's expense. Tenant shall not burn any trash or garbage of any kind in or
about the building. Tenant shall install beige or gray levelors in the Demised
Premises.
B. Tenant shall not keep on display any merchandise or signs on or
otherwise obstruct the sidewalks or areaways adjacent to the premises without
the written consent of the Landlord. Tenant shall not use or permit the use of
any portion of said premises as sleeping apartments, lodging rooms, or for any
unlawful purpose or purposes. Tenant shall maintain the windows in a neat and
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clean condition. Tenant shall not make any structural changes in the Demised
Premises without the written consent of Landlord. No animals shall be kept In
the leased premises. Tenant shall conduct business within the leased premises
and the Tenant cannot store any items outside the leased premises.
C. Environmental Responsibilities
(1) Lessee shall not use, store, generate, treat, or dispose or any
hazardous substance on the Premises, or cause, suffer or permit the same to be
done by any person without the prior written consent of Landlord, which consent
may be granted or withheld in Landlord's sole discretion. For purposes of this
section, the term "hazardous substance" means any substance, the manufacture,
use, treatment, storage, transportation, or disposal of which is regulated by
any law having as its object the protection of public health, natural resources,
or the environment, including, by way of illustration only and not as a
limitation, the following: the Resource Conservation and Recovery Act; the
Comprehensive Environmental Response, Compensation, and Liability Act; the Toxic
Substances Control Act; the Federal Water Pollution Control Act; and the Clean
Air Act; as each of such acts shall be amended from time to time.
(2) Lessee shall promptly supply to Landlord a copy of the reports of any
environmental audit or investigation at any time undertaken on the Premises or
adjacent property, all notices, demands, inquiries, or claims received from any
person or entity as a result of hazardous substances alleged to be on or
emanating from the Premises or adjacent property, and any notices, reports, or
applications for licenses, permits, or approvals submitted by or on behalf of
Tenant to any environmental regulatory agency affecting the Premises or adjacent
property.
(3) Landlord reserves the right (but shall not have the obligation) to
enter upon and inspect the Premises at any time, and from time to time, during
Tenant's business hours and, on reasonable notice, at other times. Such
inspection may include, without limitation, the taking and analysis of soil
borings, samples of ground water or surface water, installation of observation
wells, and investigation of the surface or subsurface of the Premises by
geophysical means. Tenant shall promptly furnish to Landlord any information
requested by or on behalf of Landlord concerning Tenant's operations on the
Premises and on adjacent property, whether or not such information is of a
proprietary nature,
(4) In the event that any hazardous substance is discovered to have been
released upon or from the Premises during the term of this Lease, whether such
discovery is made during the term of this Lease or at any time thereafter,
Tenant shall, at its sole cost and expense, take all steps necessary to remove
and properly dispose of such hazardous substance and cleanup or repair any
contamination or damage resulting therefrom, in full compliance with all
applicable laws and regulations and to the reasonable satisfaction of Landlord.
Tenant agrees to defend, indemnify and hold Landlord harmless from and against
any liabilities, including judgments, court costs, and actual attorney fees
claimed or asserted against or sustained by Landlord resulting from Tenant's
failure to fully comply with the provisions of this Section 4.02.
ARTICLE V UTILITY SERVICES
Section 5.01 Landlord's Obligation to Make Utility Services Available and Option
to Supply Such Services
Landlord agrees to provide and maintain the necessary mains and conduits
in order that water and sewer facilities, gas (if available) and electricity may
be available to the Demised Premises, and Tenant agrees to promptly pay for its
use of the same.
Section 5.02 Tenant's Obligation for Payment
The obligation of Tenant to pay for water, gas, if available, and
electricity, as herein provided, shall commence as of the date on which
possession of the Premises is delivered to Tenant as provided for in Article I,
Section 1.04 of this Lease, without regard to the formal commencement date of
this Lease, Landlord shall not be liable for damages or otherwise should the
furnishing of any services supplied by others to the Demised Premises be
interrupted by fire, accident, riot, strike, act of God, or the making of
necessary repairs or improvements or other cause beyond the control of Landlord.
To the extent said utilities in whole or in part are not furnished by Landlord,
Tenant covenants that it will maintain and pay for when due all utility
services.
ARTICLE VI MAINTENANCE OF LEASED PREMISES
Section 6.01 Landlord's and Tenant's Obligations for Maintenance
Landlord shall keep the four outer walls and roof of the Demised Premises
in good repair, except that Landlord shall not be called to make any such
repairs occasioned by the act of negligence of Tenant, its agents, or employees,
except to the extent that Landlord is reimbursed therefor under any policy of
insurance permitting waiver of subrogation in advance of loss. Tenant shall
notify Landlord of any repairs which are the responsibility of the Landlord to
perform. Landlord shall not be called upon to make any other improvements or
repairs of any kind upon said premises and appurtenances, and said premises and
appurtenances shall at all times be kept in good order, condition and repair by
Tenant, and shall also be kept in a clean, sanitary, and safe condition in
accordance with the laws of the State of Florida, and in accordance with all
directions, rules and regulations of the health officer, fire marshall, building
inspector or other proper officers of the governmental agencies having
jurisdiction, at the sole cost and expense of Tenant, and Tenant shall comply
with all requirements of law, ordinances and otherwise touching said premises.
Tenant shall permit no waste, damage or injury to said premises, and Tenant
shall at its own cost and expense replace any glass windows, doors, door
hardware and frames in the premises which may be broken. At the expiration of
the tenancy created hereunder, Tenant shall surrender the premises in good
condition and free from vermin, reasonable wear and tear, loss by fire or other
unavoidable casualty excepted. Notwithstanding anything in this Article
contained, there shall be no obligation on the part of Tenant to comply with any
of the laws, directions, rules and regulations referred to which may require
structural alterations, structural changes, structural repairs, or structural
additions, unless made necessary by act of work performed by Tenant, in which
event Tenant shall comply at its expense. By way of illustration and not
limitation it is specifically intended that Tenant will maintain all systems,
including plumbing, electrical, overhead doors, dock loaders, if provided, and
heating, ventilating, and air conditioning. Normal maintenance schedules and
regularly changing filters shall be performed by the Tenant.
Section 6.02 Abuse of Plumbing, Walls, Etc.
The plumbing facilities and adjoining or connecting sewer lines or mains
shall not be used for any other purpose than that for which they are
constructed, and no foreign substance of any kind shall be thrown therein, and
the expense of any breakage, stopage or damage resulting from a violation of
this provision shall be borne by Tenant, who shall, or whose employees, agents,
invitees, or licensees shall have caused it. The Tenant, its employees or
agents, shall not paint, alter or deface any walls, ceilings, partitions,
floors, wood, stone or iron work without the Landlord's written consent being
first obtained.
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ARTICLE VII SIGNS
Section 7.01
Tenant shall not erect or install any exterior or interior window or door
signs or advertising media or window or door lettering, or placards without the
previous written consent of Landlord. Tenant agrees not to use any advertising
media that shall be deemed objectionable to Landlord or other tenants, such as
loud speakers, phonographs, or radio broadcast in a manner to be heard outside
the leased premises. Tenant shall not install any exterior lighting or plumbing
fixtures, shades or awnings, or any exterior decorations or painting, or build
any fences or make any changes to the building exterior without the previous
written consent of Landlord. Notwithstanding anything herein or elsewhere to the
contrary contained, any sign(s) which Tenant may install in or about the demised
premises with the approval of Landlord either simultaneously with the execution
of this Lease Agreement or subsequently shall be removed at the termination of
this Lease and the Tenant shall restore the area where the sign was mounted to
its original condition.
ARTICLE VIII ALTERATIONS
Section 8.01
All alterations, additions, improvements and fixtures (other than trade
fixtures) which may be made or installed by either of the parties hereto upon
the premises and which in any manner are attached to the floors, walls or
ceilings or any extension thereof shall be the property of Landlord, and at the
termination of this Lease shall remain upon and be surrendered with the premises
as a part thereof, without disturbance, molestation or injury. Any floor
covering, irrespective as to manner affixed, shall be and become the property of
the Landlord absolutely; provided, however, that Landlord may designate by
written notice to Tenant those alterations, additions, improvements and
fixtures, which shall be removed by Tenant at the expiration or termination of
the Lease, and Tenant shall promptly remove the same and repair any damage to
the leased premises caused by such removal of any of the foregoing, to the
condition as when originally received by Tenant, reasonable wear and tear
excepted. Further, Tenant shall likewise remove its machinery and equipment at
the expiration or termination of this Lease and repair any damage to the leased
premises caused by such removal, restoring the premises to the condition as when
originally received by Tenant, reasonable wear and tear excepted.
ARTICLE IX INSURANCE AND INDEMNITY
Section 9.01 Covenant to Hold Harmless
Landlord shall be defended and held harmless by Tenant from any liability
for damages to any person or any property in or upon said premises and the
sidewalks, driveways and landscaped areas adjoining same, including the person
and property of the Tenant, and its employees and all persons in the building at
its or their invitation or with their consent. It is understood and agreed that
all property kept, stored or maintained in the Demised Premises shall be so
kept, stored or maintained at the risk of Tenant only. Tenant shall not suffer
or give cause for the filing of any lien against the Demised Premises.
Section 9.02 Fire Insurance Premium
Tenant shall not carry any stock of goods or do anything in or about said
premises which will in any way tend to increase the insurance rates of said
premises and in the buildings of which they are a part. Tenant agrees to pay, in
addition to its prorata share of all insurance costs as described in this Lease
Agreement, the total of any increase in premiums for insurance against loss by
fire that may be charged during the terms of this Lease on the amount of
insurance to be carried by Landlord on said premises and the buildings of which
they are a part, resulting from the business carried on in the leased premises
by Tenant, whether or not Landlord has consented to the same. If Tenant installs
any electrical equipment that overloads the lines in the herein leased premises,
Tenant shall at its own expense make whatever changes are necessary to comply
with the requirements of the Insurance Underwriters and governmental authorities
having jurisdiction.
Section 9.03 Tenant's Obligation to Carry Public Liability Insurance
Tenant shall, during the entire term hereof, keep in full force and effect
a policy of public liability insurance with respect to the Demised Premises and
the business operated by Tenant and/or any sub-tenants of Tenant in the Demised
Premises, in which both Landlord and Tenant shall be named as parties covered
thereby, or which provides equivalent protection to and is approved by Landlord,
and in which the limits of liability shall be not less than Five Hundred
Thousand Dollars ($500,000) per person and One Million Dollars ($1,000,000) for
each accident or occurrence for bodily injury and Two Hundred Fifty Thousand
Dollars ($250,000) for property damages.
Tenant shall furnish Landlord with a certificate or certificates of
insurance, or other acceptable evidence that such insurance is in force at all
times during the term hereof.
Section 9.04 Insurance Costs
A. Tenant shall pay to Landlord as additional rent during each lease year,
the cost of all of the insurance costs including by way of illustration and not
limitation, the cost of the fire and extended coverage insurance (Including
umbrella coverage and rental interruption insurance and Difference in Conditions
coverage, if any) on the full replacement value of the building and all
improvements thereon, payable by Landlord, in any lease year or portion thereof
following the Commencement Date and public liability insurance including
umbrella coverage as Landlord shall deem necessary and desirable during the term
of the Lease. For purposes of this Section, insurance costs shall include any
deductible required to be paid by any insurance policy in force for the leased
premises. Tenant hereby acknowledges and agrees to pay such deductibles upon
request by Landlord after any loss or damage to the leased premises.
B. Landlord will estimate the obligations anticipated to be required to be
paid by Tenant to Landlord as provided in Section 3.03 and Tenant shall pay 1/12
thereof in equal monthly Installments, together with the payment of minimum
annual rent. In the event that the aggregate of Tenant's installments during the
year shall be less than the amount of the obligations due from Tenant, such
deficiency shall be paid to Landlord within fifteen (15) days after demand
therefor. If there shall have been an overpayment by Tenant, Tenant shall be
given a credit towards the next due payment of its share of insurance costs. The
proportionate share to be paid by Tenant shall be computed on the basis that the
total floor area of the herein demised premises bears to the total floor area of
the Industrial Park as determined at the beginning of each calendar quarter.
Insurance shall be prorated as of the commencement date of the Lease on a due
date basis.
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ARTICLE X ASSIGNMENT AND SUBLETTING
Section 10.01
Tenant agrees not to assign or in any manner transfer this Lease or any
estate or interest therein without the previous written consent of Landlord, and
not to sublet said premises or any part or parts thereof, and Consent by
Landlord to one or more assignments of this Lease or to one or more sublettings
of said premises shall not operate to exhaust Landlord's rights under this
Article. In the event of any assignment or sublease of all or any portion of the
Premises where the rental or other consideration reserved in the sublease or by
the assignment exceeds the rental or prorata portion of the rental as the case
may be, for such space reserved in this Lease, Tenant agrees to pay Landlord
monthly, as additional rent, on the first day of each month, the excess of the
rental or other consideration reserved in the sublease or assignment over the
rental reserved in this Lease applicable to the subleased/assigned space.
Tenant acknowledges that Landlord selected Tenant in part on the basis of
Tenant's proposed use and occupation of the Premises, and agrees that Landlord
may withhold consent to any proposed sublease or assignment if the sub-tenant's
or assignee's business or proposed use of the Premises would be physically
injurious to the Building or would detract from the reputation of the Industrial
Park, if any, within which the Premises are located.
ARTICLE XI ACCESS TO PREMISES
Section 11.01 Right of Entry by Landlord
Landlord shall have the right to enter upon the leased premises at all
reasonable hours for the purpose of inspecting the same, or of making repairs,
additions or alterations to the Demised Premises or any property owned or
controlled by Landlord. If Landlord deems any repairs required to be made by
Tenant necessary, it may demand that Tenant make the same forthwith, and if
Tenant refuses or neglects to commence such repairs and complete the same with
reasonable dispatch, Landlord may make or cause such repairs to be made and
shall not be responsible to Tenant for any loss or damage that may accrue to its
stock or business by reason thereof, and if Landlord makes or causes such
repairs to be made, Tenant agrees that it will forthwith, on demand, pay to
Landlord the cost thereof with interest at eighteen percent (18%), and if it
shall default in such payment, Landlord shall have the remedies provided in
Article XV.
Section 11.02 Landlord's Right to Exhibit Premises
For a period commencing ninety (90) days prior to the termination of this
Lease, Landlord may have reasonable access to the premises herein demised for
the purpose of exhibiting the same to prospective tenants.
ARTICLE XII EMINENT DOMAIN
Section 12.01 Total Condemnation
If the whole of the premises hereby leased shall be taken by any public
authority under the power of eminent domain, then the term of this Lease shall
cease as of the day possession shall be taken by such public authority and the
rent shall be paid up to that day with a proportionate refund by Landlord of
such rent as may have been paid in advance.
Section 12.02 Partial Condemnation
If less than the whole, but more than 25% of the leased premises shall be
taken under eminent domain, Tenant shall have the right either to terminate this
Lease and declare the same null and void, or, continue in the possession of the
remainder of the leased premises, and shall notify Landlord in writing prior to
any such taking or Tenant's intention. In the event Tenant elects to remain in
possession, all of the terms herein provided shall continue in effect, except
that the minimum rent shall be reduced in proportion to the amount of the
premises taken and Landlord shall, at its own cost and expense, make all
necessary repairs or alterations to the basic building, front and interior work
as covered by Description of Landlord's Work attached hereto so as to constitute
the remaining premises a complete architectural unit.
Section 12.03 Landlord's and Tenant's Damages
All damages awarded for such taking under the power of eminent domain,
whether for the whole or a part of the leased premises, shall belong to and be
the property of Landlord whether such damages shall be awarded as compensation
for diminution in value to the leasehold or to the fee of the premises;
provided, however, that Landlord shall not be entitled to the award made to
Tenant for loss of business, depreciation to, and cost of removal of stock and
fixtures.
ARTICLE XIII DESTRUCTION OR DAMAGE TO DEMISED PREMISES
Section 13.01 Reconstruction of Damaged Premises
In the event the Demised Premises shall be partially or totally destroyed
by fire or other casualty insurable under full standard extended coverage
insurance, as to become partially or totally untenable, the same shall be
repaired as speedily as possible at the expense of Landlord, unless Landlord
shall elect not to rebuild as hereinafter provided, and a just and proportionate
part of the rent shall be abated until so repaired. The obligation of Landlord
hereunder shall be limited to the basic building and interior work as covered by
Description of Landlord's Work attached hereto. In no event shall Landlord be
required to repair or replace Tenant's merchandise, trade fixtures, furnishings
or equipment or any alterations or additions to the leased premises accomplished
by or on behalf of the Tenant. The obligations of Landlord hereunder shall be
conditioned upon Tenant's payment of any deductible required by the insurance
policy in force for the leased premises.
Section 13.02
If (i) either the Demised Premises or the building in which it is located
containing floor space (taken in the aggregate) shall be damaged to the extent
of more than 25% of the cost of replacement thereof, respectively, or (ii) the
proceeds of Landlord's insurance recovered or recoverable as a result of the
damage shall be insufficient to pay fully for the cost of replacement of so much
of the Demised Premises and/or the building in which they are located as was
included in the Landlord's Work provided In Section 1.03 hereof or (iii) the
Demised Premises or the building shall be damaged as a result of a risk which is
not covered by Landlord's insurance or (iv) the Demised Premises shall be
damaged in whole or in part during the last two years of the Lease Term or (v)
the building in which the Demised Premises are a part shall be damaged to the
extent of 50% or more of the cost of replacement thereof, whether or not the
Demised Premises shall be damaged; then, and in any of such events, Landlord may
terminate this Lease by notice given within ninety (90) days after such event
and upon the date specified in such notice, which shall not be less than
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thirty (30) days nor more than sixty (60) days after the giving of said notice,
this Lease shall terminate and come to an end and Tenant shall vacate and
surrender the Demised Premises. If the casualty, repairing or rebuilding shall
render the Demised Premises untenable in whole or in part, an equitable
abatement of the Fixed Minimum Rent and Additional Rent shall be allowed from
the date when the damage occurred until completion of the Landlord's repairs or
rebuilding or, in the event Landlord elects to terminate this lease, until said
date of termination, taking into account, among other things, the amount and
location of the floor space of the Demised Premises rendered untenable.
Section 13.03
If this Lease shall not be terminated as provided above, Landlord shall,
at its expense, proceed with the repair or restoration of the Demised Premises
and the building. All repairs and restoration of the Demised Premises not
included in Landlord's Work shall be performed by Tenant at its expense. All
salvage from repair or restoration work done at any time pursuant to this
Section shall belong to Landlord, who shall not be accountable therefor to
Tenant.
Section 13.04
The "cost of replacement" as such term is used in Section 13.02 above
shall be determined by the company or companies selected by the Landlord
insuring Landlord against the casualty in question, or, if there shall be no
insurance, then as the parties hereto shall agree, or, in the absence of an
insurance company determination or an agreement, as shall be determined by
arbitration in Broward County, Florida, in accordance with the provisions of
Section 682, Florida Statutes.
Section 13.05
If the Demised Premises and/or the building shall be damaged or destroyed
due to the fault and/or negligence of Tenant, its agents, employees or invitees,
Tenant shall at its expense, repair or restore the Demised Premises or building
and the Fixed Minimum Rent, Tax Rent and all other additional rents and charges
herein shall not abate.
Section 13.06 Subrogation
The Tenant shall be released from any liability resulting from damage by
fire or casualty (irrespective of the cause of such fire or casualty) upon the
express proviso that if at any time Landlord's insurers shall refuse to permit
waivers of subrogation, Landlord may in each instance revoke said waiver of
subrogation effective thirty (30) days from date of notice, unless within such
thirty (30) days prior, Tenant is able to secure and furnish to the Landlord
insurance in other companies with such waiver of subrogation. If Tenant can
secure such other Insurance, then the Landlord shall pay so much of the cost
thereof as Landlord was paying for its own insurance, and the Tenant shall pay
the remainder, if any.
ARTICLE XIV BANKRUPTCY OR INSOLVENCY
Section 14.01 Landlord's Option to Terminate Upon Insolvency of Tenant or
Guarantor Under State Insolvency Law of Upon Insolvency of Tenant
or Guarantor Under Federal Bankruptcy Act.
In the event the estate of Tenant created hereby shall be taken in
execution or by other process of law, or if Tenant or any guarantor of Tenant's
obligations hereunder ("guarantor") shall be adjudicated insolvent pursuant to
the provisions of any present or future insolvency law under the laws of any
state having Jurisdiction ("state law"), or if any proceedings are filed by or
against such guarantor or tenant under the Bankruptcy Code, or any similar
provisions of any future federal bankruptcy law, or if a receiver or trustee of
the property of Tenant or guarantor shall be appointed under state law by reason
of Tenant's or guarantor's insolvency or inability to pay its debts as they
become due or otherwise, or if any assignment shall be made of Tenant's or
guarantor's property for the benefit of creditors under state law, then and in
such event Landlord may at its option terminate this Lease and all rights of
Tenant hereunder by giving Tenant written notice of the election to so terminate
within thirty (30) days after occurrence of such event. In a reorganization
under Chapter 11 of the Federal Bankruptcy Code, the debtor or trustee must
assume this Lease or assign it within sixty (60) days from the filing of the
proceeding, or he shall be deemed to have rejected and terminated this Lease.
ARTICLE XV DEFAULT OF THE TENANT
Section 15.01 Right to Re-enter
In the event of any failure of Tenant to pay any rental due hereunder
within five (5) days after the same shall be due, or any failure to perform any
other of the terms, conditions or covenants of this Lease to be observed or
performed by Tenant or Guarantor for more than thirty (30) days after written
notice of such default shall have been mailed to Tenant, or if Tenant or
Guarantor shall become bankrupt or insolvent, or file any debtor proceedings, or
take or have taken against Tenant or Guarantor in any Court pursuant to any
statute either of the United States of any State, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of all or a portion of Tenant's or Guarantor's property, or if Tenant or
Guarantor makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, or if Tenant or Guarantor shall abandon said
premises, or suffer this Lease to be taken under any writ of execution, then
Landlord, besides other rights and remedies it may have, shall have the right of
reentry provided by Florida law which provides for notice to Tenant and a
judicial hearing. After notice and a final judgment, Landlord may remove all
persons and property from the leased premises and such property may be removed
and stored in a public warehouse or elsewhere at the cost of, and for the
account of Tenant, and all without liability to Landlord for any loss or damage
which may be occasioned thereby.
Should Landlord elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may from time to time without
terminating this Lease make such alterations and repairs as may be necessary in
order to relet the premises, and relet said premises or any part thereof for
such term or terms (which may be for a term extending beyond the term of this
Lease) and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable; upon each such reletting all
rentals received by Landlord from such reletting shall be applied, first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorney's fees and of cost of such alterations and
repairs; third, to the payment of rent due and unpaid hereunder, and the
residue, if any, shall be held by Landlord and applied in payment of future rent
as the same may become due and payable hereunder. If such rentals received from
such reletting during any month be less than that to be paid during that month
by Tenant hereunder. Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. If such rentals received from
such reletting during any month be more than that to be paid during that month
by Tenant hereunder, then such excess shall not benefit Tenant by reducing the
amount of any of Tenant's obligations due Landlord. Any amounts obtained by
reletting shall be for the sole benefit of Landlord. No such re-entry or taking
possession of said promises by Landlord shall be construed as an election on its
part to
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terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such previous
breach. Should Landlord at any time terminate this Lease for any breach, in
addition to any other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach, including the cost of recovering
the leased premises, reasonable attorney's fees, and including the worth at the
time of such termination of the excess, if any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the remainder of the
stated term over the amount, if any, actually received by Landlord from the
reletting of the leased premises, all of which amount shall be immediately due
and payable from Tenant to Landlord. In determining the rent which would be
payable by Tenant hereunder, subsequent to default, the annual rent for each
year of the unexpired term shall be equal to the average annual minimum rent
paid by Tenant from the commencement of the term to the time of default, or
during the proceeding three full calendar years, whichever period is shorter.
Whether or not forfeiture has been declared, Landlord will not be obligated or
responsible, in any way, for failure to release the Premises or, in the event
that the Premises are released, for failure to collect the rent under such
re-leasing. The failure of Landlord to re-lease all or any part of the Premises
will not release or affect Tenant's liability for rent or damages.
Section 15.02 Legal Expenses
In case suit shall be brought for recovery of possession of the leased
premises, for the recovery of rent or any other amount due under the provisions
of this Lease, or because of the breach of any other covenant herein contained
on the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred therefor,
including a reasonable attorney's fee.
Section 15.03 Waiver of Jury Trial and Counterclaims
The parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties any way
connected with this Lease relating to any monetary defaults. In the event
Landlord commences any proceedings for nonpayment of rent, minimum rent, or
additional rent, Tenant will not interpose any counterclaim of whatever nature
or description in any such proceedings. This shall not, however, be construed as
a waiver of the Tenant's right to assert such claims in any separate action or
actions brought by the Tenant.
Section 15.04 Curing of Tenant's Default
Notwithstanding anything herein contained to the contrary, if Tenant shall
be in default in the performance of any of the terms or provisions of this Lease
and if Landlord shall give to Tenant notice in writing of such default
specifying the nature thereof, and if Tenant shall fail to cure such default
within the time provided in Section 15.01 hereof, or immediately if such default
requires emergency action, Landlord may, in addition to its other legal and
equitable remedies, cure such default for the account of and at the cost and
expense of Tenant and the sums so expended by Landlord shall be deemed to be
additional rent and shall be paid by Tenant on the day when rent shall next
become due and payable.
ARTICLE XVI TENANT'S PROPERTY
Section 16.01 Taxes on Leasehold
Tenant shall be responsible for and shall pay before delinquency all
municipal, county or state taxes assessed during the term of this Lease against
any leasehold interest or personal property of any kind, owned by or placed in,
upon or about the leased premises by the Tenant.
Section 16.02 Notice by Tenant
Tenant shall give immediate notice to Landlord in case of fire or
accidents in the leased premises or in the building of which the premises are a
part, or of defects therein or in any fixtures or equipment.
ARTICLE XVII QUIET ENJOYMENT
Section 17.01 Landlord's Covenant
Upon payment by the Tenant of the rents herein provided, and upon the
observance and performance of all the covenants, terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the leased premises for the term hereby demised without hindrance
or interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under the Landlord, subject, nevertheless, to the terms
and conditions of this Lease.
ARTICLE XVIII HOLDING OVER, SUCCESSORS
Section 18.01 Holding Over
If Tenant remains in possession of the leased premises after the
expiration of this Lease without executing a new lease, it will be deemed to be
occupying the leased premises as a tenant from month to month, subject to all
the provisions of this Lease to the extent that they can be applicable to a
month to month tenancy, except that the minimum rental for each month will be
increased to an amount established by Landlord. The new monthly amount will be
established by written notice from Landlord to Tenant.
Section 18.02 Successors
All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors, and assigns of the said parties; and if
there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants, and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee has been approved by Landlord in writing as provided in Section
10.01 hereof.
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ARTICLE XIX CERTAIN RIGHTS OF LESSOR WITH RESPECT TO THE LAND
Section 19.01 Easements and Utilities
The Lessor shall have the right, without (lie consent of Lessee, to grant
to adjacent land owners, purchasers, Tenants or occupants or any governmental
agency or public or private utility company, including Lessor, at any time and
from time to time during the term of the Lease, as extended easements and rights
of ingress, egress, and common use and enjoyment with respect to the roads,
walks, unimproved portions of the land, water, sewage, telephone, gas and
electricity lines, and Lessor may at any time and from time to time grant
easements, public and private, for such purposes to itself and to others, and
relocate any easements now or hereafter affecting the land.
ARTICLE XX MISCELLANEOUS
Section 20.01 Waiver
One or more waivers of any covenant or condition by Landlord shall not be
construed as a waiver of a subsequent breach of the same covenant or condition,
and the consent or approval by Landlord to or of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent similar act
by Tenant.
Section 20.02 Subordination
Tenant hereby grants the right to Landlord to, and Landlord hereby
reserves the right to, subject and subordinate this Lease (at all times) to any
mortgage(s) or deed(s) of trust that may hereafter be placed upon the Demised
Premises and to any and all advances to be made thereunder and to the interest
thereon and all renewals, replacements and extensions thereof. Landlord may
execute and deliver any instrument or instruments subordinating this Lease to
any such mortgage or deed of trust without any further action or consent by
Tenant, and Tenant hereby irrevocably appoints the Landlord the attorney-in-fact
of the Tenant to execute and deliver any such instrument or instruments for and
in the name of the Tenant. Tenant additionally hereby grants to any first
mortgagee of the leased premises the right to subject and subordinate this
Lease (at all times) to any such first mortgage and to any and all advances to
be made thereunder and to the interest thereon and all renewals, replacements
and extensions thereof. Any such first mortgages may execute and deliver any
instrument or instruments subordinating this Lease to any such first mortgage
without any further action or consent by Tenant, and Tenant hereby irrevocably
appoints such first mortgagee the attorney-in-fact of the Tenant to execute and
deliver any such instrument or instruments for and in the name of the Tenant. In
confirmation of any such subordination, the Tenant shall promptly execute any
certificate that the Landlord or such first mortgagee may request.
Section 20.03 Notices
Whenever under this Lease a provision is made for notice of any kind, it
shall be deemed sufficient notice and service thereof if such notice to Tenant
is in writing, addressed to Tenant at the last known post office address or
office address of Tenant or at the leased premises, and sent by registered or
certified mail with postage prepaid, and if such notice to Landlord is in
writing, addressed to the last known post office address of Landlord and sent by
registered or certified mail with postage prepaid. Notice must be sent to but
one Tenant or Landlord where Tenant or Landlord is more than one person.
Section 20.04 Construction
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant. Wherever herein the singular number is
used, the same shall include the plural, and the masculine gender shall include
the feminine and neuter genders. In the event any language is deleted from this
Lease, said language shall be deemed to have never appeared and no other
implication shall be drawn therefrom.
Section 20.05 Non-Liability
Landlord shall not be responsible or liable to Tenant for any loss or
damage that may be occasioned by or through the acts or omissions of persons
occupying adjoining premises, if any, or any part of the premises adjacent to or
connected with the premises hereby leased or any loss or damage resulting to
Tenant or his property from burst, stopped or leaking water, gas, sewer or steam
pipes, or for any damage or loss or property within the Demised Premises from
any cause whatsoever.
Notwithstanding any provisions of this Lease to the contrary, Tenant
acknowledges and agrees that no personal liability of any kind under any of the
terms, conditions or provisions of this Lease shall attach to the Landlord
(including any joint venturer of the joint venture which is the Landlord
hereunder or any leasing agent, broker or other agent or representative of
Landlord) for the payment of any amounts payable under this Lease or for the
performance of any terms, conditions or provisions required to be performed by
Landlord under this Lease. If Landlord shall fail to perform any term, condition
or provision of this Lease required to be performed by Landlord and if as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution and levy of such judgment against the right, title and
interest of the Landlord in time building of which the Tenant's Demised Premises
are a part, and neither Landlord nor any of the joint venturers of the joint
venture which is the Landlord hereunder shall be personally liable for any such
judgment or monetary deficiency.
Section 20.06 Net Lease
It is the intent of the parties that the within Lease be a net, net, net
Lease.
Section 20.07 Financing and Tenant's Acknowledgement of Acceptance of Premises
Notwithstanding anything herein or elsewhere to the contrary contained.
A. The Landlord shall not be obligated to proceed with the construction of
the leased premises unless and until financing acceptable to Landlord is
obtained. Should such financing not be obtainable within six (6) months after
completion of final plans and specifications, Landlord may so notify Tenant in
writing, and this Lease shall thereupon cease and terminate, and each of the
parties hereto shall be released and discharged from any and all liability and
responsibility hereunder. If Landlord can obtain
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financing only upon the basis of modification of the terms and provisions of
this Lease, the Landlord shall have the right to cancel this Lease if the Tenant
refuses to approve in writing any such modifications within thirty (30) days
after Landlord's request therefor. If such right to cancel is exercised, this
Lease shall thereafter be null and void, any money or security deposited
hereunder shall be returned to the Tenant, and neither party shall have any
liability to the other by reason of such cancellation.
B. Tenant agrees to furnish Landlord, upon request and after Tenant has
taken possession of the Demised Premises, a letter addressed to Landlord's
mortgagee or financial institution, giving the information, as described in the
attached Exhibit "C".
Failure of Tenant to provide Landlord such a letter at the request of
Landlord, Landlord's mortgagee or financial institution at any time during the
lease term as above described, shall give Landlord the right to cancel this
Lease at that time upon five (5) days written notice to Tenant of such
cancellation, and the Tenant shall remain liable to the Landlord for any damages
sustained by the Landlord because of such failure by the Tenant.
Section 20.08 Accord and Satisfaction
No payment by Tenant or receipt by Landlord of a lessor amount than the
monthly rental herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this Lease provided.
Section 20.09 Captions and Section Numbers
The captions, section numbers, article numbers and index appearing in this
Lease are inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or intent of such sections or articles of this
Lease nor in any way affect this Lease.
Section 20.10 Partial Invalidity
If any term, covenant or condition of this Lease or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
Section 20.11 No Option
The submission of this Lease for examination does not constitute a
reservation of or option for the leased premises, and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord and
Tenant.
Section 20.12 Recording
This Lease shall not be recorded by the Tenant. However, it may be
recorded by Landlord at Landlord's option. If this Lease is recorded by Tenant
without the written consent of the Landlord, then this Lease may, at any time,
without notice and whenever the Landlord so elects, be declared by Landlord null
and void.
Section 20.13 Sale or Transfer of the Demised Premises
Upon any sale or transfer, including any transfer by operation of law, of
the Demised Premises, or the Industrial Park, Landlord shall be relieved from
all subsequent obligations and liabilities under this Lease as long as successor
Landlord assumes all of the obligations of the Lease.
Section 20.14 Liens
In the event a mechanic's lien shall be filed against the Demised Premises
or Tenant's interest therein as a result of the work undertaken by Tenant to
ready the Demised Premises for the opening of Tenant's business or as a result
of any repairs or alterations made by Tenant, Tenant shall, within ten (10) days
after receiving notice of such lien, discharge such lien, either by payment of
the indebtedness due the mechanic's lien claimant or by filing a bond (as
provided by statute) as security therefor. If Tenant shall fall to cause such
lien to be discharged upon demand, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same by paying the amount claimed to be due or by bonding or other proceeding
deemed appropriate by Landlord and the amount so paid by Landlord and/or all
costs and expenses, including reasonable attorney's fees, incurred by Landlord
in procuring the discharge of such lien shall be deemed to be additional rent.
Nothing in this Lease contained shall be construed as a consent on the part of
the Landlord to subject Landlord's estate in the Demised Premises to any lien or
liability under the Lien Law of the State of Florida.
Section 20.15 Attornment
In the event any proceedings are brought for foreclosure or in the event
of exercise of the power of sale under any mortgage made by Landlord covering
the leased premises, or areas surrounding same, Tenant shall, at the option and
request of purchaser, attorn to the purchaser upon any such foreclosure or sale
and recognize such purchaser as the Landlord under this Lease.
Section 20.16 Set-Off Statement
Tenant agrees within ten (10) days after any request therefor by the
Landlord to execute in recordable form and deliver to Landlord a statement, in
writing, certifying (a) that this Lease is in full force and effect, (b) the
date of commencement of the term of this Lease, (c) that rent is paid currently
without set-off or defense thereto, (d) the amount of rent, if any, paid in
advance, and (e) that there are no uncured defaults by Landlord or stating those
claimed by Tenant.
Section 20.17 Entire Agreement
This Lease shall constitute the entire agreement of the parties hereto.
All prior agreements, statements or representations between the parties and
their agents and/or employees, whether written or oral, are expressly merged
herein and if not contained in this Lease agreement shall be of no force or
effect. This Lease agreement shall not be modified, changed, altered, or
discharged whatsoever, excepting only by an agreement in writing and executed by
both Landlord and Tenant.
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Section 20.18 Brokerage
Tenant warrants that it has had no dealings with any broker or agent in
connection with this Lease, and Tenant covenants to pay, hold harmless and
indemnify Landlord from and against any and all costs, expense or liability for
any compensation, commissions and charges claimed by any broker or agent with
respect to this Lease or the negotiation thereof based upon or arising out of
any acts or dealings which Tenant or any representative of Tenant has had or is
claimed to have had with such broker or agent.
Section 20.19 No Oral Changes
This Lease may not be changed or terminated orally but only upon an
agreement in writing signed by the parties hereto.
Section 20.20 No Representations by Landlord
Landlord or Landlord's agents have made no representations, warranties or
promises with respect to the Demised Premises or the building except as herein
expressly set forth.
Section 20.21 Corporate or Partnership Tenant
If Tenant is or will be a corporation, partnership, or other entity, the
persons executing this Lease on behalf of Tenant hereby covenant and warrant
that Tenant tins been duly organized and is qualified or authorized to do
business in the State of Florida; and that the person(s) executing this Lease on
behalf of Tenant is (are) duly authorized to sign and execute this Lease.
Furthermore, prior to the Commencement Date, Tenant shall provide Landlord with
evidence of the foregoing which, where applicable, will include a certificate
from the State of Florida that Tenant is qualified to do business in that state,
and a certified resolution of the Board of Directors or partners of Tenant that
the person(s) executing this Lease on behalf of Tenant was (were) duly
authorized to do so. Furthermore, Tenant agrees to take any and all necessary
action to keep its existence as an entity in good standing throughout the term
of this Lease in the state in which Tenant has been organized and, if such state
is other than the State of Florida, to continue to be qualified to do business
in the State of Florida.
Section 20.22 Damage From Roof Leaks
As to Tenant's machinery, equipment and inventory:
Tenant understands and agrees that the Landlord shall have no liability
for any resultant damage from any leaks as a result of excessive rain, roofing
defects or hurricane damage, and that it shall be the responsibility of the
Tenant to protect itself as it sees fit concerning any leakage of water
whatsoever, either from the roof, leaking or burst pipes or from any other
source.
Section 20.23 Security Deposit
The Tenant has simultaneously herewith, deposited with Landlord, the sum
of One thousand five hundred fifteen and 83/100 Dollars ($1,515.83). Said
deposit shall be held by Landlord as security for the faithful performance by
Tenant of the terms, covenants, provisions and conditions of this Lease. It is
agreed that in the event Tenant defaults in respect to any of the terms,
covenants, provisions and conditions of this Lease, including but not limited to
the payment of rental, Landlord may, but in no event shall Landlord be required
to, use, apply or retain the whole or any part of the security so deposited to
the extent required for the payment of any rental or any other sum as to which
Tenant is in default or any sum which Landlord may expend or may be required to
expend, including attorney's fees, by reason of Tenant's default, in respect to
any of the terms, covenants, provisions and conditions of this Lease, including
but not limited to any damages or deficiencies in the reletting of the premises,
whether such damages or deficiencies accrued before or after summary proceedings
or other reentry by Landlord. Should the entire deposit, or any portion thereof,
be appropriated and applied by Landlord for the payment of overdue rental or
other sums due and payable to Landlord by Tenant hereunder, then Tenant shall,
upon the written demand of Landlord, forthwith remit to Landlord a sufficient
amount in cash to restore said security to the original sum deposited, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute a breach of this Lease. Said security deposit, if not applied
toward the payment of rent in arrears or toward the payment of damages suffered
by the Landlord by reason of the Tenant's breach of the covenants, conditions
and agreements of this Lease, is to be returned to the Tenant when this Lease
is terminated, according to these terms and in no event is said security
deposit to be returned until the Tenant has vacated the premises and delivered
possession to the Landlord upon the terms and conditions as provided and
required under this Lease. In the event of a sale of the land and building or
leasing of the same of which the premises form a part, Landlord shall have the
right to transfer the security to the vendee or the lessee, and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the security deposited hereunder and that neither Landlord nor its successors
or assigns shall be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance. Landlord shall not be required to segregate
Tenant's security deposit, nor shall Tenant be entitled to any interest on the
aforesaid deposit or security. It is expressly understood and agreed that the
insurance of a writ or restitution and the reentering of the premises by
Landlord for any default on the part of Tenant prior to the expiration of the
term, shall not be deemed such a termination of this Lease as to entitle Tenant
to the recovery of the said security and that the said deposit shall be retained
and remain in the possession of Landlord until the end of the term as
hereinbefore stated.
Section 20.24 Administrative Charge
All rent is due on the first of the month. Any rent paid after the fifth
of any month will be subject to a $150.00 a month service charge for
administrative expenses.
Section 20.25 Laws of the State of Florida
This Lease shall be governed by and construed in accordance with the laws
of the State of Florida.
Section 20.26 Counterparts
This Lease shall be executed by Landlord and Tenant in two counterparts,
each of which shall be deemed to be an original but both of which shall
constitute one and the same agreement. If requested by Landlord or any mortgagee
holding any mortgage encumbering the leased premises or any part thereof, Tenant
agrees to execute and deliver to Landlord or any such mortgagee within five (5)
days of such request, a duplicate original of this Lease together with all
exhibits, drawings, riders or amendments thereto.
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Section 20.27 Right to Plat
Landlord reserves the right to plat or otherwise subdivide the property
during the term of the Lease and Tenant agrees to cooperate with Landlord.
Section 20.28 Radon Gas
Florida State Law requires that every lease contain the following
statement:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit."
Section 20.29 Rider
A Rider is attached hereto and made part hereof.
IN WITNESS WHEREOF, Landlord and Tenant have signed their names and
affixed their seals the day and year first above written.
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF: LANDLORD:
LYONS BUSINESS PARK
/s/ Katie Ronan By: /s/ Michele Ferrara
- ---------------------------- --------------------------
Michele Ferrera, Trustee
/s/ Vickie Buzzell
- ---------------------------- By: /s/ Michael J. Ferrera
--------------------------
Michael J. Ferrera, Trustee
By: /s/ Augustine Ferrera
--------------------------
Augustine Ferrera, Trustee
By: /s/ Lee S. Lasser
--------------------------
Lee S. Lasser, Trustee
TENANT: Robert L. McDowell
/s/ Faye Harrison
- -------------------------- By: /s/ Robert L. McDowell
--------------------------
/s/ [ILLEGIBLE] Title:
- -------------------------- -----------------------
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INDIVIDUAL
STATE OF FLORIDA )
COUNTY OF BROWARD ) ss.
The forgoing instrument was acknowledged before me this 18 day of November 1994,
by Robert L. McDowell.
/s/ Faye Harrison
-----------------------------------
Faye Harrison
Print Type or Stamp Name of Notary
[OFFICIAL NOTARY SEAL
FAYE HARRISON
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC267883
MY COMMISSION EXP. MAR. 4, 1997] PERSONALLY KNOWN x
OR PRODUCED IDENTIFICATION__________
TYPE OF IDENTIFICATION PRODUCED__________
PARTNERSHIP OR CORPORATION
STATE OF )
COUNTY OF ) ss.
The foregoing was acknowledged before me this _____________day
of____________________19_____________, by______________
AS___________________________FOR________________________________
[SEAL]
-----------------------------------
Print, Type or Stamp Name of Notary
PERSONALLY KNOWN__________
OR PRODUCED IDENTIFICATION__________
TYPE OF IDENTIFICATION PRODUCED__________
STATE OF FLORIDA )
COUNTY OF BROWARD )ss.
The forgoing instrument was acknowledged before me this 18th day of November
1994, by MICHELE FERRERA, TRUSTEE, MICHAEL J. FERRERA, TRUSTEE, AUGUSTINE
FERRERA, TRUSTEE and LEE S. LASSER, TRUSTEE, d/b/a LYONS BUSINESS PARK. They are
personally known to me.
/s/ Vickie Buzzell
-----------------------------------
Print, Type or Stamp Name of Notary
[SEAL]
VICKIE BUZZELL
MY COMMISSION #CC290756 EXPIRES
June 17, 1997
BONDED THRU TROY FAIN INSURANCE, INC.]
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Lot 3, 4, & 5 of Lyons Business Park according to the Plat thereof as recorded
in Plat Book 137, Page 47 of the Public Records of Broward County.
7/15/93
<PAGE>
EXHIBIT "B"
SITE PLAN
["SITE PLAN" GRAPHIC OMITTED]
<PAGE>
EXHIBIT "C"
LEASE DATE:
LANDLORD:
TENANT:
PREMISES:
AREA: __________________ Sq. Ft.
The undersigned Landlord and Tenant of the above lease hereby certify to
________________________________________ as mortgagee, the following:
1. That the term of the lease commenced on _____________, 19__ and the
Tenant is in full and complete possession of the premises demised under the
lease and has commenced full occupancy and use of the premises, such possession
having been delivered by the landlord and having been accepted by the Tenant.
(May be omitted where term has not commenced and Tenant is not yet in
occupancy.)
2. That the lease calls for and Tenant is paying monthly rental
installments of $____________________ which commenced to accrue on the ______
day of _______________ 19__.
3. That no advance rental or other payment has been made in connection
with the lease, except rental for the current month and the last month of the
lease term (if applicable) and the rent has been paid to and including
______________, 19__.
4. That a security deposit in the amount of $_____________ is being held
by Landlord, which amount is not subject to any set off or reduction or to any
increase for interest or other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed to
date by Landlord or Tenant have been satisfied, free of defenses and set-offs
including all construction work in the demised premises.
6. That the lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice or both, would constitute an event of default; and that said
Lease has: (initial one)
( ) not been amended, modified, supplemented, extended, renewed or
assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
- --------------------------------------------------------------------------------
7. That the lease provides for a primary term of _______________________
19__; and that: (Initial one)
( ) neither the Lease nor any of the documents listed in Paragraph
6, (if any), contain an option for any additional term or terms.
( ) the Lease and/or the documents listed under Paragraph 6, above,
contain an option for ___________ additional term(s) of ____________ year(s) and
_____________ month(s) (each) at a rent to be determined as follows:
- --------------------------------------------------------------------------------
8. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
9. That this certification is made knowing that _________ is relying upon
the representations herein made,
TENANT:
DATED _____________________________ BY: ______________________________
TITLE:____________________________
LANDLORD:
DATED _____________________________ BY: ______________________________
TITLE:____________________________
<PAGE>
EXHIBIT "D" Page 1 of 2
RIDER - LEASE SPECIFICATIONS
(Description of Landlord's Work)
FOR LOTS 3, 4 AND 5 OF
LYONS BUSINESS PARK
A. Building Construction
1. Building Fill -- compacted to a density of 98 percent at optimum
moisture contact.
2. Foundations: Reinforced concrete (3,000 p.s.i) spread footings. Soil
bearing capacity assumed to be 2,500 psf.
3. Exterior Walls: 8" concrete masonry units with tie columns and tie
beams with painted stucco exterior finish, interior finish not
painted.
4. Structural Frame: A-36 steel roof framing made up of open web steel
bar joists bearing on steel girder joists supported by steel pipe
columns. Minimum clear height to be 18'-0" from finish floor slab
to underside of roof structure.
5. Floor slab: 4" concrete slab reinforced with 6" x 6" - 1.4/1.4
welded wire mesh on 6 mil. visqueen vapor barrier.
6. Roof Construction:
a) 22 ga. corrugated metal deck with 1" rigid insulation board
fastened to metal deck.
b) 4 ply built-up tar and gravel roof.
7. Doors:
a) Overhead doors: 12'w x 14'h at bays and 8'w x 8'h at truck
dock. Metal overhead rolling door with manual drive surface
mounted inside space.
b) Entrance Doors: 3'O" x 7'0" Gray tinted tempered glass set in
Satin aluminum frames.
c) "Rear Doors" 3'O" x 7'0" metal doors in hollow metal frames.
d) Interior Doors: Wood hollow core stain grade door set in wood
jamb. 3'O" x 6'8" x 1-3/8" at office and 2'8" x 6'8" x 1-3/8"
at toilets.
8. Interior Partitions: Building C = 9'O" high and Building F and C =
8'O" high constructed from 3-5/8" galvanized metal studs with top
and bottom cap .25 gauge thickness. Studs to be placed 24" o.c.
Finish on walls to be 1/2" gypsum wallboard, joints to be finished
with 2" joint tape covered with 3 coats of spackling compound sanded
smooth. 3-1/2" batt insulation at perimeter interior partitions.
9. Toilet Facilities: Each toilet facility shall have 1 water closet, 1
lavatory. 1-18" x 24" plate glass mirror, 1 paper holder. Floor
finish shall be vinyl tile, walls to be painted dry wall and ceiling
to be acoustical tile.
1 toilet facility per bay shall conform to the American National
Standards "Specifications for Making Buildings and Facilities
Accessible to, and Usable by, the Physically Handicapped" ANSI A
117.1.
<PAGE>
EXHIBIT "D" Page 2 of 2
Description of Landlord's Work
FOR LOT 3, 4, AND 5 OF
LYONS BUSINESS PARK
10. Office Area Finishes:
a) Walls, 2 coats of interior type flat latex paint.
b) Doors and Frames: 2 coats semi-gloss paint or stain.
c) Flooring: carpet allowance of $9.00 s.y.
d) Base: 4" vinyl or rubber.
e) Ceiling: 2' x 4' x 5/8" mineral fiber board White flush type,
with fissured face. Runners and edge moldings to be 5/8" x 6"
fiberglass batt insulation above ceiling. Ceiling height at
Building C is 9' and at Building F and C is 8'.
11. Hardware:
a) Entrance Doors to have double cylinder dead bolt lockset with
interior thumb turn, push/pull bar, automatic closer and
offset pivot hinges. All finishes to match finish of door
frame.
b) Interior Door - 1 pr. at 3 1/2" x 3 1/2" antique brass finish
mortise type butts with one Schlage or equal F series tulip
antique brass finish passage hardware per door and one door
stop.
c) Rear Door - 1 1/2" pr. at 4 1/2" x 4'1/2" paint grade mortise
type butts with double cylinder dead bolt with 1" throw.
d) Washroom Doors with privacy HDW.
12. Plumbing -- Exterior lines all to be polyvinyl chloride type (PVC).
Interior waste and vent lines to be PVC. Interior water distribution
to be copper pipe.
13. HVAC -- Air conditioning to be provided by split package with the
compressor mounted on steel curbs set on the roof, and the air
handler suspended from the roof, above the office area. A/C supplied
at 1 ton/400 s.f. of office space. Heating will be accomplished by
heat strips in air handling unit. Ductwork to be standard fiberglass
foil-clad. One 1/3 h.p. ventilator exhaust fan in shop area.
14. Electrical Service -- Individual meters, 200 amp 3 phase service for
each bay. Lighting is to be provided in the office space by 2' x 4'
lay in 4 lamp florescent fixtures and in warehouse area by 1' x 8'
lamp florescent fixtures mounted to underside of roof structures.
15. Water Service - 3/4' supply with 5/8' meter - each bay is
individually metered.
16. Accessories - Shop area 3' x 3' white translucent skylights.
17. The plans for this premises are Job No. 9101, dated 1/17/92, drawn
by Perez & Associates.
<PAGE>
EXHIBIT "E"
SIGN CRITERIA
LOCATION: Lyons Business Park
6601 Lyons Road
Coconut Creek, Florida 33073
EXTERIOR BUILDING SIGN: All signs shall be fabricated identically using
the following construction specifications:
1) All sign layouts must be approved by
landlord before installation. Sketch and
specifications must be submitted.
2) All live sign areas are restricted in size
to allow perimeter air space where no sign
element can be placed
3) All signs to consist of individual molded 3
dimensional (not flat) plastic letters
outfitted with studs and perforated metal
pads for cementing onto steel sign band. A
silicone adhesive and sticky back tape must
be used to allow for removal of letters when
necessary. Perforated pads must be adjusted
to allow a minimum of 1/8" projection from
back of letters to wall (See Diagram B)
4) Tenant may choose from a variety of letter
styles available and the color must be
white.
5) Logos and company emblems may be used as
long as they conform to these general
construction specifications and do not
exceed sign "size" regulations
<PAGE>
EXHIBIT "E-1"
["SIGN ELEVATIONS" GRAPHIC OMITTED]
SIGN ELEVATIONS
SIGN NOTES:
20" MAXIMUM WHITE HELVETICA STYLE
LETTERS, NON ILLUMINATED
SIGN AREA SHALL NOT EXCEED AREA INDICATED
WITHIN DASHED AREAS OF SIGN BAND, LOGOS INCLUDED
SIGNS SHALL CONSIST OF INDIVIDUAL MOLDED
3 DIMENSIONAL (NOT FLAT) PLASTIC LETTERS. USE
STUDS AND PERFORATED METAL PADS FOR
CEMENTING TO EXISTING STEEL SIGN BAND WITH
SILICONE ADHESIVE TO ALLOW FOR REMOVAL OF
LETTERS WHEN NECESSARY.
PERFORATED PADS MUST BE ADJUSTED TO ALLOW
FOR A MINIMUM OF 1/8" PROJECTION FROM BACK OF
LETTERS TO SIGN BAND.
["DIAGRAM B" GRAPHIC OMITTED]
<PAGE>
Exhibit 10.41
[LOGO](R)
Apple Commercial Credit Catalog Business Lease Agreement
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
- --------------------------------------------------------------------------------
Lessee (Complete Legal Name): 1199 MAC, INC. Lease Number: 469759
DBA: ELECTRONIC COMPUTER IMAGING
- --------------------------------------------------------------------------------
Billing Address: 6601 LYONS RD C2
- --------------------------------------------------------------------------------
City: COCONUT CREEK County: BROWARD State: FL Zip: 33073
- --------------------------------------------------------------------------------
Area Code/Phone No. 9544299603 Area Code/Fax No. 9545707808
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION
- --------------------------------------------------------------------------------
"Equipment" shall mean all goods described herein and/or listed on the
attached document marked Schedule A.
- --------------------------------------------------------------------------------
(4) 32 MB DIMM 4X64 168 PIN 70NS. RADIUS THUNDERPOWER 1920 PCI VIDEO CARD. APPLE
- --------------------------------------------------------------------------------
MULTIPLE SCAN 20INCH MONITOR. APPLE LASER WRITER 12/640 PS PRINTER. MINOLTA
- --------------------------------------------------------------------------------
QUICKSCAN 35. FASTMAC V.34 33.6 FAXMODEM EXT.. APPLE EXTENDED KEYBOARD II.
- --------------------------------------------------------------------------------
MEMORY CONFIG.. APPLE POWERMAC 9500/200E 32/2GB 8XCD. EXP. CARD CONFIG.
- --------------------------------------------------------------------------------
Your end of lease term option allows you to purchase the Equipment for 10%
BUYOUT
- --------------------------------------------------------------------------------
TERMS & CONDITIONS
- --------------------------------------------------------------------------------
INITIAL TERM LEASE PAYMENT ADVANCE PAYMENT
36 Months $ 516.56 $ 0
- --------------------------------------------------------------------------------
In consideration of Lessor's purchase of the Equipment, selected by Lessee
without Lessor's assistance, Lessee leases from Lessor the Equipment pursuant to
all terms and conditions of this Agreement. The Equipment is leased exclusively
for Lessee's established business purposes and not for personal, family, or
household purposes. Lessee agrees that this lease is set up to work as a net
lease in which Lessee will pay all costs connected with the Lease and the
Equipment, including taxes (e.g., property, sales and use taxes), insurance,
repairs, maintenance, shipping, termination fees, collection costs, bad check
charges, reasonable attorney's fees, and other expenses normally paid in a net
lease. Lease payments shall be increased by any expense Lessor incurs to
preserve the Equipment or to pay taxes, insurance, repairs, maintenance, liens,
assessments or any other amount necessary to preserve Lessor's rights. For any
lease and other payment not received by Lessor when due, Lessee shall pay a late
charge, as liquidated damages and not as interest of $10/dollar for each late
payment, or when less, the maximum allowed by law. Each payment received, at
Lessor's discretion, shall be applied first to the oldest amount due. Any
advance payments shall be held as a non-refundable deposit, which shall not bear
interest and shall be co-mingled with other funds. Lessee agrees to pay Lessor's
one-time standard documentation fee to be billed with the first lease payment to
cover account-setup costs. Should Lessee be entitled to revoke its equipment
acceptance, Lessee agrees to indemnify Lessor for any payments made by Lessor in
reliance thereon. If Lessor elects to make filings of financing statements,
Lessee agrees to execute all required documents, and authorizes filings without
Lessee's signature where allowed by law, and if a signature is required, Lessee
appoints Lessor as Lessee's attorney in fact to execute all filings. The Lessee
hereby waives the right to receive any verification statements or financing
statements. Lessee hereby grants Lessor a security interest in all Equipment,
including proceeds, deposits, and products, but in no case shall this grant or
any filing be deemed to contravene the `true-lease' status of this Lease.
EXCEPT AS TO QUIET ENJOYMENT, LESSOR MAKES ABSOLUTELY NO WARRANTIES, EXPRESSED
OR IMPLIED, INCLUDING NO WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE. Lessee agrees to look to vendor for any warranties. Lessee
shall make any claim arising out of Equipment defect solely against the vendor,
and any such claim is waived as to Lessor. All warranties from the vendor to
Lessor are hereby assigned for the term of the Lease to Lessee for Lessee's
exercise at Lessee's expense. IN NO CASE SHALL LESSOR BE LIABLE FOR SPECIAL,
INDIRECT, OR CONSEQUENTIAL DAMAGES. Time is of the essence and Lessee agrees to
make payments to Lessor when due, unconditionally and without abatement or
offset for any cause and regardless of any problems with the Equipment or
vendor. Payment is due in advance on the same date each month as set by Lessor
upon verification of the equipment delivery. Further, Lessee indemnifies Lessor
against loss or claim arising out of Equipment's defect, use, or operation, and
whether arising out of breach of contract, tort, or strict or product liability.
LESSEE AGREES NOT TO MOVE THE EQUIPMENT OR TO TRANSFER, SELL, SUBLEASE, OR
ENCUMBER EITHER THE EQUIPMENT OR ANY RIGHTS UNDER THIS LEASE WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR, NOT TO BE UNREASONABLY WITHHELD. LESSOR MAY, AT ITS
OPTION, FREELY ASSIGN ITS RIGHTS AND INTERESTS UNDER THIS LEASE WITHOUT NOTICE
TO OR CONSENT OF LESSEE.
Lessor is the sole and absolute owner of the Equipment, and may inspect the
Equipment, affix and display notice of ownership. Lessee shall be solely
responsible for the installation, operation, and maintenance of the Equipment,
shall keep it in good condition, and shall use and operate it in compliance with
applicable law. At the end of Lease, subject to any purchase option and upon
Lessee request, Lessor will designate the return location and Lessee will return
Equipment at its expense in the same condition as at Lease commencement
excepting only reasonable wear and tear and with all original manuals,
attachments and accessories. If Equipment is not returned at the end of the
Lease, Lessee shall be liable for continuing lease payments at the original rate
for each month, or part thereof, that the Equipment has not been returned to
Lessor's possession. Until Lessee has returned the Equipment to Lessor, Lessee
bears all risk of loss or damage to or from the Equipment, regardless of how
arising and shall insure such risk, naming Lessor as a loss payee and additional
insured, for at least all remaining lease payments plus the Equipment's fair
market value. Lessee agrees to furnish a Certificate of insurance as proof of
insurance for the term of the Lease. Because of increased credit risk when the
Lessee fails to provide insurance, Lessee agrees to pay each month to Lessor a
risk charge stipulated and liquidated at 125% of original Equipment cost until
Lessor receives a proper Certificate of Insurance. This risk charge is not
payment for insurance benefits and is not in lieu of Lessee's obligation to
purchase insurance. If Lessee should default in any obligation under this
Agreement, Lessor shall have the right to collect lost tax benefits and all
contractual payments and to exercise any or all of the following: 1) Accelerate
without notice all payments provided for in the Agreement, 2) Immediately retake
possession of the Equipment, which shall always remain Lessor's personal
property whether or not affixed to realty, 3) Collect all cost of collection,
including reasonable attorney's fees, and 4) Exercise all other remedies at law
or equity. Lessor, at its discretion, shall hold for Lessee's account or dispose
of returned or repossessed Equipment, and shall credit to Lessee's account any
excess receipts over the Equipment residual value belonging to Lessor and over
the expenses of retaking and disposing of Equipment. Lessor's action or failure
to act on any one remedy shall not constitute an [ILLEGIBLE]. The provisions of
this Agreement are severable if unenforceable. Each accelerated sum shall be
discounted to the date of default at a rate of 6% per annum. Any action be
Lessee against Lessor for misrepresentation, product liability, breach of
warranty, default, and any other claim whatsoever shall be commenced within one
year after the cause of action arises or be forever barred. THIS LEASE AGREEMENT
SHALL BE DEEMED FULLY EXECUTED AND PERFORMED IN THE STATE OF MICHIGAN AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS THEREOF, AND THE
PARTIES HERETO EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY JURISDICTION.
AGENCY DISCLAIMER: Lessee acknowledges that neither Vendor nor any Equipment
salesperson is an agent of Lessor nor are they authorized to waive or alter the
terms of this Agreement. Their representations in no way affect the Lessee's or
Lessor's rights and obligations as herein set forth.
- --------------------------------------------------------------------------------
Signature Here and Initial Below.*
ROBERT MCDOWELL
By: --> X /s/ Robert McDowell
- --------------------------------------------------------------------------------
READ CAREFULLY BEFORE SIGNING
THIS LEASE AGREEMENT IS NON-CANCELLABLE and it consists of all terms herein.
THIS IS THE FULL AND FINAL AGREEMENT, MERGING ALL PRIOR UNDERSTANDINGS, AND IT
CANNOT BE MODIFIED OR TERMINATED EXCEPT BY A WRITTEN AGREEMENT SIGNED BY LESSEE
AND BY A CORPORATE OFFICER OF LESSOR. ALL EQUIPMENT IS DEEMED ACCEPTED UNLESS
LESSOR RECEIVES WRITTEN NOTICE OF REJECTION FROM LESSEE WITHIN THIRTY (30) DAYS
OF EQUIPMENT DELIVERY.
- --------------------------------------------------------------------------------
*Acknowledged and Accepted (initial) --> X /s/ Robert McDowell
- --------------------------------------------------------------------------------
ACCEPTED BY LESSOR: Apple Commercial Credit
BY: DATE:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
- --------------------------------------------------------------------------------
In consideration of the Lessor leasing to the Lessee and other good and valuable
consideration, the receipt of which is hereby acknowledged, the undersigned
personally and unconditionally guarantees payment and performance of, and as a
primary debtor agrees to be jointly and severally liable for, without becoming
entitled to the benefits of, all terms and conditions of this Lease Agreement
until all obligations under the Lease Agreement are fulfilled including payment
of collection costs and lawyer's fees. LESSOR MAY PROCEED AGAINST THE
UNDERSIGNED IN THE FIRST INSTANCE WITHOUT RESORTING TO OTHER REMEDIES, AND THE
UNDER SIGNED WAIVES ANY STATUTORY OR OTHER RIGHT TO REQUIRE OTHERWISE. The
undersigned waives exoneration by election of remedies, by loss of subrogation
or by release or compromise of Lessee, and waives notice of any settlement,
impairment, substitution, dishonor, modification, amendment or extension under
the Lease Agreement and waives demand, protest, presentment and all related
notices. THIS GUARANTEE IS NON-CANCELLABLE.
- --------------------------------------------------------------------------------
Signatures: Each individual (No Title) with full joint and several liability.
- --> X /s/ Robert McDowell Soc. Sec. # ###-##-####
- --------------------------------------------------------------------------------
X Soc. Sec. #
- --------------------------------------------------------------------------------
[ILLEGIBLE] Apple and the Apple logo are registered trademarks of Apple (Z)
Computer, Inc. Apple Commercial Credit is administered by
[ILLEGIBLE] Commercial Credit Corporation.
<PAGE>
Exhibit 10.42
- --------------------------------------------------------------------------------
LEASE AGREEMENT
IKON Capital P.O. Box 9115 Macon, GA 31208-9115 800-800-1060
- --------------------------------------------------------------------------------
Lease Agreement Lease Number 254623 99.44
Thank you for choosing IKON! This lease agreement has been written in clear,
easy to understand language. Please take time to review the terms. If you have
any questions, please ask us. When we use "you" or "your", we are referring to
you, our customer. When we use "IKON", we are referring to IKON Office
Solutions, one of the largest distributors of the office solutions in the world.
When we use "we", "us", and "our", we are referring to to IKON Capital, owned by
IKON and created exclusively to support them. IKON is committed to providing you
quality service!
CUSTOMER INFORMATION
================================================================================
Customer Location
Full Legal Name /s/ Magnum Digital Services
- --------------------------------------------------------------------------------
Address 6601 Lyons Rd
- --------------------------------------------------------------------------------
Coconut
City Creek County Broward State FL Zip 33073
- --------------------------------------------------------------------------------
Customer Billing Contact: Bob McDowell
Customer Billing Address (if different)
Full Legal Name Magnum Digital Services
- --------------------------------------------------------------------------------
Address 6601 Lyons Rd
- --------------------------------------------------------------------------------
Coconut
City Creek County Broward State FL Zip 33073
- --------------------------------------------------------------------------------
Phone: (954) 570-7877 Fax: ( )
-------------- -------------------------------------------------------
<TABLE>
<CAPTION>
EQUIPMENT DESCRIPTION
==========================================================================================================================
Quantity Description, Make, Model & Serial Number Quantity Description, Make, Model & Serial Number
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Savin 55201 BVN1201UB920 1 Printcontroller/BU2R0G
- --------------------------------------------------------------------------------------------------------------------------
1 [ILLEGIBLE] Feeder/BVNF0112VROF 1 Copy Memory/BU2M03
- --------------------------------------------------------------------------------------------------------------------------
1 [ILLEGIBLE]/[ILLEGIBLE] 1 [ILLEGIBLE]/F32M12
- --------------------------------------------------------------------------------------------------------------------------
1 [ILLEGIBLE]/BU2C01 1 JetDirectx/BC2I18
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAYMENT SCHEDULE
==========================================================================================================================
Minimum Lease Term: Payment Due: Monthly Payment Advanced Payment: $381.60 Documentation Fee:
-------
<S> <C> <C> <C> <C>
Monthly ________ Without Sales, Use, and (Tax Included by Check# 09184 $ --
48 Other___________ Property Tax |X| First Month's Lease Payment
Step $ 360.00 ___ Other _____________________
(See Addendum)__
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PROVISIONS:
- --------------------------------------------------------------------------------
Sales Tax Exempt |_| YES (Attach Exemption Certificate)
|_| NO
Customer Purchase Order #_____________ (Attach copy of PO)
TERMS AND CONDITIONS
================================================================================
(1) Lease Agreement: You agree to lease from us the Equipment listed above.
THIS LEASE IS NON-CANCELABLE. You agree to all of the terms and conditions
contained in this Lease. You agree this Lease is for the minimum lease
term indicated above. You also agree that the Equipment will be used for
business only, and not for personal, family or household purposes. Our
acceptance of this Lease is indicated by our leasing manager's signature.
(See reverse side for more terms and conditions.)
AUTHORIZED SIGNER
================================================================================
THE PERSON SIGNING THIS LEASE ON BEHALF OF THE CUSTOMER SPECIFICALLY
REPRESENTS THEY HAVE THE AUTHORITY TO DO SO.
|X| /s/ Robert M. [ILLEGIBLE]
Date 11/21/97
- -----------------------------------
Printed Name
- -----------------------------------
Title
DELIVERY AND ACCEPTANCE
================================================================================
You certify that all the Equipment described above has been delivered and is
accepted. You acknowledge that such Equipment is in good condition and is
performing satisfactorily.
|X| /s/ Robert M. [ILLEGIBLE] Date
- -----------------------------------
Printed Name
- -----------------------------------
Title
<PAGE>
2. Ownership of Equipment: We are the sole owner and title holder to the
Equipment.
3. Taxes and Filing Costs: In addition to lease payments, you agree to pay
all taxes, fees, and filing costs related to the use of the Equipment,
even if billed after the end of the Lease. We will file property tax
returns and bill you as soon as an invoice from the local jurisdiction is
received. If we are required to pay property tax, you agree to reimburse
us. If you are required to file and pay the taxes directly to the tax
collector, we will notify you in advance in writing.
4. UCC Filing: You authorize us or IKON to sign any documents in connection
with the Uniform Commercial Code filing on your behalf. You authorize us
to insert the serial number(s) of the Equipment in this Lease (including
any schedules) and in any filings.
5. Agency: You agree that neither IKON nor any of its employees are our
agents.
6. Liability and Insurance: You are responsible for any losses or injury
caused by the Equipment. You promise to keep the Equipment fully insured
against loss until the Lease is paid in full and maintain insurance that
protects us from liability for any damage or injury caused by the
Equipment or its use. You promise to provide us evidence of the insurance,
showing us as the loss payee and additional insured, upon request. If you
fail to provide such evidence, you authorize us to obtain coverage on your
behalf. We may file claims and endorse insurance checks on your behalf.
You must continue to make payments until the Lease is paid off by the
insurance proceeds.
7. Indemnity: We are not responsible for any losses or injuries caused by the
installation or use of the Equipment. You agree to reimburse us for and
defend us against any claims, for losses or injuries caused by the
Equipment, unless due to our gross negligence or willful misconduct.
8. Warranties: We pass to you, without recourse, the benefits of all
warranties made by IKON or the manufacturer to us as equipment owner. YOU
ARE LEASING THE EQUIPMENT FROM US "AS IS". WE MAKE NO WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE OR
FOR A PARTICULAR PURPOSE. You agree we are not responsible for repairs,
service or defects.
9. Renewal: After the minimum term or any extension, this Lease will renew on
a month-to-month basis unless you notify us in writing at least 30 days
prior to the expiration of the new minimum term or extension. You must pay
any additional lease payments due until the Equipment is received in good
working order by IKON or its agents. So long as replacement equipment is
selected from IKON, shipping charges within the territory of the IKON
supplier from which you have selected the replacement equipment will be
borne by that IKON supplier.
10. Other Rights: You agree that our delay, or failure to exercise any rights,
does not prevent us from exercising them at a later time. If any part of
this Lease is found to be invalid, then it shall not invalidate any of the
other parts and the Lease shall be modified to the minimum extent as
permitted by law.
11. Entire Agreement: This Lease represents the entire agrement between us and
you. Neither of us will be bound by any amendment, waiver, or other chane
unless agreed to in writing and signed by both parties. Except for
identifying the goods, services, or software ordered, the price(s), and
the quantity(ies), the terms and conditions of the purchase order, or
other ordering documents you will not modify or effect this Lease, or have
any other legal effect whether issued or signed before, on, or after the
date of this Lease.
12. Lease Payments: Payments will begin on the agreement date or delivery
date, whichever is later. You agree to pay us the lease payment when due,
and if any payment is more than ten days late you agree to pay a fee of 5%
or $5 (whichever is greater) on the overdue amount. You also agree to pay
$25 for each check that the bank returns for insufficient funds or any
other reason. You agree to pay a one time documentation fee, if any, as it
appears on the front of this Lease.
13. Maintenance and Care of Our Equipment: You agree to install, use and
maintain the Equipment in accordance with IKON specifications and use only
those supplies approved by IKON which meet manufacturer specifications.
14. Location of Equipment: You will keep the Equipment at the location
specified in this Lease. You must obtain our written permission, which
will not be unreasonably withheld to move the Equipment. With reasonable
notice, you will allow us or our agents to inspect the Equipment.
15. Assignment: YOU HAVE NO RIGHT TO SELL, TRANSFER, ENCUMBER, SUBLET OR
ASSIGN THE EQUIPMENT OR THIS LEASE.
16. Default: If you do not pay any amount due when it is due, you are in
default. If you default, we can demand that you pay the remaining balance
of the Lease and return the Equipment to us at your expense. We may
repossess the Equipment. You waive any rights you may have to notice
before we seize any of the Equipment and waive any requirement that we
post a bond in connection with any such seizure or repossession. In
addition, if you break any promise in the Agreement we can use any
remedies available to us under the Uniform Commercial Code or any other
applicable law. You promise to pay reasonable attorney fees and any cost
associated with any action to enforce this Lease. This action will not
void your responsibility to maintain and care for the Equipment, nor will
IKON be liable for any action taken on our behalf.
17. Business Agreement and Choice of Law: YOU AGREE THAT THIS AGREEMENT WILL
BE GOVERNED UNDER THE APPLICABLE LAW FOR THE STATE IN WHICH WE HAVE OUR
HOME OFFICE. YOU ALSO AGREE TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF OUR HOME OFFICE OR THE COURTS OF THE STATE WHERE THE IKON
SUPPLIER IS LOCATED TO RESOLVE ANY ACTION UNDER THIS LEASE. WE BOTH WAIVE
THE RIGHT TO A TRIAL BY JURY IN THE EVENT OF A LAWSUIT.
/s/ [ILLEGIBLE] 12/30/97
ACCEPTED BY IKON CAPITAL LEASING MANAGER
================================================================================
X Date
/s/ Karen H. Malone Dec 31 1997
<PAGE>
Exhibit 10.43
- --------------------------------------------------------------------------------
LEASE AGREEMENT
IKON Capital P.O. Box 9115 Macon, GA 31208-9115 800-800-1060
- --------------------------------------------------------------------------------
Lease Agreement Color Copier Lease Number 297018
Thank you for choosing IKON! This lease agreement has been written in clear,
easy to understand language. Please take time to review the terms. If you have
any questions, please ask us. When we use "you" or "your", we are referring to
you, our customer. When we use "IKON", we are referring to IKON Office
Solutions, one of the largest distributors of the office solutions in the world.
When we use "we", "us", and "our", we are referring to IKON Capital, owned by
IKON and created exclusively to support them. IKON is committed to providing you
quality service!
CUSTOMER INFORMATION E23428
================================================================================
Customer Location
Full Legal Name /s/ Magnum Digital Services
Address 6601 Lyons Rd St C-2
Coconut
City Creek County Broward State FL Zip 33073
Customer Billing Contact: Faye Harrison
Customer Billing Address (if different)
Full Legal Name Magnum Digital Services
Address 6601 Lyons Rd St C-2
Coconut
City Creek County Broward State FL Zip 33073
Phone: (954) 570- Fax: (954) 570-7808
<TABLE>
<CAPTION>
EQUIPMENT DESCRIPTION
==========================================================================================================================
Quantity Description, Make, Model & Serial Number Quantity Description, Make, Model & Serial Number
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Savin 206E Color System 7050021
- --------------------------------------------------------------------------------------------------------------------------
1 Fiery 170+ Color Server B05973
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAYMENT SCHEDULE
==========================================================================================================================
Minimum Lease Term: Payment Due: Monthly Payment Advanced Payment: $1,703.63 Documentation Fee:
<S> <C> <C> <C> <C>
Monthly 1,607.42 Without Sales, Use, and (Tax Included) by Check #08824 $ 45.00
60 Other____________ Property Tax |X| First Month's Lease Payment
Step $ 1,607.42 ___ Other _____________________
(See Addendum)___
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PROVISIONS:
- --------------------------------------------------------------------------------
Sales Tax Exempt |_| YES (Attach Exemption Certificate)
|X| NO
Customer Purchase Order # N/A (Attach copy of PO)
TERMS AND CONDITIONS
================================================================================
(1) Lease Agreement: You agree to lease from us the Equipment listed above.
THIS LEASE IS NON-CANCELABLE. You agree to all of the terms and conditions
contained in this Lease. You agree this Lease is for the minimum lease
term indicated above. You also agree that the Equipment will be used for
business only, and not for personal, family or household purposes. Our
acceptance of this Lease is indicated by our leasing manager's signature.
(See reverse side for more terms and conditions.)
AUTHORIZED SIGNER
================================================================================
THE PERSON SIGNING THIS LEASE ON BEHALF OF THE CUSTOMER
SPECIFICALLY REPRESENTS THEY HAVE THE AUTHORITY TO DO SO.
|X| /s/ Bob McDowell Date 8-27-97
Bob McDowell Owner
- ---------------------------------- ----------------------------------------
Printed Name Title
PERSONAL GUARANTY
================================================================================
I guaranty that the Customer will make all lease payments and pay all other
charges required under the Lease when they are due, and that the Customer will
perform all other obligations under the Lease fully and promptly. I also agree
that you may modify the Lease or make other arrangements with the lessee and I
will still be responsible for those payments and other obligations under the
Lease. I agree that IKON Capital need not notify me of any default under the
Lease, and in the event of default, I will pay all amounts due under the terms
of the Lease. In addition, I will reimburse IKON Capital for any costs or
attorney fees incurred in enforcing its rights.
|X| /s/ Bob McDowell Date 8-27-97
Printed Name of Guarantor __________________________
Home Address 3061 N.W 112th Ave
-------------------------------------------------------------------
City Coral Springs State FL Zip 33065-[ILLEGIBLE]
------------------------ ------------- --------------------------
Home Phone (954) 753-6653 SSN ###-##-####
----------------------- -----------------------------------------
DELIVERY AND ACCEPTANCE
================================================================================
You certify that all the Equipment described above has been delivered and is
accepted. You acknowledge that such Equipment is in good condition and is
performing satisfactorily.
|X| /s/ Bob McDowell Date 8-27-97
Bob McDowell Owner
- ---------------------------------- ----------------------------------------
Printed Name Title
<PAGE>
CUSTOMER AGREEMENT "Retained Title"
IKON
Office Solutions
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
M/A SALES REP NAME DATE SALES REP NO. SALE TYPE NATURE OF BUSINESS E23428
<S> <C> <C> <C> <C>
|X| Y |_| N Nora Austin 8-15-97 4060 2759
- ------------------------------------------------------------------------------------------------------------------------------------
Account |X| NEW |_| EXISTING INSTALL DATE INSTALL METER COLOR
8-27-97 9999086 9998011
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BILL TO LEASING SOURCE ACCOUNT NO.
- --------------------------------------------------------------------------------
COMPANY
Magnum Digital Services
- --------------------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
- --------------------------------------------------------------------------------
ADDRESS
6601 Lyons Rd, St C-2
- --------------------------------------------------------------------------------
CITY COUNTY
Coconut Creek FL 33073
- --------------------------------------------------------------------------------
PHONE STATE ZIP+4
954-570-7808
- --------------------------------------------------------------------------------
SHIP TO DEPARTMENT
- --------------------------------------------------------------------------------
COMPANY
Magnum Digital Services
- --------------------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
- --------------------------------------------------------------------------------
ADDRESS
6601 Lyons Rd. St C-2
- --------------------------------------------------------------------------------
CITY COUNTY
954-570-7808
- --------------------------------------------------------------------------------
PHONE STATE ZIP+4
Coconut Creek FL 33073
================================================================================
E Q U I P M E N T
================================================================================
<TABLE>
<CAPTION>
QTY. PROD CODE MODEL NO. DESCRIPTION SERIAL NO. MACHINE ID. NO. UNIT PRICE EXTENDED PRICE
<S> <C> <C> <C> <C> <C>
1 CVN001 1 VC20E Savin Color 7050021 Lease
- ------------------------------------------------------------------------------------------------------------------------------------
1 CRN007 2 4F17P Fiery 170+ B05973
- ------------------------------------------------------------------------------------------------------------------------------------
1 CRZ101 3 Interface Non Serialized
- ------------------------------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------------------------------
5
- ------------------------------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------------
7
- ------------------------------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------------------------------
REPLACEMENT |_| CANCEL M/A
NET ADD |X| |_| YES |X| NO TRADE IN APPRAISAL NO. DSR $ SUB TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
DELIVERY
SEE BELOW
- ------------------------------------------------------------------------------------------------------------------------------------
TAX
- ------------------------------------------------------------------------------------------------------------------------------------
FREIGHT
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL Lease
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PURCHASE |_| CASH NET DUE ON DELIVERY
TERMS |_| OTHER ______________________
- ----------------------------------------------
Amount $ Date
$________________ ___/___/___
$________________ ___/___/___
$________________ ___/___/___
|X| LEASE
|_| RENTAL TERMS
Total No. of Months 60 Monthly Payments of
$ 1,607.42, plus applicable taxes.
Advance payment(s) of first and
last ___________ months.
Total amount of advance $1,703.86
PO NO. _______________________ $_____________
- --------------------------------------------------------------------------------
CK NO. _______________________ $_____________
- --------------------------------------------------------------------------------
DELIVERY Delivery Date 8/27/97
INSTRUCTIONS |X| AM |_| PM
|_| |_| DBS Delivery Service
PAYOFF Amount $36,242.96
Good Till 9/6/97
Payable to Copelco
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Account No.
---------------------------------------------------------------------
|X| Lead
Originator /s/ Robert Gree
|_| Call in |_|Self Generated
- --------------------------------------------------------------------------------
Supplies
|_| Delivered by Rep. |_| Shipped by Corporate Supply
|_| Delivered with Equipment from Branch
================================================================================
S U P P L I E S
================================================================================
<TABLE>
<CAPTION>
QTY. UNIT PRODUCT CODE DESCRIPTION UNIT PRICE EXTENDED PRICE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SUB TOTAL
- ----------------------------------------------------------------------------------------------------
TAX
- ----------------------------------------------------------------------------------------------------
FREIGHT
- ----------------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS [ILLEGIBLE] Seller retains title and ownership to all
equipment listed in this Agreement until all charges for said equipment and
supplies are paid. Customer agrees to pay all charges of 1 1/2% per month on all
past due balances. If Customer defaults on any payments provided for in this
Agreement, or if the equipment is removed from the location to which it is
delivered without the written authorization of Seller or Customer makes an
assignment for the benefit of creditors, or files for protection of the
Bankruptcy Court, or if a lien is placed on the equipment by any third party or
a claim to ownership is made on the equipment by any third party, then Seller
shall have the right to take immediate possession of the equipment without
posting a bond or obtaining a court order. Should Seller retake possession of
the equipment pursuant to these terms and conditions, Customer shall nonetheless
be liable for immediate payment of all charges listed and upon payment of all
charges, the equipment shall be returned to Customer. If payment is not made
within 7 days of Seller taking possession, Seller may dispose of the equipment
at public or private sale for the benefit of Customer and Customer shall be
liable for the remaining unpaid balance. If Seller retains the services of an
attorney to protect its interest under this Agreement, Customer agrees to pay
all costs including reasonable attorney's fees. All payments called for herein
shall be due in Orange County, Florida. If Customer is a corporation, then the
individual signing this Agreement on its behalf, shall be jointly and severally
liable with Customer for payment of all monies due hereunder. In the event the
equipment is not paid for and therefore picked up there will be a $.05 per copy
usage charge and a reasonable pickup charge.
- -------------
E 23428
- -------------
ACCEPTANCE: THIS AGREEMENT IS NOT VALID UNLESS SIGNED BY AN AUTHORIZED MANAGER
OF IKON OFFICE SOLUTIONS
- ----------------------------------------
MANAGER APPROVAL
X /s/ Bob McDowell
- ----------------------------------------
AUTHORIZED CUSTOMER SIGNATURE
Bob McDowell
- ----------------------------------------
PRINTED AUTHORIZED CUSTOMER NAME
X /s/ Robert L McDowell
- ----------------------------------------
DELIVERY ACCEPTANCE SIGNATURE DATE
- --------------------------------------------------------------------------------
CORPORATE USE ONLY
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- --------------------------------------------------------------------------------
IOS-002 (11-96)
DELIVERY CHARGE:
FAX THRU SEGMENT 3: $75.00
SEGMENTS 4 THRU 5: $125.00
OCE AND CLC: $300.00
CUSTOMER COPY
<PAGE>
MAINTENANCE AGREEMENT
IKON
Office Solutions
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
M/A SALES REP NAME DATE SALES REP NO. SALE TYPE NATURE OF BUSINESS E23428
<S> <C> <C> <C> <C>
|X| Y |_| N Nora Austin 8-15-97 4060 [ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
Account |X| NEW |_| EXISTING INSTALL DATE INSTALL METER COLOR
8-24-94 [ILLEGIBLE] 9998011
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BILL TO LEASING SOURCE ACCOUNT NO.
----------------------------------------------------------------------
COMPANY
Magnum Digital Services
----------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
----------------------------------------------------------------------
ADDRESS
6601 Lyons Rd, St C-2
----------------------------------------------------------------------
CITY COUNTY
Coconut Creek FL 33073
----------------------------------------------------------------------
PHONE STATE ZIP+4
954-570-7808
================================================================================
SHIP TO DEPARTMENT
----------------------------------------------------------------------
COMPANY
Magnum Digital Services
----------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
----------------------------------------------------------------------
ADDRESS
6601 Lyons Rd. St C-2
----------------------------------------------------------------------
CITY COUNTY
954-570-7808
----------------------------------------------------------------------
PHONE STATE ZIP+4
Coconut Creek FL 33073
================================================================================
E Q U I P M E N T
================================================================================
<TABLE>
<CAPTION>
QTY. PROD CODE MODEL NO. DESCRIPTION SERIAL NO. MACHINE ID. NO. BASE RATE PLAN TYPE BEG. METER
<S> <C> <C> <C> <C>
1 CVN001 1 VC20E Savin Color 7050021
- ------------------------------------------------------------------------------------------------------------------------------------
1 CRN007 2 4F17P Fiery 170+ B05973
- ------------------------------------------------------------------------------------------------------------------------------------
1 CRZ101 3 Interface Non Serialized
- ------------------------------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------------------------------
5
- ------------------------------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------------
7
- ------------------------------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------------------------------
REPLACEMENT |_| CANCEL M/A
NET ADD |X| |_| YES |X| NO TRADE IN APPRAISAL NO. DSR $
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOMER P.O. NO.
BASE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MAINTENANCE AGREEMENT COPIER PLAN TYPES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Plans A B C D E F
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Covers parts, labor, Covers parts, labor, Covers parts and Covers parts and Refer to Excluded, not
drums and toner drums only (excludes labor only (excludes labor for non- separate covered under
(excludes paper, paper, toner) drums, paper, toner) copier equipment contract for any service
staples, color toners (excludes supplies) connectivity program
and optional color and software
units) services
</TABLE>
- --------------------------------------------------------------------------------
Comments
- --------------------------------------------------------------------------------
1703.86 Color toners not included. $1600.00 to be credited to account from Savin
manufacturer.
- --------------------------------------------------------------------------------
PERFORMANCE GUARANTEES
Equipment Guarantee -- The equipment specified above is conditionally warranted
by IKON Office Solutions for as long as the above described company shall own
the machine, provided that it is covered by a IKON Office Solutions maintenance
and support program. The warranty shall cover the plan indicated and is subject
to the terms and conditions on the reverse side.
Emergency Response Time Guarantee -- We guarantee to respond to an emergency
call within 2 to 4 hours (depending on the type of equipment, see back for
specifics). This guarantee is applicable during normal business hours. If we
fail to meet this response time you will be eligible for a $25.00 coupon toward
your next purchase of service or supplies.
Replacement Guarantee -- If the equipment specified above is covered by IKON's
maintenance agreement and becomes unrepairable within 36 months from the date of
the agreement, we will replace it with a piece of similar or like equipment at
no additional charge.
Loaner Protection Plan -- If we are unable to repair your equipment covered
under this maintenance agreement within 8 hours of our arrival, we will provide
a loaner for your use at no additional cost.
Billing Terms:
- --------------------------------------------------------------------------------
Equipment Line No.
is covered by plan: [ILLEGIBLE]
- --------------------------------------------------------------------------------
at a Base Rate of: $ 210.16 $ $
- --------------------------------------------------------------------------------
to be billed (interval): monthly
- --------------------------------------------------------------------------------
and includes allowable
copies of: [ILLEGIBLE]
- --------------------------------------------------------------------------------
Excess copies will be
billed at a per copy
price of: $.0495 $ $
per scan
- --------------------------------------------------------------------------------
I have reviewed IKON Office Solutions' Maintenance Agreement Programs and DO NOT
want to participate at this time.
Customer Signature
- --------------------------------------------------------------------------------
ACCEPTANCE: THIS AGREEMENT IS NOT VALID UNLESS SIGNED BY AN AUTHORIZED MANAGER
OF IKON OFFICE SOLUTIONS
- -----------------------------------
MANAGER APPROVAL
X /s/ Bob McDowell
- -----------------------------------
AUTHORIZED CUSTOMER SIGNATURE
Bob McDowell
- -----------------------------------
PRINTED AUTHORIZED CUSTOMER NAME
CUSTOMER COPY
<PAGE>
CUSTOMER AGREEMENT "Retained Title"
IKON
Office Solutions
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
M/A SALES REP NAME DATE SALES REP NO. SALE TYPE NATURE OF BUSINESS E47628
<S> <C> <C>
|X| Y |_| N Robert Greenspon 11-21-97
- ------------------------------------------------------------------------------------------------------------------------------------
Account |_| NEW |X| EXISTING INSTALL DATE INSTALL METER
12/2/97 5597
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BILL TO LEASING SOURCE ACCOUNT NO.
- --------------------------------------------------------------------------------
COMPANY
Magnum Digital Services
- --------------------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
- --------------------------------------------------------------------------------
ADDRESS
6601 Lyons Rd. Suite C-2
- --------------------------------------------------------------------------------
CITY COUNTY
Coconut Creek FL 33073
- --------------------------------------------------------------------------------
PHONE STATE ZIP+4
(954) 570-7877
- --------------------------------------------------------------------------------
SHIP TO DEPARTMENT
- --------------------------------------------------------------------------------
COMPANY
Magnum Digital Services
- --------------------------------------------------------------------------------
CONTACT ACCOUNT NO.
Bob McDowell
- --------------------------------------------------------------------------------
ADDRESS
6601 Lyons Rd. Suite C-2
- --------------------------------------------------------------------------------
CITY COUNTY
Coconut Creek FL 33073
- --------------------------------------------------------------------------------
PHONE STATE ZIP+4
(954) 570-7877
================================================================================
E Q U I P M E N T
================================================================================
<TABLE>
<CAPTION>
QTY. PROD CODE MODEL NO. DESCRIPTION SERIAL NO. MACHINE ID. NO. UNIT PRICE EXTENDED PRICE
<S> <C> <C> <C> <C> <C>
1 BUN120 1 UB920 Savin 9920 6A77040032 9987M Lease
- ------------------------------------------------------------------------------------------------------------------------------------
1 BUNF01 2 2URDF Auto Document
Feeder 7A877050497
- ------------------------------------------------------------------------------------------------------------------------------------
1 BUNP02 3 2UDUP Paper Bank Unit 6A97020172
- ------------------------------------------------------------------------------------------------------------------------------------
1 BUN901 4 2UDUP Duplex Unit G8017050592
- ------------------------------------------------------------------------------------------------------------------------------------
1 BU2C01 5 One bin tray
- ------------------------------------------------------------------------------------------------------------------------------------
1 BU2B06 6 Print controller
- ------------------------------------------------------------------------------------------------------------------------------------
1 BU2M03 7 Copy memory
- ------------------------------------------------------------------------------------------------------------------------------------
1 F32M12 8 16mb Printer
Memory [ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
REPLACEMENT |_| CANCEL M/A
NET ADD |X| |_| YES |X| NO TRADE IN APPRAISAL NO. DSR $ SUB TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
DELIVERY
SEE BELOW
- ------------------------------------------------------------------------------------------------------------------------------------
TAX
- ------------------------------------------------------------------------------------------------------------------------------------
FREIGHT
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PURCHASE |_| CASH NET DUE ON DELIVERY
TERMS |_| OTHER ______________________
- ----------------------------------------------
Amount $ Date
$________________ ___/___/___
$________________ ___/___/___
$________________ ___/___/___
|X| LEASE
|_| RENTAL TERMS
Total No. of Months 48 Monthly Payments of
$ 360.00, plus applicable taxes.
Advance payment(s) of (first) and
last ___________ months.
Total amount of advance $ 381.60
PO NO. _______________________ $_____________
- --------------------------------------------------------------------------------
CK NO. _______________________ $_____________
- --------------------------------------------------------------------------------
DELIVERY Delivery Date ___/___/___
INSTRUCTIONS |_| AM |_| PM
12/2 |_| Sales Rep. |_| IKON Delivery Service
PAYOFF Amount $______________
Good Till ___/___/___
Payable to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Account No.
---------------------------------------------------------------------
|_| Lead
Originator _____________________________________________________________________
|_| Call in |X|Self Generated
- --------------------------------------------------------------------------------
Supplies
|_| Delivered by Rep. |_| Shipped by Corporate Supply
|_| Delivered with Equipment from Branch
================================================================================
S U P P L I E S
================================================================================
<TABLE>
<CAPTION>
QTY. UNIT PRODUCT CODE DESCRIPTION UNIT PRICE EXTENDED PRICE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SUB TOTAL
- ----------------------------------------------------------------------------------------------------
TAX
- ----------------------------------------------------------------------------------------------------
FREIGHT
- ----------------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS [ILLEGIBLE] Seller retains title and ownership to all
equipment listed in this Agreement until all charges for said equipment and
supplies are paid. Customer agrees to pay all charges of 1 1/2% per month on all
past due balances. If Customer defaults on any payments provided for in this
Agreement, or if the equipment is removed from the location to which it is
delivered without the written authorization of Seller or Customer makes an
assignment for the benefit of creditors, or files for protection of the
Bankruptcy Court, or if a lien is placed on the equipment by any third party or
a claim to ownership is made on the equipment by any third party, then Seller
shall have the right to take immediate possession of the equipment without
posting a bond or obtaining a court order. Should Seller retake possession of
the equipment pursuant to these terms and conditions, Customer shall nonetheless
be liable for immediate payment of all charges listed and upon payment of all
charges, the equipment shall be returned to Customer. If payment is not made
within 7 days of Seller taking possession, Seller may dispose of the equipment
at public or private sale for the benefit of Customer and Customer shall be
liable for the remaining unpaid balance. If Seller retains the services of an
attorney to protect its interest under this Agreement, Customer agrees to pay
all costs including reasonable attorney's fees. All payments called for herein
shall be due in Orange County, Florida. If Customer is a corporation, then the
individual signing this Agreement on its behalf, shall be jointly and severally
liable with Customer for payment of all monies due hereunder. In the event the
equipment is not paid for and therefore picked up there will be a $.05 per copy
usage charge and a reasonable pickup charge.
- -------------
E 47628
- -------------
ACCEPTANCE: THIS AGREEMENT IS NOT VALID UNLESS SIGNED BY AN AUTHORIZED MANAGER
OF IKON OFFICE SOLUTIONS
- ----------------------------------------
MANAGER APPROVAL
X /s/ Bob McDowell
- ----------------------------------------
AUTHORIZED CUSTOMER SIGNATURE
Bob McDowell
- ----------------------------------------
PRINTED AUTHORIZED CUSTOMER NAME
X /s/ [ILLEGIBLE]
- ----------------------------------------
DELIVERY ACCEPTANCE SIGNATURE DATE
- --------------------------------------------------------------------------------
CORPORATE USE ONLY
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
- --------------------------------------------------------------------------------
MZ-108 (6/97)
DELIVERY CHARGE:
FAX THRU SEGMENT 3: $75.00
SEGMENTS 4 THRU 5: $125.00
OCE AND CLC: $300.00
<PAGE>
Exhibit 10.44
[LOGO]
Mart Financial Group, Inc. 1430 N. Meacham Road, Schaumburg, IL 60173
o 708-882-2800
NAME AND ADDRESS OF LESSEE SUPPLIER OF EQUIPMENT
(COMPLETE LEGAL NAME) (COMPLETE ADDRESS)
1199 Mac, Inc. dba/ GBC/Protech
Magnum Digital Services 3300 Univerity Blvd. Suite 142
6601 Lyons Road, Suite C-2 Winter Park, FL 32792
Coconut Creek, FL 33073
EQUIPMENT LEASE AGREEMENT Lease No. 11032
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION AND IDENTIFICATION OF EQUIPMENT LEASED
- --------------------------------------------------------------------------------
1 GBC/Protech DS6O Transfer Laminator
THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED OF MERCHANTABILITY,
FITNESS, OR OTHERWISE WHICH EXTEND BEYOND THE ABOVE DESCRIPTION
OF THE EQUIPMENT. LESSOR ASSUMES NO RESPONSIBILITY FOR
PERFORMANCE OR MAINTENANCE. EQUIPMENT WILL BE INSURED BY LESSEE.
THIS LEASE IS NON-CANCELABLE
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT IF OTHER THAN ABOVE ADDRESS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DURATION OF LEASE AND SCHEDULE OF RENTAL PAYMENTS
- ------------------------------------------------------------------------------------------------------------------------------
TERM OF LEASE PAYMENTS ARE TO FIRST PAYMENT NO. OF RENTAL PAYMENTS AMOUNT OF EACH PAYMENT ADVANCE RENTAL DOWN PAYMENT
NO. OF YEARS BE MADE DUE
<S> <C> <C> <C> <C> <C> <C>
|X| MONTHLY
|_| QUARTERLY 24 $1,075.64 $ 2,151.27 $
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER PROVISIONS
$1.00 Purchase Option
- --------------------------------------------------------------------------------
EQUIPMENT LEASE TEAMS AND CONDITIONS
1. LEASE AND PAYMENTS. LESSOR hereby leases to LESSEE and LESSEE hereby leases
from LESSOR, the Equipment pursuant to the terms and conditions of this Lease
which include those on the reverse side hereof. LESSEE agrees to make all of the
payments ("Monthly Lease Payment(s)") as set forth above at the Lessor's address
shown above or such other address as LESSOR may direct on or before each monthly
due date and shall commence upon the first day of the month following the
acceptance of the Equipment to be leased hereunder, and shall continue
thereafter to be paid on the same day of each succeeding month or other calendar
period in the amount specified and for the total number of payments as provided
in the Schedule of Rent Payments as set forth above. Charges from the date of
delivery of the Equipment to the Commencement Date shall be computed by
converting the rent payment to a daily rate based on a thirty (30) day month.
Said Lease term shall be automatically extended at the Monthly Lease Payment in
effect at the end of said term unless and until terminated by either party
hereto giving the other not less than ninety (90) days prior written notice.
Each such Monthly Lease Payment is due and payable whether or not LESSEE is
invoiced or supplied with a payment coupon book. Without LESSOR'S prior written
consent, any Monthly Lease Payment of a sum less than due shall not constitute a
release or accord and satisfaction of what is due (or to become due regardless
of any endorsement restriction). If either party declines to execute this Lease
for any reason, LESSOR may retain its documentation and processing expenses from
the Initial Payment. All obligations of the Lessee, if more than one, shall be
joint and several.
2. SELECTION OF EQUIPMENT. LESSEE acknowledges the selection by it of both the
Equipment and the supplier thereof and has requested LESSOR to purchase the
Equipment for lease and shipment to LESSEE. Upon receipt thereof LESSEE shall
execute LESSOR'S certificate of delivery and acceptance. In the event that
LESSEE has not executed and delivered to LESSOR such certificate of delivery and
acceptance within ten (10) business days after receipt of the Equipment, it
shall be conclusively presumed, as between LESSOR and LESSEE, that the Equipment
is acknowledged to be in good working order and condition and the LESSEE has
accepted and is satisfied with the Equipment for all of its intended uses and
purposes and LESSEE shall be required to commence Monthly Lease Payments due as
of the first payment date.
LESSEE AGREES AND ACKNOWLEDGES THAT IT IS THE INTENT OF BOTH PARTIES TO
THIS AGREEMENT THAT THIS LEASE QUALIFY AS A STATUTORY FINANCE LEASE UNDER
ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE. LESSEE REPRESENTS AND
ACKNOWLEDGES THAT THE LESSOR HAS NOT SELECTED, MANUFACTURED OR SUPPLIED
THE EQUIPMENT AND LESSOR HAS ACQUIRED THE EQUIPMENT OR THE RIGHT TO
POSSESSION AND USE OF THE EQUIPMENT SPECIFICALLY FOR LEASE TO LESSEE AT
LESSEE'S REQUEST AND DIRECTION IN CONNECTION WITH THIS LEASE. LESSEE, IN
LESSEE'S SOLE DISCRETION, SELECTED THE EQUIPMENT AND SUPPLIER AND ONLY
LESSEE WILL ACCEPT DELIVERY OF, INSPECT, USE AND MAINTAIN THE EQUIPMENT.
LESSEE IS ALSO ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT
EVIDENCING THE LESSOR'S PURCHASE OF THE EQUIPMENT AND THAT IT SHOULD
CONTACT THE SUPPLIER FOR THE DESCRIPTION OF ANY SUCH RIGHTS.
This Lease, including the provisions on the reverse side hereof, contains the
entire agreement between the LESSOR and LESSEE and may not be altered, amended,
modified, terminated or otherwise changed, except by writing signed by an
executive officer of LESSOR. Notwithstanding the foregoing, LESSEE hereby
authorizes the LESSOR without further notice, to complete the description of the
Equipment to be leased and the quantity thereof, to insert the serial numbers or
other identification data for the equipment when determined, to fill any blank
spaces of this lease and to date this lease.
3. LOCATION AND LESSORS INSPECTION. Equipment shall be delivered and thereafter
kept at the location specified above, or, if none specified, at Lessee's address
set forth above and shall not be removed therefrom without Lessor's prior
written consent. Any and all costs incurred by Lessor as a result of such
relocation shall be borne by Lessee. Any charges hereunder shall not abate
during the period the Equipment is out of service due to any such relocation
requested by Lessee. Lessee shall permit Lessor on its premises to inspect the
equipment and the business records of the Lessee relating to it during normal
business hours.
4. TITLE; FILINGS. Title of the Equipment shall at all times remain with the
LESSOR and LESSEE shall at no time make any assertion to the contrary and shall
keep the Equipment free and clear of all encumbrances, liens, or levies of any
kind or nature and shall defend LESSOR'S title at LESSEE'S expense. LESSEE shall
immediately give LESSOR notice in writing of the pendency of any claim to the
Equipment adverse to LESSOR'S ownership. LESSEE grants to LESSOR a limited power
of attorney to execute in LESSEE'S name and file any financing statement or
other document reflecting the existence of this Lease and agrees to pay to
LESSOR $25.00 as LESSOR'S expenses in effecting any such filing. LESSEE shall
cause to be placed on each piece of Equipment identification, noting LESSOR'S
ownership. LESSEE warrants that the Equipment will at all times remain personal
property, regardless of how it may be affixed to any real property. LESSEE
agrees to hold LESSOR harmless and indemnify LESSOR with regard to any and all
claims, actions, damages, costs, and attorney's fees asserted by any landlord or
mortgage against LESSOR or the Equipment herein.
5. ADDITIONS TO AND USE OF EQUIPMENT. Without Lessor's prior written consent,
Lessee shall not make any alterations or additions to the Equipment which would
adversely affect the Equipment's intended use or value. All additions,
attachments, or replacements made to the Equipment, unless otherwise agreed to
in writing by Lessor, shall become part of the Equipment. Lessee, at its
expense, shall maintain the Equipment in good operating order and repair in
accordance with the manufacturer's recommendations. Supplies required for use of
the Equipment are to be provided by Lessee at its expense and are to meet the
Equipment manufacturer specifications.
6. NO WARRANTIES BY LESSOR. LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES WITH
RESPECT TO THE EQUIPMENT INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND DISCLAIMS ANY AND ALL SUCH WARRANTIES. LESSOR shall not
be liable to LESSEE or any other persons to any extent whatsoever for any claim
arising out of the manufacture, selection, delivery, possession, use,
suitability, operation, return or condition of the Equipment (including. without
limitation, latent or other defects whether or not discoverable by LESSEE).
LESSEE agrees to make any such claims which may arise directly to the supplier
or manufacturer of the Equipment and provided LESSEE is not in default, LESSOR
grants to LESSEE the right to assert any and all warranty claims which LESSOR
may otherwise have by reason of its purchase and ownership of the Equipment.
THIS DISCLAIMER OF WARRANTIES IS FUNDAMENTAL TO THE NATURE OF THIS TRANSACTION,
IS EXPRESSLY BARGAINED FOR AND AS SUCH LESSOR WOULD NOT HAVE ENTERED INTO THE
LEASE WITHOUT SUCH DISCLAIMER. THE PENDENCY OF ANY CLAIM BY LESSEE ARISING IN
THE CONNECTION THE EQUIPMENT WHETHER OR NOT COVERED BY ANY WARRANTY SHALL NOT
AFFECT THE OBLIGATION OF LESSEE TO MAKE LEASE PAYMENTS.
- --------------------------------------------------------------------------------
THE UNDERSIGNED AGREE TO ALL THE TERMS AND CONDITIONS SET FORTH ABOVE
AND ON THE REVERSE SIDE HEREOF.
IN WITNESS WHEREOF THE PARTIES HAVE HEREUNTO EXECUTED THIS LEASE.
1199 Mac, Inc. dba/
Dated November 19 19 97 LESSEE Magnum Digital Services
---------------------------------
MART FINANCIAL GROUP, INC. LESSOR BY X /s/ Robert L. McDowell X PRES
---------------------------------
BY /s/ [ILLEGIBLE] AUTHORIZED SIGNATURE AND TITLE
X Robert L. McDowell X 10/29/97
<PAGE>
CONTINUED FROM REVERSE SIDE
7. ENTIRE LEASE; CHANGES. This Lease contains the entire and final agreement
between the LESSOR and LESSEE and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral discussions, negotiations or agreement of the
parties. There is no understanding or agreement, oral or written which is not
set forth herein. This lease may not be amended except by a written instrument
signed by the LESSOR and LESSEE. This lease and any such writing shall be
binding upon and shall inure to the benefit of the parties hereto and therein
permitted successors and assigns. Notwithstanding the foregoing, LESSEE hereby
authorizes LESSOR, without further notice, to complete the description of the
Equipment to be leased, the quantity thereof, to insert the serial numbers or
other identification data when determined and to fill in any blank spaces on
this Lease and to date this Lease.
8. CONCLUSION OF LEASE TERM. At the conclusion of the term of this lease, Lessee
shall, at its expense, return the Equipment to Lessor, properly packaged or
crated, in good condition and repair, in working order, ordinary wear and tear
permitted, at the address of Lessor above, or such other location as Lessor
shall direct.
9. LOSS, THEFT, DAMAGE, DESTRUCTION. Lessee agrees to bear the entire risk of
any loss, theft, damage or destruction of the Equipment from any cause
whatsoever and agrees that no such loss, theft, damage or destruction, whether
upon delivery or thereafter, shall relieve LESSEE of its obligation to pay rent
or of any other of its obligations under the Lease. In the event of loss, theft,
damage or destruction of any of the Equipment, LESSEE, at the option of LESSOR
and at LESSEE'S sole expense, shall immediately:
(a) Repair and place the same in good condition and furnish all parts,
mechanisms and devices required therefor;
(b) Replace the same with like Equipment in good condition and repair
and provide LESSOR with clear title thereto; or
(c) Pay to LESSOR the total of the following amounts:
(i) All Monthly Lease Payments and other amounts due under this
Lease at the time of payment, plus
(ii) All Monthly Lease Payments and other amounts due under this
Lease from date of such payment to the end of the Lease term
plus LESSOR'S estimated residual value, discounted at the time
of payment to present value by an annual factor of six percent
(6%).
Upon LESSOR'S receipt of such payment, LESSOR agrees that its entire interest in
said item shall become the property of LESSEE and LESSEE'S insurer (as their
interests may appear) in its then condition, as is, where is, WITHOUT WARRANTY
FROM LESSOR, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
10. TAXES, FEES and ASSESSMENTS. Lessee, shall promptly pay when due all
licensing, filing and registration fees and all sales, use, personal property,
income or any other taxes (other than LESSOR'S income taxes) which may be levied
by any taxing authority with respect to the Equipment or the Monthly Lease
Payments or other payments due hereunder. In addition, LESSEE authorizes LESSOR
to file at LESSORS option financing statements without LESSEE'S signature and,
if a signature is required by law, LESSEE appoints LESSOR as LESSEE'S
attorney-in-fact to execute such financing statements. LESSEE agrees to pay
LESSOR a fee of $50.00 to reimburse LESSOR'S expenses of preparing such
financing statements and of making credit checks, and LESSOR'S other
administrative costs. LESSEE and any guarantor agree to reimburse LESSOR for
reasonable costs incurred in collecting taxes, assessments, or fees for which
LESSEE is liable, and any collection charges attributable thereto including
reasonable attorney fees. LESSEE agrees that LESSOR is entitled to all tax
benefits resulting from ownership of the Equipment including any investment tax
credit and depreciation. LESSEE agrees that, should any of such tax benefits be
disallowed, LESSEE shall indemnify LESSOR for such loss by paying LESSOR an
amount to the value of the lost benefits as stipulated and liquidated herein.
11. INDEMNITY. To the fullest extent permitted by law, LESSEE shall indemnify
and hold harmless the LESSOR, its assigns, successors, agents and employees,
from and against all claims, damages, losses and expenses, including but not
limited to attorneys' fees, arising out of or resulting in any way from or
related the Equipment including, without limitation, the manufacture, selection,
delivery, possession, use, suitability, operation, return or condition
(including, without limitation, latent or other defects whether or not
discovered by LESSOR). This indemnification shall not be limited in any way by
any limitation on the amount or type of damages, compensation or benefits
payable by or for the LESSEE under any Workers Compensation or other employee
benefit act. LESSEE'S indemnities and liabilities shall continue in full force
and effect, notwithstanding the expiration, termination, or cancellation of this
Lease for any reason, including without limitation, the expiration of time,
operation of law, or otherwise.
12. ASSIGNMENT. Lessee shall not assign or hypothecate this lease, and shall not
sublet, lend or encumber any Equipment without Lessor's prior written consent.
The Equipment shall remain personal property regardless of whether affixed to
real property, and Lessee agrees to execute and obtain the execution of all
agreements and documents in recordable form by all parties having an interest in
real property to which the Equipment is affixed, as Lessor may request, to
protect Lessors title to the Equipment. Lessor may assign, sell, transfer,
mortgage, encumber, or otherwise dispose of this lease or the Equipment in whole
or in part without notice or consent of Lessee. In the event of any such
transfer or assignment of the Lease or the Equipment, Lessee agrees to pay to
the assignee or transferee all sums and to perform all obligations under the
Lease without defense, offset, or counterclaim whatsoever, including breach of
warranty, and such assignee or transferee shall have all rights and powers of
Lessor, but shall not be obligated to perform any of Lessors obligations under
this Lease; provided that no such assignment or transfer shall deprive Lessee of
its right to use the Equipment in accordance with the terms of the Lease. Lessee
acknowledges that any assignment or transfer by Lessor made in accordance with
the provisions of this Section shall not materially change Lessee's duties or
obligations under this Lease nor materially increase the burdens or risks
imposed on Lessee. If Lessee is given notice of any such transfer or assignment,
Lessee agrees to acknowledge receipt thereof in writing and to pay directly to
the transferee or assignee all rents and other sums so assigned.
13. DEFAULT; REMEDIES. In the event LESSEE and or its guarantors (i) fails to
make any Monthly Lease Payment when due; (ii) breaches any covenant,
representation or warranty contained in this Lease; (iii) makes an assignment
for the benefit of creditors or a petition for relief under any bankruptcy or
insolvency law is filed by or against LESSEE; (iv) is in default under any other
Lease, note or obligation including any other lease, or obligation with lessor
or any of its affiliates; (v) misrepresents or falsely warrants the financial
information given in connection with this Lease; (vi) makes a Bulk Sale or
change in the majority ownership interest of LESSEE; (vii) ceases to operate as
a going concern, then LESSOR shall have the right to exercise any one or more of
the following cumulative remedies:
a. without notice, the entire amount of the Monthly Lease Payments
remaining and other amounts which have accrued hereunder to be paid
over the balance of the Lease term, together with all other
obligations as herein set forth, shall become immediately due and
payable;
b. proceed to appropriate court action or actions at law or in equity
or in bankruptcy to enforce performance by LESSEE of the covenants
and terms of this Lease and/or to recover damages for the breach
thereof;
c. terminate this Lease and/or any or all leases or other obligations
with Lessor or any of its affiliates upon written notice to LESSEE;
d. whether or not this lease be so terminated, and without notice to
LESSEE, repossess the Equipment wherever found, with or without
legal process, and for this purpose LESSOR and/or its agents may
enter upon any premises or under the control or jurisdiction of
LESSEE any agent of LESSEE without liability for suit, action or
proceeding by LESSEE (any damages occasioned by such repossession
being hereby expressly waived by LESSEE) and remove the Equipment
therefrom; or
e. at LESSOR'S sole option, LESSOR may perform for LESSEE and LESSEE
will be responsible for cost of performance plus interest thereon.
If this Lease or any other obligation with Lessor or any of it's
affiliates is deemed at any time to be one intended as security, Lessee agrees
that the Equipment shall secure, in addition to the indebtedness herein, all
other indebtedness at any time owing by Lessee to Lessor. Notwithstanding the
fact that any or all of the Equipment is returned to or repossessed by LESSOR,
LESSEE shall remain liable for the entire amount of unpaid Monthly Lease
Payment(s), plus all other unpaid sums or charges that accrue prior to the date
of LESSEE'S default, together with all costs and expenses incurred by LESSOR as
set forth herein, including its reasonable attorneys' fees, with accelerated
payments being discounted to present value as of the date of default at an
annual discount rate of six percent (6%).
If LESSEE fails to redeliver any Equipment to LESSOR, or LESSOR is unable
for any reason to effect repossession of any Equipment, or LESSOR in its sole
discretion does not repossess any of the Equipment, then, with respect to such
Equipment, LESSEE shall be liable for, in addition to the entire amount of
unpaid Monthly Lease Payments, LESSOR'S estimated residual value, with both the
accelerated payments and residual value being discounted to present value as of
the date of default at an annual factor of six percent (6%), plus all other
unpaid sums or charges together with all costs and expenses incurred by LESSOR,
including its reasonable attorneys' fees. LESSOR, at its option, may apply the
Initial Payments against the LESSEE'S obligations under this Lease.
Any repossession, resale or re-lease of any Equipment by LESSOR shall not
be a bar to the institution of litigation by LESSOR against LESSEE for damages
for breach of this Lease, as hereinbefore provided, and the commencement of any
litigation or the entry of judgement against LESSEE shall not be a bar of
LESSOR'S rights to repossess any or all of the Equipment.
To the extent permitted by applicable law, the LESSEE waives any and all
rights and remedies conferred upon a LESSEE by UCC Sections 2A-508 through
2A-522, including (without limitation) the LESSEE'S rights to (a) cancel or
repudiate the LEASE, (b) reject or revoke acceptance of the leased Equipment,
(c) recover damages from the LESSOR for breach of warranty or for any other
reason, (d) claim a security interest in any rejected Equipment in the LESSEE'S
possession or control, (e) deduct from rental payments all or any part of any
claimed damages resulting from the LESSOR'S default under the LEASE, (f) accept
partial delivery of the leased Equipment, (g) "cover" by making any purchase or
lease of other Equipment in substitution for Equipment due from the LESSOR, (h)
recover from the LESSOR any general, special, incidental or consequential
damages, for any reason whatsoever, and (i) specific performance, replevin or
the like for any of the leased Equipment.
In the event that any court of competent jurisdiction determines that any
provision of this Lease is invalid or unenforceable in whole or in part, such
determination shall not prohibit LESSOR from establishing its damages sustained
as a result of any breach of this Lease in any action or proceeding in which
LESSOR seeks to recover such damages or the return of the Equipment.
All remedies of LESSOR hereunder are cumulative and may, to the extent
permitted by law, be exercised concurrently or separately, and the exercise of
any one remedy shall not be deemed to be an election of such remedy or to
preclude the exercise of any other remedy. No failure on the part of LESSOR to
exercise, and no delay in exercising any right or remedy hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise by LESSOR of any
right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy. Damages occasioned by LESSOR'S taking
possession of Equipment are hereby waived by LESSEE. LESSEE waives any right to
select or contest venue and agrees that all legal and equitable actions between
LESSEE and LESSOR can be brought in a court of competent jurisdiction at the
said election and determination of LESSOR, and LESSEE consents thereto.
14. INSURANCE. LESSEE agrees to procure at its own expense and maintain in force
until the Equipment is returned to LESSOR the following insurance with companies
and in form acceptable to LESSOR.
(a) A policy of general liability insurance, including bodily injury and
property damage, protecting the interest of LESSOR and LESSEE with
such higher limits as LESSOR may specify, naming LESSOR as
additional insured.
(b) A policy of all risk, physical damage insurance, including burglary
and theft, covering the Equipment for not less than the greater of
the replacement value or the original total cost of the Equipment,
naming the LESSOR as loss payee.
LESSEE shall furnish to LESSOR satisfactory evidence of the required
insurance. The proceeds of any insurance received by LESSOR on account of any
loss or casualty which has been satisfied by LESSEE shall be released to LESSEE
upon appropriate proof unless at the time the LESSEE is in default. Such
policies of insurance shall provide for at least thirty (30) days written notice
of cancellation to LESSOR. Without liability to LESSEE, LESSOR may act as
attorney-in-fact for LESSEE in making, adjusting, or settling any claims under
any insurance policies insuring the Equipment. LESSEE assigns to LESSOR all of
its right, title and interest to any insurance policies insuring the Equipment,
including all rights to receive the proceeds of insurance not in excess of the
unpaid obligations under the Lease plus LESSOR'S estimated residual value of the
Equipment at the end of the Lease and directs any Insurer to pay all such
proceeds directly to LESSOR and authorizes LESSOR to endorse LESSEE'S name on
any draft or other instrument for such proceeds.
15. APPLICABLE LAW; JURISDICTION AND VENUE; WAIVERS. This Lease will be deemed
to have been made, executed and delivered in the State of Illinois and shall be
governed and construed for all purposes in accordance with the laws of the State
of Illinois. LESSEE and Guarantor waive, insofar as permitted by law, trial by
jury. LESSEE and Guarantor hereby irrevocably consent to jurisdiction and venue
in any court located in Cook County, Illinois. LESSEE and any Guarantor agree
that any process served for any action or proceeding shall be valid if mailed by
regular or certified mail, return receipt requested, with delivery restricted to
either the addressee, its registered agent or any agent appointed in writing to
accept service of process.
16. COLLECTION CHARGES, LESSEE AGREES THAT TIME IS OF THE ESSENCE TO THIS LEASE.
Accordingly, if any part of any sum is not paid when due, LESSEE agrees to pay
LESSOR upon demand;
a. in the event any Monthly Lease Payment is not received within ten
(10) days of the due date, a late charge on the Monthly Lease
Payment equal to the greater of five percent (5%) or $15; and
b. other amounts allowed by law.
17. ADDITIONAL SECURITY: In any jurisdiction where the Uniform Commercial Code
is in effect, LESSEE grants to LESSOR a security interest in any and all goods,
chattels, fixtures, furniture, equipment, assets, accounts receivable, contract
rights, general intangibles, and property of every kind wherever located now
and/or hereafter belonging to LESSEE and in which LESSEE has any interest and
proceeds thereof, and agrees that any security interest created by this
agreement secures any and all obligations of LESSEE and those of any affiliate
of LESSEE to LESSOR whether hereunder or otherwise and whether now in existence
and/or to come into existence and whether initially owing to LESSOR or acquired
by LESSOR through one or more assignments.
18. MISCELLANEOUS: Lessor's failure to insist in any instance upon strict
performance by Lessee of any terms, warranties, covenants and promises herein
shall not be construed as a permanent waiver of such terms, warranty, covenant,
or promise, or as a waiver of any other of the terms, warranties, covenants, and
promises contained herein. No representations, warranties, promises, guarantees
or agreements oral or written, expressed or implied, have been made by either
party hereto with respect to this lease or the equipment. No modifications,
extension, renewal, termination or waive of any provisions herein contained
shall be binding upon the Lessor unless made in writing and executed in behalf
of Lessor by a duly authorized officer of the Lessor and this lease shall not be
binding upon the Lessor until it is so executed (the entire agreement of the
parties being in writing and any prior writings being superseded hereby).
19. NOTICES: Services of all notices under this agreement shall be sufficient,
if given personally or mailed to the party involved at its respective address
hereinafter set forth, or at such address as such party may provide in writing
from time to time. Any such notice mailed to such address shall be effective
<PAGE>
Exhibit 10.45
3M Financing Services
Master Lease Agreement
THIS MASTER LEASE AGREEMENT ("Agreement") is effective as of the date executed
by Lessor ("Effective Date") and is entered into by and between 3M FINANCING
SERVICES having an office at 55 Federal Road, Danbury, Connecticut 06810
(together with any successor or assignee, "Lessor"), and 1199 Mac, Inc. dba
Electronic Computer Imaging, a Corporation with its principal place of business
at 6601 Lyons Road Suite C-2, Coconut Creek, FL 33073 (together with any
successor or permitted assignee, "Lessee").
LEASE TERMS AND CONDITIONS:
1. LEASING. (a) Subject to the terms of this Agreement, Lessor agrees to
lease to Lessee and Lessee agrees to lease from Lessor the new or equivalent of
new equipment (the "Equipment") described in any schedule (each, a "Schedule")
signed by Lessee and executed by Lessor. Each Schedule will incorporate all the
terms of this Agreement and will constitute a separate agreement (each, a
"Lease") for lease of the Equipment and license for any operating or application
software (the "Software"). With respect to each Lease, capitalized terms not
defined in this Agreement will have the meanings stated in the applicable
Schedule. Unless it purchases the Equipment under Section 14(b) ("Options"),
Lessee does not have any right or interest in the Equipment except as a lessee.
This Agreement is effective from the Effective Date, and will continue until all
Leases have terminated or expired.
(b) If Software is included in the Description of Equipment, Lessee has
entered into a separate license for the Software with the licensor thereof.
Lessee's rights to the Software are governed by its license agreement with the
Software licensor. Lessee will have a continuing right to use the Software with
the Equipment in accordance with the terms of such license upon payment of all
amounts due under the Lease.
(c) If this is a Lease with a $1.00 or other fixed price Purchase Option,
Lessee agrees that the cash price and the cost of financing the Equipment have
been disclosed to its satisfaction and Lessee has freely chosen not to purchase
for cash but to lease the Equipment and to finance any Software over time
pursuant hereto.
2. NET LEASE. EACH LEASE IS A NET LEASE. LESSEE IS UNCONDITIONALLY
OBLIGATED TO PAY RENT AND OTHER AMOUNTS DUE UNDER SUCH LEASE REGARDLESS OF ANY
DEFECT OR DAMAGE TO EQUIPMENT OR SOFTWARE, OR LOSS OF POSSESSION, USE OR
DESTRUCTION FROM ANY CAUSE WHATSOEVER. LESSEE'S OBLIGATIONS CONTINUE UNTIL
SPECIFICALLY TERMINATED AS PROVIDED IN SUCH LEASE. LESSEE IS NOT ENTITLED TO ANY
ABATEMENT, REDUCTION, RECOUPMENT, DEFENSE, OR SET-OFF AGAINST RENT OR OTHER
AMOUNTS DUE TO LESSOR OR ITS ASSIGNEE, WHETHER ARISING OUT OF SUCH LEASE OR OUT
OF LESSOR'S STRICT LIABILITY OR NEGLIGENCE, FROM ANY THIRD PARTY, OR OTHERWISE.
EACH LEASE IS A "FINANCE LEASE" AS DEFINED IN ARTICLE 2A OF THE UNIFORM
COMMERCIAL CODE.
3. PURCHASE OF EQUIPMENT. (a) Lessor is not obligated to purchase or lease
Equipment, including the Software, unless before the Expiration Date on a
Schedule: (i) Lessor receives from Lessee a fully signed and completed
Agreement, Schedule and such other documents as Lessor may require: (ii) Lessor
has confirmed to its satisfaction, either in writing or pursuant to a telephone
audit, that the Equipment and any Software have been delivered and irrevocably
accepted by Lessee; (iii) Lessor has received from Supplier clear and
unencumbered title to the Equipment; and (iv) there is no Default (Section 13).
So long as no Default has occurred, Lessor appoints Lessee its agent to inspect
and accept the Equipment from Supplier simultaneously with acceptance of the
Equipment for lease. For each Lease, Lessee irrevocably authorizes Lessor to
adjust the Equipment Total Cost by no more than fifteen percent (15%) to account
for change orders or returns, invoicing errors and similar matters, any
adjustments required by commencement of any Lease after the applicable
Expiration Date or to make any Leases continuous and agrees to any resulting
adjustments in the TRANSACTION TERMS stated in the applicable Schedule. Lessor
will send Lessee a written notice stating the final Equipment Total Cost and
TRANSACTION TERMS, if different from those stated in the applicable Schedule.
(b) If Lessor has issued any purchase order, agreement or ancillary
documents (the "Purchase Agreement") for Equipment and/or Software but the Lease
does not commence, Lessor may assign all rights under the Purchase Agreement to
Lessee without recourse or warranty and Lessee will reimburse Lessor for all
expenses incurred, plus interest at the Overdue Rate (Section 17). Lessee agrees
that if a Default is declared or if Lessee fails to accept the Equipment or
Software for any reason, Lessee will remain liable to Supplier to honor the
purchaser's obligations under the Purchase Agreement. If Lessor has issued any
Purchase Agreement to the Supplier named in any Schedule, it is at the express
request and direction of Lessee. Lessee acknowledges that it may have rights
under such Purchase Agreement, and that it may contact Supplier for a
description of such rights or any warranties.
4. TERM AND RENT. The Initial Term begins on the acceptance by the Lessee
of the Equipment and Software (a "Lease Commencement Date"), and continues for
the Initial Term stated in the applicable Schedule. Rent accrues from the Lease
Commencement Date. Rent is payable either in advance or arrears as indicated in
the TRANSACTION TERMS contained in the applicable Schedule and on the same day
of each month as the Lease Commencement Date if the Lease Commencement Date is
on or before the 20th of the month. If the Lease Commencement Date is after the
20th of the month, Rent is payable on the first day of each month. If Rent is
not paid within ten (10) days of its due date, Lessee agrees to pay a late
charge of ten (10) cents per dollar on, and in addition to, such Rent, but not
exceeding the lawful maximum, if any, to compensate Lessor for additional
collection costs not contemplated by the Lease. Advance Rent, if any, is payable
upon execution by Lessee of a Schedule and is applied to the first Rent due and
then to the final Rents or, at Lessor's option, to the payment of any overdue
obligation of Lessee. Lessor is not required to: (i) refund any Advance Rent or
Rent unless the Lease does not commence: (ii) pay any interest on Advance Rent;
or (iii) keep Advance Rent in a separate account. Lessee agrees that Lessor may,
at the request and on behalf of Supplier or other third party, bill and collect
any amounts due for maintenance services provided by Supplier or such other
third party.
5. TAXES. Lessee agrees to pay promptly as additional Rent all license and
registration fees and all taxes (excluding taxes on Lessor's net income)
together with penalties and interest (collectively, "Taxes") assessed against
Lessor, Lessee, any Lease, the Equipment, the purchase (including purchase by
Lessee), sale, ownership, delivery, leasing, possession, use, operation or
return of the Equipment or Software or its proceeds. Lessor shall not be
required to contest any Taxes. Where permitted by applicable law, Lessee will
report and pay all Taxes; provided that if they are reported by Lessor, Lessee
will reimburse Lessor on demand for any Taxes paid by Lessor, or at Lessor's
option, Lessee shall pay a portion of estimated Taxes along with each payment of
Rent.
Lessee's Initials RLM
---
1
<PAGE>
6. USE, MAINTENANCE AND REPAIR. (a) Lessee agrees at its own expense to:
(i) maintain the Equipment and Software in good operating condition suitable for
certification by the manufacturer and in compliance with all applicable laws and
manufacturer requirements or recommendations; (ii) keep in place for the term of
each Lease a maintenance program covering the Equipment and Software which
complies with manufacturer's requirements; (iii) use the Equipment and Software
solely for business purposes, in the manner for which it was intended; (iv)
ensure that all Equipment and Equipment operations conform to all applicable
local, state and federal laws, health and safety guidelines; (v) pay all
expenses, fines, and penalties related to the use, operation, condition or
maintenance of the Equipment and Software; and (vi) comply with all license and
copyright requirements of any Software, whether or not included in a Lease.
Lessee agrees to permit periodic inspection of Equipment by Lessor upon
reasonable written notice by Lessor to Lessee.
(b) Lessee agrees not to attach to the Equipment any accessory, equipment
or device not leased from Lessor unless it is easily removable without damaging
the Equipment. Lessee agrees to pay all costs for parts, alterations, and
additions to the Equipment (including those required by law), all of which will
become the property of Lessor. Lessee agrees that it shall not under any
circumstances install any Equipment or Software inside any other personal
property. Lessor and Lessee intend the Equipment to remain personal property of
Lessor.
(c) Provided that there is no Default, Lessee is authorized on behalf of
Lessor to enforce in its own name (and at its own expense) any warranty,
indemnity or right to damages related to the Equipment or Software which Lessor
may have against the manufacturer or Supplier.
7. DISCLAIMER OF WARRANTIES. Lessor warrants that, so long as no Default
has occurred and is continuing, Lessor or its assignee will not interfere with
Lessee's use and possession of the Equipment and Software. LESSOR MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, DIRECT OR INDIRECT, EXPRESS OR IMPLIED.
AS TO ANY MATTER WHATSOEVER INCLUDING, WITHOUT LIMITATION, THE DESIGN, CAPACITY,
MATERIAL, WORKMANSHIP, OPERATION, CONDITION, CONFORMITY WITH ANY SPECIFICATIONS,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, HIDDEN OR LATENT DEFECT, OR
AS TO ANY PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT WITH RESPECT TO THE
EQUIPMENT OR SOFTWARE. LESSEE ACKNOWLEDGES THAT (i) LESSEE SELECTED THE
EQUIPMENT AND SOFTWARE WITHOUT RELIANCE ON LESSOR, (2) THE EQUIPMENT AND
SOFTWARE ARE LEASED FROM LESSOR "AS-IS, WHERE-IS", (3) NEITHER LESSOR NOR
LESSOR'S ASSIGNEE IS THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT OR SOFTWARE
OR THE REPRESENTATIVE OF EITHER. (4) NEITHER LESSOR NOR LESSOR'S ASSIGNEE IS
REQUIRED TO ENFORCE ANY MANUFACTURER'S WARRANTIES ON BEHALF OF ITSELF OR OF
LESSEE, (5) NEITHER LESSOR NOR LESSOR'S ASSIGNEE IS OBLIGATED TO INSPECT THE
EQUIPMENT OR SOFTWARE, AND (6) NO TERM OR CONDITION OF ANY LEASE MAY BE ALTERED
OR WAIVED BY ANY SALESMAN OR AGENT OF ANY SUPPLIER. NEITHER LESSOR NOR LESSOR'S
ASSIGNEE SHALL BE LIABLE FOR ANY LIABILITY, LOSS OR DAMAGE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT OR SOFTWARE OR BY ITS INADEQUACY OR BY ANY EQUIPMENT
OR SOFTWARE DEFECT, OR ANY FAILURE TO PROVIDE MAINTENANCE SERVICES, WHETHER OR
NOT LESSOR OR ITS ASSIGNEE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
LIABILITY, LOSS OR DAMAGE. NEITHER LESSOR NOR LESSOR'S ASSIGNEE SHALL HAVE ANY
LIABILITY TO LESSEE OR ANY OTHER PERSON WITH RESPECT TO ANY OF THE FOLLOWING,
REGARDLESS OF ANY NEGLIGENCE OF LESSOR: (1) THE USE, CONDITION, OPERATION OR
PERFORMANCE OF THE EQUIPMENT OR SOFTWARE; (2) ANY INTERRUPTION OF SERVICE, LOSS
OF BUSINESS OR ANTICIPATED PROFITS, OR INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES; OR (3) THE DELIVERY, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR
REPLACEMENT OF THE EQUIPMENT OR SOFTWARE.
8. LOSS OR DAMAGE: CASUALTY VALUE. Lessee assumes the risk of any
disappearance of or damage to any part of the Equipment or Software from any
cause whatsoever from the time the Equipment or Software is shipped to Lessee
until it is returned to Lessor pursuant to Section 14(b). A casualty to any part
of the Equipment or Software may, at Lessor's discretion, be considered a
casualty as to all the Equipment and Software. Within ten (10) days of learning
of any condemnation or other circumstance where the Equipment or Software is, in
Lessee's reasonable opinion, irreparably damaged or permanently unfit for use
("Casualty"), Lessee will provide Lessor full details of the Casualty and will,
at Lessor's option, promptly do one of the following:
(A) Repair the Equipment or Software so that it is in good condition and
working order.
(B) Replace the Equipment or Software with like equipment or software of
the same or later model, in good condition and working order. Lessee must
provide Lessor with title to the replacement equipment free and clear of
all liens and encumbrances.
(C) Prepay Lessee's obligations under the applicable Lease with respect to
the lost, stolen or damaged Equipment or Software. The amount required to
be prepaid under option (C) shall be the sum of
(i) all Rents due under such Lease but unpaid at the time of
prepayment, plus
(ii) all other amounts due under the terms of such Lease but unpaid
at the time of prepayment, plus
(iii) that portion of all future Rents to become due under the Lease
relating to the lease of such Equipment, discounted to their present
value at the agreed lease charge rate applicable to the Lease or the
lowest rate permitted by law, plus
(iv) if applicable, the Fair Market Value of such Equipment
(determined in the manner described in Section 1 4(b)) calculated as
of the date of such prepayment of Lessee's obligations, discounted
to present value at the agreed lease charge rate applicable to the
Lease or the lowest rate permitted by law, plus
(v) if applicable, the Fixed Purchase Option to be paid at the end
of the Initial Term (plus any applicable tax), discounted to present
value at the agreed lease charge rate applicable to the Lease or the
lowest rate permitted by law, plus
(vi) interest on the sum of the amounts calculated pursuant to
subsections (i) through (v) above accruing to the date of payment at
the Overdue Rate (Section 17(f)).
The sum of the amounts calculated pursuant to subsections (i) through (vi)
above is collectively referred to as, the "Casualty Value".
Lessor will forward to Lessee any insurance proceeds which Lessor may
receive for lost, damaged or destroyed Equipment or Software provided (a) Lessee
has satisfied all of its obligations to Lessor under this Section, and (b)
Lessee is not otherwise in default under the terms of this Agreement or any
Lease.
9. INSURANCE. Lessee agrees, at its own expense, to maintain primary
insurance coverage consisting of (i) actual cash value all risk insurance on the
replacement value of Equipment and Software, naming Lessor as loss payee and
(ii) single limit public liability and property damage insurance of not less
than $500,000 per occurrence (or such other amounts as Lessor may require by
notice to Lessee) naming Lessee as insured and Lessor as additional insured. All
insurance policies shall be in such form, amount and deductibles as are
satisfactory to Lessor, All insurance policies must provide for not less than
thirty (30) days written notice to Lessor of material changes in or cancellation
of the policy. Premiums for all such insurance will be prepaid. Lessee will
deliver evidence of such insurance to Lessor or its designee upon request and
will promptly provide to Lessor all information pertinent to any occurrence
which may become the basis of a claim. Lessee will not make claim adjustments
with insurers except with Lessor's prior written consent. If Lessee fails to
provide the required insurance, Lessor may but is not obligated to insure its
interest in the Equipment and Software and Lessee agrees to pay the direct or
financed cost thereof (at a rate not to exceed the highest annual rate permitted
by applicable law) and a charge for costs incurred in connection therewith
promptly upon receipt of invoices.
10. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and
warrants to Lessor that as of the date of each Lease and of each Lease
Commencement Date:
(a) Lessee has adequate power and capacity to enter into this Agreement,
each Lease, any documents relative to the purchase of the Equipment leased under
such Lease and to the license of all Software and any other documents required
to be delivered in connection with the Lease (collectively, the "Documents");
the Documents have been duly authorized, executed and delivered by Lessee and
constitute valid, legal and binding agreements, enforceable in accordance with
their terms; there are no proceedings presently pending or threatened against
Lessee which will impair its ability to perform under the Documents; and all
information supplied to Lessor is accurate and complete.
(b) Lessee's entering into the Lease and leasing the Equipment and
licensing any Software does not and will not: (i) violate any judgment, order,
or law applicable to the Lease, Lessee or Lessee's certificate of incorporation
or by-laws (if Lessee is a corporation) or Lessee's partnership agreement (if
Lessee is a partnership); or (ii) result in the creation of any lien, security
interest or other encumbrance upon the Equipment or Software.
(c) All financial data of Lessee or of any consolidated group of companies
of which Lessee is a member ("Lessee Group"), delivered to Lessor have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial position and results from
operations of Lessee, or of the Lessee Group, as of the stated date(s) and
period(s). Since the date of the most recently delivered financial data, there
has been no material adverse change in the financial or operating condition of
Lessee or of the Lessee Group.
(d) If Lessee is a corporation or partnership, it is and will be validly
existing and in good standing under laws of the state of its incorporation or
organization; the persons signing the Lease are acting with the full authority
of its board of directors or partners (if Lessee is a partnership) and hold the
offices indicated below their signatures, which are genuine.
11. LESSEE'S AGREEMENTS. (a) LESSEE AGREES THAT IT WILL KEEP THE EQUIPMENT
AND SOFTWARE FREE AND CLEAR FROM ALL CLAIMS, LIENS AND ENCUMBRANCES AND WILL NOT
ASSIGN, SUBLET, OR GRANT A SECURITY INTEREST IN THE EQUIPMENT OR SOFTWARE OR IN
ANY LEASE WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. If and to the extent that any
Lease is deemed a security agreement under the Uniform Commercial Code, and
otherwise for precautionary purposes only, Lessee grants Lessor a first priority
security interest in its interest in (a) Equipment and Software governed by any
Lease. Such security interest secures Lessee's obligations with respect to each
Lease. Lessee will notify Lessor in writing, with all details, within ten (10)
days after it learns of the attachment of any lien on any Equipment or Software.
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(b) Lessee will not relocate any unit of Equipment or Software from the
Equipment Location stated on a Schedule without the prior written approval of
Lessor (which shall not be unreasonably withheld). Lessee agrees to notify
Lessor immediately in writing of any change in the Equipment's or Software's
location, in Lessee's corporate or business name or in the location of its
executive offices.
(c) This subparagraph (c) only applies to a Lease with a Fair Market Value
Purchase Option. Lessee will not take or fail to take any action which Lessor
determines will result in the disqualification of any Equipment leased for, or
the recapture of, all or any portion of the accelerated cost recovery deductions
permitted to Lessor by the Internal Revenue Code of 1986, as amended. Lessee
will indemnify Lessor for any loss in Lessor's after tax economic yields and
cash flows caused by Lessee's acts or failures to act. Lessee agrees that the
Rent and Advance Rent have been calculated on Lessor's current effective
corporate income tax rate. If Lessor is not taxed at such tax rate during the
Initial Term because of Congressional enactment of any law, Lessor has the right
to increase the Rent and Advance Rent and adjust the Casualty Value (Section
8(c)) in such a manner as will both (i) take into account that such assumption
is no longer correct and (ii) preserve Lessor's after tax economic yields and
cash flows. A change in the Rent, Advance Rent, or Casualty Value is effective
on the effective date of such law.
(d) Lessor may inspect the Equipment and Software during normal business
hours. At Lessor's request, Lessee will attach identifying labels supplied by
Lessor showing Lessor's ownership in a prominent position on each unit of
Equipment. Lessor shall have the right to remove any Equipment or Software
without notice and to declare the Lease in default if Equipment or Software is
determined to be improperly used, maintained, operated or stored.
(e) Within one hundred twenty (120) days of the close of each fiscal year
of Lessee, Lessee will deliver to Lessor Lessee's balance sheet and profit and
loss statement, certified by a recognized firm of certified public accountants.
Upon request, Lessee will deliver to Lessor duplicate copies of Lessee's most
recent quarterly financial report.
12. INDEMNIFICATION. Lessee agrees to indemnify, defend and keep harmless
Lessor, its agents, successors and assigns, from and against any and all losses,
damages, penalties, claims and actions, including reasonable attorney's fees and
expenses, arising out of or in any way related to the Equipment or the Software
including, without limitation, (i) the selection, manufacture, purchase,
ownership, possession, lease, acceptance or rejection, delivery, maintenance,
operation or use of the Equipment or Software; or (ii) the violation of any
software license; or (iii) the condition of Equipment or Software sold or
disposed of after or as a result of use by Lessee excluding, however, any of the
foregoing to the extent attributable to Lessor's gross negligence or willful
misconduct. Lessee shall give Lessor prompt notice of any such claim or
liability received by Lessee. The provisions of this Section shall survive the
termination of any Lease or the applicable statute of limitations period.
13. DEFAULT: REMEDIES. (a) Lessee shall be in default (a "Default") if,
with respect to a Lease: (i) Lessor has not received Advance Rent or any other
Rent within ten (10) days after its due date; or (ii) Lessee or any guarantor
violates any other term of a Lease or any term of a guaranty and fails to
correct such violation within ten (10) days after written notice from Lessor; or
(iii) Lessee violates the terms of any license or agreement for Software; or
(iv) Lessee or any guarantor becomes insolvent, is liquidated or dissolved,
merges, transfers substantially all of its assets or stock, stops doing business
or assigns its rights or property for the benefit of creditors; or (v) a
petition is filed by or against Lessee or any guarantor under Title 11 of the
United States Code or any successor or similar law; or (vi) (for individuals)
Lessee or any guarantor dies or a guardian is appointed for Lessee's or
guarantor's person; or (vii) Lessee (or any affiliate) is in default of or fails
to fulfill the terms of any other agreement between Lessee and Lessor or any
affiliate of either; or (viii) without Lessor's prior written consent, Lessee
attempts to remove, sell, transfer, encumber, part with possession, or sublet
any Equipment or Software.
(b) At any time after a Default, Lessor may in its sole discretion declare
a default under this Agreement, any Lease and any other agreement between Lessee
(or any affiliate) and Lessor or its affiliate and may exercise any or all of
the following remedies: (i) provide written notice to Lessee of default; (ii) as
liquidated damages for loss of a bargain and not as a penalty, declare due and
payable (A) the entire balance of future Rent for the full term of the Lease,
discounted to present value at the agreed lease charge rate applicable to the
Lease or the lowest rate permitted by law, plus (B) if applicable, an amount
equal to the Fixed Purchase Option amount set forth in the Lease, discounted to
present value at the agreed lease charge rate applicable to the Lease or the
lowest rate permitted by law, plus (C) if applicable, Lessor's reasonable
estimate of the fair market value of like equipment, determined as of the date
of such Default, discounted to present value at the agreed lease charge rate
applicable to the Lease or the lowest rate permitted by law, plus (D) any Rent
or other amounts then due and payable under the Lease, plus (E) interest on such
sum accruing to the date of payment at the Overdue Rate (Section 17(f)). Lessor
has the right to require Lessee to make the Equipment and Software available to
Lessor or its agents during reasonable business hours or to return it to Lessor
as required by Section 14(a), or Lessor may repossess the Equipment and
Software, with or without legal process, provided that Lessor shall not breach
the peace in so doing. Lessor may, but is not required to, sell or lease the
Equipment in bulk or in individual pieces. If Lessor intends to sell the
Equipment, it may do so in a public or private sale and is not required to give
notice of such sale or of any advertising. The Equipment need not be displayed
at the sale. Lessee waives its right to object to the notice of the time or
place of sale or lease and to the manner and place of any advertising. Lessor
may, without paying rent or providing insurance, use the Equipment Location to
store the Equipment or conduct any sale. The proceeds of any sale or lease will
be applied in the following order of priorities: (1) to pay all of Lessor's
expenses in taking, moving, holding, repairing and disposing of the Equipment
and Software, if applicable; then, (2) to pay any late charges and accrued
interest; then, (3) to pay accrued and unpaid Rent together with the net present
value of any future Rent, the net present value of any Fixed Purchase Option or
any Estimated Fair Market Value of like equipment, and all other due and unpaid
sums. Any remaining proceeds will be used to reimburse Lessee for payments which
it made to reduce the amounts owed to Lessor in the preceding sentence. If the
Lease has a Fair Market Value Purchase Option, Lessor may keep any excess. If
the proceeds of any sale or lease are not enough to pay the amounts owed to
Lessor under this Section, Lessee will promptly pay the deficiency.
(c) Lessor's remedies for Default may be exercised instead of or in
addition to each other or any other legal or equitable remedies. Lessor has the
right to set-off any sums received from any source (including insurance
proceeds) against Lessee's obligations under each Lease. Lessee waives any
defense based on statutes of limitations or waiver of rights in actions for
damages. Lessor's waiver of any Default is not a waiver of its rights with
respect to a different or later Default.
14. OPTIONS. (a) At least ninety (90) days prior to the end of the term of
a Lease, or in the event of a Default, Lessee agrees, at its own expense and
risk, (i) to make the Equipment available for operational inspection by
potential purchasers, (ii) to have the manufacturer or an independent expert
selected by Lessor inspect, examine and certify that the Equipment is operating
within the manufacturer's specifications; and (iii) to provide that all
Equipment is cleaned and acceptable (free from all Lessee installed markings),
and in such condition so that it may be immediately installed and placed into
use in a similar operating environment.
(b) At the end of the term of a Lease, or in the event of a Default,
Lessee agrees, at its own expense and risk, (i) to immediately cease using the
Equipment and Software; (ii) to provide to Lessor one set of operating manuals
detailing Equipment configuration, operating requirements and other technical
data concerning the set-up and operation of the Equipment including replacement
and additions thereto, such that all documentation is completely up to date:
(iii) to pay for any repairs necessary to place the Equipment or Software in the
same condition as when received by Lessee, reasonable wear and tear excepted;
(iv) without unreasonable delay, to provide for the disassembly, deinstallation,
packing and transporting of the Equipment which shall include: (1)
deinstallation by the manufacturer's representative (including all wire, cable
and mounting hardware), (2) dismantling and handling in accordance with the
manufacturer's specifications or normal industry accepted practices for new
systems and (3) providing that all keys belonging to the Equipment are wired
together and secured to a major component of the system; and (v) to deliver the
Equipment and all copies of the Software, freight prepaid, to a carrier selected
by Lessor for shipment to a location selected by Lessor.
(c) At the end of the term of a Lease, Lessor has the right to attempt
resale of the Equipment from Lessee's facility with the Lessee's full
cooperation and assistance. Lessee agrees to provide to Lessor, at no expense to
Lessor, one hundred twenty (120) days of free storage. During this period the
Equipment must remain operational, provided with adequate electrical power,
lighting, heat or air conditioning necessary to maintain and demonstrate the
Equipment to any potential buyer.
(d) So long as no Default has occurred, Lessee has the option (i) to
purchase all and not less than all Equipment under a Lease at the end of the
Initial Term or any renewal term on an "AS-IS, WHERE-IS" BASIS WITHOUT
REPRESENTATION OR WARRANTY, for a cash purchase price as stated on the Schedule
equal to (A) if applicable, the Equipment's Fair Market Value (plus any
applicable sales taxes) determined as of the end of such Initial Term or such
renewal term, or (B) if applicable, any other stated Fixed Purchase Option
amount (plus any applicable sales tax) or (ii) to extend the Initial Term or any
renewal term of a Lease for the then Fair Market Rental of the Equipment. Unless
the Fixed Purchase Option price is $1.00, Lessee must give irrevocable written
notice at least thirty (30) days before the end of the Initial Term to Lessor
that it will purchase the Equipment or extend the Initial Term. If a Lease is
renewed, Lessee's obligations (other than the amount of Rent to be paid) will
remain unchanged. For the purposes of this Section, "Fair Market Value" or "Fair
Market Rental" means the price or rental which Lessee and Lessor agree to which
shall not be less than the price or rental which a willing buyer or lessee (who
is not a used equipment dealer) would pay for the Equipment in an arm's-length
transaction to a willing seller or lessor who is under no compulsion to sell or
lease the Equipment. In determining "Fair Market Value" or "Fair Market Rental":
(i) the Equipment's assumed to have been maintained and returned as required by
the Lease; (ii) in the case of any installed Equipment, the Equipment will be
valued on an installed basis, and (iii) costs of removal from the Equipment's
current location will not be included.
(e) At the end of the term of a Lease, or in the event of a Default, until
Lessee has complied with Sections 14 (a), and (b) or has purchased the Equipment
pursuant to Section 14(d), Lessee shall pay Lessor Rent, as liquidated damages
for lost rentals and not as a penalty, such payment to be computed on a daily
basis (with one day's rent being 1/30th of the Rent) until the Equipment is
returned or purchased. Lessee's obligations and all other provisions of the
Lease continue until such time.
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15. ASSIGNMENT. LESSOR MAY, WITHOUT NOTICE TO LESSEE, ASSIGN ITS INTEREST
IN A LEASE, ITS RIGHTS TO RECEIVE RENT AND OTHER SUMS DUE HEREUNDER AND ITS
RIGHTS IN THE EQUIPMENT, IF REQUESTED, LESSEE AGREES TO ACKNOWLEDGE, IN WRITING,
ANY ASSIGNMENT. LESSEE AGREES TO SUCH ASSIGNMENT, AND FURTHER AGREES THAT, BY
SUCH ASSIGNMENT: (1) THE ASSIGNEE SHALL NOT BE CHARGEABLE WITH OR ASSUME ANY OF
THE OBLIGATIONS OR LIABILITIES OF LESSOR, AND (2) THE ASSIGNEE SHALL HAVE ALL
THE RIGHTS OF LESSOR UNDER THE LEASE, INCLUDING BUT NOT LIMITED TO THE RIGHT TO
GIVE ALL CONSENTS, TO RECEIVE TITLE TO THE EQUIPMENT AND TO EXERCISE ALL
REMEDIES THEREUNDER, AND (3) LESSEE SHALL, IN ACCORDANCE WITH THE TERMS OF SUCH
LEASE AND ON INSTRUCTION FROM LESSOR, PAY ASSIGNEE ALL RENTS AND OTHER AMOUNTS
DUE UNDER SUCH LEASE AS AND WHEN DUE, WITHOUT DEDUCTION OR OFFSET,
NOTWITHSTANDING ANY CLAIM LESSEE MAY HAVE AGAINST LESSOR, OR RELATIVE TO THE
EQUIPMENT OR SOFTWARE, OR ANY OTHER CLAIM OF LESSEE ARISING PRIOR TO THE
ASSIGNMENT, AND (4) LESSEE WILL NOT ASSERT AGAINST THE ASSIGNEE ANY DEFENSE,
CLAIM, COUNTERCLAIM, OR SET-OFF ON ACCOUNT OF BREACH OF WARRANTY, BREACH OF
SERVICE AGREEMENT OR OTHERWISE IN ANY ACTION FOR RENT OR POSSESSION BROUGHT BY
LESSOR'S ASSIGNEE, AND WILL SETTLE ALL WARRANTY, MECHANICAL, SERVICE, OR OTHER
CLAIMS WITH RESPECT TO THE EQUIPMENT OR SOFTWARE DIRECTLY WITH THE LESSOR OR
SOFTWARE LICENSOR, AND ASSIGNEE SHALL NOT BE LIABLE FOR SUCH SERVICE OR OTHER
CLAIMS, LESSEE MAY ASSIGN A LEASE ONLY WITH THE PRIOR WRITTEN CONSENT OF LESSOR
OR ITS ASSIGNEE.
16. LESSEE'S WAIVERS. LESSEE AND LESSOR EACH WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY LITIGATION ARISING FROM OR RELATED TO A LEASE. To the extent
permitted by applicable law, Lessee hereby waives all rights and remedies
conferred upon a Lessee by Article 2A (Sections 508-522) of the Uniform
Commercial Code, including but not limited to Lessee's rights to: (i) cancel or
repudiate a Lease; (ii) reject, revoke acceptance or accept partial delivery of
the Equipment or Software; (iii) recover damages from Lessor for any breach of
warranty or for any other reason; and (iv) grant a security interest in any
Equipment or Software in Lessee's possession. To the extent permitted by
applicable law, Lessee also hereby waives any rights now or hereafter conferred
by statute or otherwise (a) which may require Lessor to sell, lease or otherwise
use any Equipment or Software in mitigation of Lessor's damages hereunder, or
(b) which may otherwise limit or modify any of Lessor's rights or remedies
hereunder, or (c) which may require Lessor to provide Lessee with notice of
default or intent to accelerate amounts becoming due.
ANY ACTION BY LESSEE AGAINST LESSOR FOR ANY DEFAULT UNDER ANY LEASE,
INCLUDING BREACH OF WARRANTY OR INDEMNITY, SHALL BE COMMENCED WITHIN ONE (1)
YEAR AFTER ANY SUCH CAUSE OF ACTION ACCRUES. Lessor shall not be liable to
Lessee or any other party for specific performance of any Lease or for any
damages, losses, delays or failure to deliver the Equipment or Software.
17. MISCELLANEOUS. (a) Lessee agrees that (i) for income tax purposes
only, Lessor is treating Lessee as owner of any Equipment unless leased pursuant
to a Lease with a Fair Market Value Purchase Option and (ii) Lessee has not
received tax advice from Lessor. By signing a Lease with a Fixed Purchase
Option, Lessee agrees to pay Rent (consisting of an Equipment payment and, if
applicable, a Software payment) which includes a principal amount based on the
cost of the Equipment and the Software and a lease charge derived from a lease
charge (interest) rate. The lease charge portion of the monthly Equipment
payment and Software payment may be determined by applying to the Equipment
Total Cost the rate which will amortize such Equipment Total Cost (adjusting for
any Advance Rent) down to the amount of the Fixed Purchase Option at a constant
rate over the Initial Term by payment of the monthly Rent. The lease charge
(interest) rate is the constant rate referred to in the preceding sentence. The
lease charge (interest) rate can also be calculated using the Equipment Total
Cost as the present value, the Purchase Option as the future value, the Rent as
the payment and the stated Term. The lease charge (interest) rate may be higher
than the actual annual interest rate because of the amortization of certain
payments made to the Supplier, if applicable. LESSOR AND LESSEE EACH AGREE THAT
IT INTENDS TO COMPLY WITH ALL APPLICABLE LAWS, INCLUDING THOSE CONCERNING THE
REGULATION OF INTEREST. If this transaction were re-characterized as a
financing, no lease charge, late charge, or post maturity interest charge is
intended to exceed the maximum amount of time price differential or interest, as
applicable, permitted to be charged or collected by applicable law. If this
transaction were re-characterized as a financing and one or more of such charges
exceeded such maximum, then such charges will be reduced to the legally
permitted maximum charge and any excess charge will be used to reduce the
initial value of the Equipment or refunded. In no event shall Lessor charge or
receive nor shall Lessee pay any amounts in excess of those permitted by law.
(b) TIME IS OF THE ESSENCE IN EACH LEASE. Lessor's failure at any time to
require that Lessee strictly perform its obligations under any Lease will not
prevent Lessor from later requiring such performance. Lessee agrees, upon
Lessor's request, to sign any document presented by Lessor from time to time to
protect Lessor's rights in the Equipment and Software. Lessee also agrees to pay
Lessor's attorneys" fees and out-of-pocket expenses in protecting or enforcing
its rights under a Lease up to the amount permitted by law.
(c) All required notices will be considered to have been given if sent by
registered or certified mail or recognized overnight courier service to Lessor
at its address stated above and to Lessee at its address stated in the Lease or
to such other place as such addressee may have designated in writing.
(d) Each Lease constitutes the entire agreement of the parties with
respect to the lease of the Equipment and financing of the Software and
supersedes and incorporates all prior oral or written agreements or statements.
So long as there is no Default, Lessor shall not interfere with Lessee's quiet
enjoyment of the Equipment or Software. If a provision of a Lease is declared
invalid under law, the affected provision will be considered omitted or modified
to conform to applicable law. All other provisions will remain in full force and
effect.
(e) If Lessee fails to comply with any provision of a Lease, Lessor has
the right, but is not obligated, to have such provision brought into compliance.
This right is in addition to Lessor's right to declare a Default. All expenses
incurred by Lessor in bringing about such compliance will be considered
additional Rent which is due to Lessor within five (5) days after the date
Lessor sends to Lessee a written request for payment.
(f) In the event of any Default, all overdue payments will bear interest
at the Overdue Rate, which is the lower of twenty percent (20%) per annum or the
maximum rate allowed by law. Interest will accrue daily until payment in full is
received.
(g) If at Lessee's request, Lessor agrees in its sole discretion to permit
the early termination of any Lease, Lessee agrees to pay Lessor a fee to
compensate Lessor for its expenses and for the privilege of so doing.
(h) All of Lessor's rights (including indemnity rights) under a Lease
survive the Lease's expiration or termination, and are enforceable by Lessor,
its successors and assigns.
(i) Lessee hereby grants to Lessor the power to sign Lessee's name and
generally act on behalf of Lessee to execute and file financing statements,
notices of lien and other documents pertaining to any or all of the Equipment
(including the Software).
THIS AGREEMENT IS BINDING UPON LESSEE AND UPON EXECUTION, BY LESSOR AND IS
FOR THE BENEFIT OF THE PARTIES HERETO, AND THEIR PERMITTED SUCCESSORS AND
ASSIGNS. THIS AGREEMENT SHALL BE EFFECTIVE ONLY WHEN APPROVED AND EXECUTED BY
LESSOR AT ITS OFFICES IN CONNECTICUT, SHALL BE DEEMED TO BE MADE IN CONNECTICUT
AND SHALL BE GOVERNED BY CONNECTICUT LAW. LESSEE AGREES THAT ALL LEGAL ACTIONS
IN CONNECTION WITH THIS AGREEMENT MAY, AT LESSOR'S OPTION, TAKE PLACE IN
CONNECTICUT.
THE TERMS OF EACH LEASE SHOULD BE READ CAREFULLY, BECAUSE ONLY THOSE TERMS
INCLUDED HEREIN AND THEREIN AND NOT ANY ORAL PROMISES OR TERMS NOT INCLUDED IN A
WRITTEN LEASE ARE ENFORCEABLE. A LEASE MAY NOT BE CHANGED EXCEPT BY WRITTEN
AGREEMENT SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTY AGAINST WHOM IT IS
TO BE ENFORCED. LESSEE IRREVOCABLY AUTHORIZES LESSOR TO PREPARE AND SIGN ON
BEHALF OF LESSEE ANY INSTRUMENT NECESSARY OR EXPEDIENT FOR FILING, RECORDING OR
PERFECTING THE INTEREST OF LESSOR IN EACH LEASE, THE RELATED EQUIPMENT OR
SOFTWARE AND THE PROCEEDS THEREOF AND AGREES TO PAY THE COST THEREOF AND OF
PREPARATION OF LEASE DOCUMENTATION.
NO LEASE ENTERED INTO IN CONNECTION WITH THIS AGREEMENT MAY BE CANCELED
PRIOR TO THE EXPIRATION OF THE INITIAL TERM WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR. LESSEE WARRANTS TO LESSOR THAT THE EQUIPMENT AND SOFTWARE WILL BE USED
FOR BUSINESS OR COMMERCIAL PURPOSES ONLY.
LESSOR: 3M Financing Services LESSEE: 1199 Mac, Inc. dba Computer Imaging
By: By: /s/ Robert L. McDowell
------------------------- -----------------------
Robert L. McDowell
- ----------------------------- --------------------------
(Print or Type, Name) (Print or Type, Name)
PRESIDENT
- ----------------------------- --------------------------
(Print or Type Title) (Print or Type Title)
Date: Date:
------------------------- ---------------------
Social Security Or Taxpayer ID No.59-2732028
----------
4
<PAGE>
3M Financing Services
Schedule No. 001
THIS SCHEDULE to Master Lease Agreement dated October 10, 1996 ("Schedule")
incorporates all of the terms of the referenced Master Lease Agreement
("Agreement"). This Schedule and the Agreement as it relates to this Schedule
constitutes a lease ("Lease") for the equipment including the applicable
software (collectively referred to as the "Equipment") described below between
3M Financing Services ("Lessor") and the Lessee indicated below. All terms used
and not defined in this Schedule have the definitions stated in the Agreement.
<TABLE>
<CAPTION>
<S> <C> <C>
A. LESSEE: LEGAL NAME: 1199 Mac, Inc. dba Electronic Computer Imaging
TRADE NAME (if any):
ADDRESS: 6601 Lyons Road Suite C-2
Coconut Creek, FL 33073
B. SUPPLIER: NAME: 3m Commercial Graphics
3M Center
St Paul MN 55144
C. EQUIPMENT LOCATION:
Street Address: 6601 Lyons Road Suite C-2
County: Broward
City, State Zip: Coconut Creek, FL 33073
D. DESCRIPTION OF EQUIPMENT: 3M Graphic Printer
Equipment Type/Model & Serial/ID Numbers Number of Units Cost
- ---------------------------------------- --------------- ------------
<S> <C> <C>
3M Graphic Printer 9612 1 $226,276.00
Color Image Processor(ultra sparc)
2.1 GB add'l Internal Disk Drive for color image
processo, Laminator, Orca III w/ silent air
compressor 3.0 software for 9612 Scanner, Howtek
D45OO including COSmyk Bd, Mounting Station Spare
Drum & cable, Color Densitometer (X-Rite 4O4G)
Equipment Price: $226,276.00
-----------
Sales Tax: $13,576.56
-----------
Freight:
-----------
Delivery and Installation:
-----------
Service
-----------
Other:
-----------
Equipment Total Cost: $239,852.56
-----------
L TRANSACTION TERMS:
Advance Rent: $9,277.36 Purchase Option (Equipment only):
Sales Tax: Fair Market Value
Total Advance Rent: $9,277.36 X Fixed $1.00
Fixed Purchase Option in GA, MD, NM, TX or WI: % Rate
Initial Term (# of Months): 36 (in Advance)
Monthly Rent: 3 at $0.00
(plus any 3 at $4,638.68
applicable 30 at $9,277.36
taxes) at
at
at
</TABLE>
Commitment to Lease expires on 01/09/97 ("Expiration Date").
F. INDEXING: The Lease Rate Factor (determined by dividing Rent by Total
Equipment Cost) charged has been calculated, in part, using an interest rate
based on the 3-year U.S. Treasury Constant Maturity of 6.29% ("Original Treasury
Rate") as published in the Wall Street Journal on 9/16/96. This Lease Rate
Factor will be held for thirty (30) days to 10/31/96 (the "Rate Expiration
Date"). If Lessee does not accept the Equipment on or before the Rate Expiration
Date, the Lease Rate Factor will be adjusted as follows: If the rate of the
3-year U.S. Treasury Constant Maturity on the Monday immediately preceding the
Lease Commencement Date of Schedule No. 001 is greater or lesser than the
Original Treasury Rate, Rent under Schedule No, 001 will be increased or
decreased, as appropriate, by adjusting the Lease Rate Factor by approximately
0.00012 for each twenty-five (25) basis point change (or portion thereof, in
which case the adjustment will be pro-rated) from the Original Treasury Rate.
<PAGE>
3M Financing Services
Schedule No. 002
THIS SCHEDULE to Master Lease Agreement dated October 10, 1996 ("Schedule")
Incorporates all of the terms of the referenced Master Lease Agreement
("Agreement"). This Schedule and the Agreement as it relates to this Schedule
constitutes a lease ("Lease") for the equipment including the applicable
software (collectively referred to as the "Equipment") described below between
3M Financing Services ("Lessor") and the Lessee indicated below. All terms used
and not defined In this Schedule have the definitions stated in the Agreement.
A. LESSEE: LEGAL NAME: 1199 Mac, Inc.
TRADE NAME (if any): dba Electronic Computer Imaging
ADDRESS: 6601 Lyons Road, Suite C-2
Coconut Creek, FL 33073
B. SUPPLIER: NAME: 3M
3M Center
St. Paul MN 55144
C. EQUIPMENT LOCATION:
Street Address: 6601 Lyons Road, Suite C-2
County: Broward
City, State Zip: Coconut Creek, FL 33073
D. DESCRIPTION OF EQUIPMENT: Graphics Equipment
<TABLE>
<CAPTION>
Equipment Type/Model & Serial/ID Numbers Number of Units Cost
- ---------------------------------------- --------------- ------------
<S> <C> <C>
Used Raster Graphics 5442 1 $98,030.00
Color Image Processor 1
Ultra Sparc 1/200E with 2.1 Internal 1
& 9.1 External HD Color Image Processor 1
Software for Second WS 1
Adobe CPSI License for 5442 1
Adobe CPSI License for 36" TIJ Printer 1
Scotchprint Material 1
Equipment Price: $98,030.00
-----------
Sales Tax: $21,084.80
-----------
Freight:
-----------
Delivery and Installation: $1 ,900,00
-----------
Service
-----------
Other: Refinance 7004802-001 $251,483.29
-----------
Equipment Total Cost: $372,498.09
-----------
E. TRANSACTION TERMS:
Advance Rent: $16,479.32 Purchase Option (Equipment only):
Sales Tax: Fair Market Value
Total Advance Rant: $16,479.32 X Fixed $1.00
Fixed Purchase Option In GA, MD, NM,
TX or WI: % Rate
Initial Term (# of Months): 60 (in Advance)
Monthly Rental: 1 at $16,479.32
(plus any 58 at $8,239.66
applicable 1 at
taxes) at
at
at
</TABLE>
Commitment to Lease expires on November 1, 1997 ("Expiration Date").
F. INDEXING: The Lease Rate Factor (determined by dividing Rent by Total
Equipment Cost) charged has been calculated, in part, using an interest rate
based on the 5-year U.S. Treasury Constant Maturity of 6.13% ("Original Treasury
Rate") as published in the Wall Street Journal on 07/21/97 This Lease Rate
Factor will be held for thirty (30) days to 09/25/97 (the "Rate Expiration
Date"). If Lessee does not accept the Equipment on or before the Rate Expiration
Date, the Lease Rate Factor will be adjusted as follows: If the rate of the
5-year U.S. Treasury Constant Maturity on the Monday immediately preceding the
Lease Commencement Date of Schedule No. 002 is greater or lesser than the
Original Treasury Rate, Rent under Schedule No. 002 will be increased or
decreased, as appropriate, by adjusting the Lease Rate Factor by approximately
0.00012 for each twenty-five (25) basis point change (or portion thereof, in
which case the adjustment will be pro-rated) from the Original Treasury Rate.
<PAGE>
3M Financing Services
Annex B - Certificate of Acceptance
Annex B to Schedule No. 001 Effective Date: October 10, 1996 ("Schedule")
Master Lease Agreement Effective Date: October 10, 1996
(Schedule and Master Lease as it relates to the Schedule are referred to as the
"Lease")
To: 3M Financing Services (LESSOR):
A. LESSEE: LEGAL NAME: 1199 Mac, Inc.
TRADE NAME (if any): dba Electronic Computer Imaging
ADDRESS: 6601 Lyons Road, Suite C-2
Coconut Creek, FL 33073
B. EQUIPMENT LOCATION:
Street Address: 8601 Lyons Road, Suite C-2
County: Broward
City, State Zip: Coconut Creek, FL 33073
C. DESCRIPTION OF EQUIPMENT (Including Software) 3M Graphic Printer
D. DELIVERY DATE:
Equipment Type/Model/Serial/ID Numbers Number of Units
- -------------------------------------- ---------------
3M Graphic Printer 9612 1
Color Image Processor(ultra sparc)
2.1 GB add'l Internal Disk Drive for color image
processo, Laminator, Orca (II w/ silent air
compressor 3.0 software for 9612 Scanner, Howtek
D4500 including COSmyk Bd, Mounting Station Spare
Drum & cable, Color Densitometer (X-Rite 4O4G)
LESSEE, THROUGH ITS AUTHORIZED REPRESENTATIVE, CERTIFIES TO LESSOR THAT:
(a) All the Equipment (including Software) described in the Lease, as modified
above ("System"), has been delivered to and inspected by Lessee on the
Lease Commencement Date specified below pursuant to the terms of the
Lease;
(b) The System has been delivered and properly installed and is ready for
operation. Lessee acknowledges that it has inspected the System and finds
that the System performs in accordance with its published specifications;
(c) Lessee irrevocably accepts the System under the Lease as of the Lease
Commencement Date; and
(d) No event which would allow the Lessor to declare a Default (Section 13 of
the Master Lease Agreement) has occurred, and all of the representations
and warranties made in the Lease are true as of the Lease Commencement
Date.
LESSEE: 1199 Mac, Inc. dba Electronic Computer Imaging
By: /s/ Robert L. McDowell
--------------------------
Robert L. McDowell
------------------------------
(Print or Type, Name)
PRESIDENT
------------------------------
(Print or Type Title)
Date of Acceptance/
Lease Commencement Date: ________
UPON EXECUTION, PLEASE MAIL TO:
3M Financing Services
ATTN: Doreen Pennella
55 Federal Road
Danbury, CT 06810-3199
<PAGE>
3M Financing Services
Annex B - Certificate of Acceptance
Annex B to Schedule No. 002 Effective Date: August 27, 1997 ("Schedule")
Master Lease Agreement Effective Date: October 10, 1996
(Schedule and Master Lease as it relates to the Schedule are referred to as the
"Lease")
To: 3M Financing Services (LESSOR):
A. LESSEE: LEGAL NAME: 1199 Mac, Inc.
TRADE NAME (if any): dba Electronic Computer Imaging
ADDRESS: 6601 Lyons Road, Suite C-2
Coconut Creek, FL 33073
B. EQUIPMENT LOCATION:
Street Address: 6601 Lyons Road, Suite C-2
County: Broward
City, State Zip: Coconut Creek, FL 33073
C. DESCRIPTION OF EQUIPMENT (Including Software) Graphics Equipment
D. DELIVERY DATE:
Equipment Type/Model/Serial/ID Numbers Number of Units
- -------------------------------------- ---------------
Used Raster Graphics 5442 1
Color Image Processor 1
Ultra Sparc 1/200E with 2.1 Internal 1
& 9.1 External HD Color Image Processor 1
Software for Second WS 1
Adobe CPSI License for 5442 1
Adobe CPSI License for 36" TIJ Printer 1
Scotchprint Material 1
LESSEE, THROUGH ITS AUTHORIZED REPRESENTATIVE, CERTIFIES TO LESSOR THAT:
(a) All the Equipment (including Software) described in the Lease, as modified
above ("System"), has been delivered to and inspected by Lessee on the
Lease Commencement Date specified below pursuant to the terms of the
Lease;
b) The System has been delivered and properly installed and is ready for
operation. Lessee acknowledges that it has inspected the System and finds
that the System performs in accordance with its published specifications;
(c) Lessee irrevocably accepts the System under the Lease as of the Lease
Commencement Date; and
(d) No event which would allow the Lessor to declare a Default (Section 13 of
the Master Lease Agreement) has occurred, and all of the representations
and warranties made in the Lease are true as of the Lease Commencement
Date.
LESSEE: 1199 Mac, Inc. dba Electronic Computer Imaging
By: /s/ Robert L. McDowell
--------------------------
Robert L. McDowell
------------------------------
(Print or Type, Name)
PRESIDENT
------------------------------
(Print or Type Title)
Date of Acceptance/
Lease Commencement Date: 10/29/97
--------
UPON EXECUTION, PLEASE MAIL TO:
3M Financing Services
ATTN: Barbara Zabretsky
55 Federal Road
Danbury, CT 06810-3199
Fax 800-327-4701
Phone 800-876-2033 x6204
<PAGE>
3M Financing Services
Schedule No. 001
THIS SCHEDULE to Master Lease Agreement dated October 10, 1996 ("Schedule")
Incorporates all of the terms of the referenced Master Lease ("Agreement"). This
Schedule and the Agreement as it relates to this Schedule constitutes a lease
("Lease") for the equipment including the applicable software (collectively
referred to as the "Equipment") described below between 3M Financing Services
("Lessor") and the Lessee indicated below. All terms used and not defined in
this Schedule have the definitions stated in the Agreement.
A. LESSEE: LEGAL NAME: 1199 Mac, Inc.
TRADE NAME (if any): dba Electronic Computer Imaging
ADDRESS: 6601 Lyons Road, Suite C-2
Coconut Creek, FL 33073
B. SUPPLIER: NAME: 3M Commercial Graphics
3M Center
St. Paul MN 55144
C. EQUIPMENT LOCATION:
Street Address: 6601 Lyons Road, Suite C-2
County: Broward
City, State Zip: Coconut Creek, FL 33073
D. DESCRIPTION OF EQUIPMENT: 3M Graphic Printer
<TABLE>
<CAPTION>
Equipment Type/Model & Serial/ID Numbers Number of Units Cost
- ---------------------------------------- --------------- ------------
<S> <C> <C>
3M Graphic Printer 9612 1 $226,276.00
Color Image Processor(ultra sparc)
2.1 GB add'l Internal Disk Drive for color image
processo, Laminator, Orca III w/ silent air
compressor 3.0 software for 9612 Scanner, Howtek
D4500 including COSmyk Bd, Mounting Station Spare
Drum & cable, Color Densitometer (X-Rite 4O4G)
Equipment Price: $226,276.0
-----------
Sales Tax: $13,576.56
-----------
Freight:
-----------
Delivery end Installation:
-----------
Service
-----------
Other:
-----------
Equipment Total Cost: $239,852.56
-----------
E. TRANSACTION TERMS:
Advance Rent: $9,277.36 Purchase Option (Equipment only):
Sales Tax: Pair Market Value
Total Advance Pent: $9,277.36 X Fixed $1.00
Fixed Purchase Option in GA, MD,
NM, TX or WI: % Rate
</TABLE>
Initial Term (# of Months): 36 (In Advance)
Monthly Rent: 3 at $0.00
(plus any 3 at $4,638,68
applicable 30 at $9,277.33
taxes) at
at
Commitment to Lease expires on O1/O9/97 ("Expiration Date")
F. INDEXING: The Lease Rate Factor (determined by dividing Rent by Total
Equipment Cost) charged has been calculated, in part, using an interest rate
based on the 3-year U.S. Treasury Constant Maturity of 6.29% ("Original Treasury
Rate") as published in the Wall Street Journal on [ILLEGIBLE]. This Lease
Rate Factor will be held for thirty (30) days to 10/31/36 (the "Rate Expiration
Date"). If Lessee does not accept on or before the Rate Expiration Date, the
Lease Rate Factor will be adjusted as follows: If the rate of the 3-year U.S.
Treasury Constant Maturity on the Monday immediately preceding the Lease
Commencement Date of Schedule No. 001 is greater or lesser than the Original
Treasury Rate, Rent under Schedule No. 001 will be increased or decreased, as
appropriate, by adjusting the Lease Rate Factor by approximately 0.00012 for
each twenty-five (25) basis point change (or portion thereof, in which case the
adjustment will be pro-rated) from the Original Treasury Rate.
<PAGE>
Exhibit 10.46
[LETTERHEAD OF NIMLOK COMPANY]
D I S P L A Y A N D E X H I B I T S Y S T E M S
Nimlok Company o 7420 N. Lehigh Ave. o Niles, Illinois 60714-4024
Phone: 847-647-1012 o Fax: 847-647-2044 o www.nimlok.com
July 8, 1998
EXCLUSIVE DISTRIBUTOR AGREEMENT
Mr. Don McNamee
Display Arts
1425 Elm Hill Pike
Nashville, TN 37210
Dear Don,
We would like to confirm the details of the future distribution of Nimlok
products in your area.
The Nimlok commitments would include the following:
1. You will be the only Nimlok distributor appointed by Nimlok in the
territory defined as the State of Tennessee, excluding the
Chattanooga area as defined by zip codes 373 and 374.
Nimlok agrees not to appoint any other distributor with a sales
location in the territory and not to make any direct sales to
customers in the territory. Incidental to your activities in the
territory, you may also sell Nimlok products to customers outside
your territory and other distributors may similarly sell Nimlok
products to customers within your territory.
2. Nimlok will supply you with all sales leads for the area.
3. We will make available to you, the discounts, bonuses (currently 40%
+ 5% volume related bonus) and prices available to our most favored
distributors.
4. We will supply you with all of the marketing support programs
including showroom programs, signage, Yellow Pages programs, and
co-op advertising programs, as defined in the current Distributor
Program.
5. All of our sales and designing know-how and training facilities will
be at your disposal. Your sales staff would participate in our Sales
Incentive Program, you wold have full access to our design
capabilities and our free management advisory service.
[GRAPHIC OMITTED]
<PAGE>
-2-
6. As we develop any other subsequent programs for our key
distributors, you will be entitled to participate.
7, You will be included in subsequent publications on the International
Network Booklet.
Your commitments would include the following:
1. Exceed targets of net purchases from Nimlok of the following:
1998 $250,000
1999 $300,000
2000 $350,000
2. Employ a sufficient number of Nimlok trained salespeople with direct
responsibility for Nimlok sales to achieve the above target.
3. Not sell directly competitive products. (However, it is understood
that Display Arts has been selling other brands for several years
and will continue to service existing clients with these products.)
4. Place a Nimlok co-op Yellow Pages ad in Memphis, Nashville, and
Knoxville that we mutually agree is reasonable for a territory of
this size. Knoxville ad to start in 1999.
5. Use the Nimlok logo on your business cards and letterhead.
6. Maintain a 5 Star Nimlok Showroom in Memphis and Nashville.
7. You agree to participate in the Nimlok Sales Incentive Program
designed to encourage and reward your salespersons' individual
Nimlok sales performance.
8. Have a Nimlok showroom sign on the exterior of your building, either
in the format supplied in our co-op program, or incorporated into
your exterior signage.
9. Pay for the products you purchase from us within agreed credit
terms.
10. Send your staff to the appropriate Nimlok sales and design training
classes.
<PAGE>
-3-
11. Aggressively follow-up Nimlok sales leads and report their
conversion to sales promptly.
12. Use Mini-Cad design software program that can be integrated with the
Nimlok design database.
13. Become a member of the International Nimlok Network and provide
contract services to Nimlok distributors and customers visiting the
area.
TERMINATION
This Agreement will remain in effect indefinitely, subject to:
Termination by you at any time without cause upon 60 days' written notice.
Termination by Nimlok upon:
30 days notice in the event of your bankruptcy or failure to pay
overdue invoices on demand; or
60 days notice in the event of your breach of this Agreement and
failure to cure the breach within the 60 day period and in the event
of your failure to meet target purchases for any year.
This Agreement may be amended at any time by our written agreement.
If you are in agreement with the above, please would you sign this letter and
return it at your convenience.
Sincerely yours,
/s/ Simon Perutz
Simon Perutz
President
/s/ Donovan McNamee 7-8-98
- ------------------------------------ ---------------
Signed Date
<PAGE>
Exhibit 10.47
[LETTERHEAD OF XEROX COLORGRAFX SYSTEMS]
XEROX
COLORGRAFX
SYSTEMS
July 31, 1998
Display Arts, Inc.
1425 Elm Hill Pike
Nashville, TN 37210
Attn: Don McNamee
*Important information about your ColorgrafX Service Contract*
Dear Customer:
As you may know from previous communications, Xerox ColorgrafX Systems is in the
process of migrating our administrative and service contract functions into
mainline Corporate Xerox. We're taking these steps in an effort to increase our
customer satisfaction levels and to bring our processes into conformance with
Xerox standards.
This letter serves as official notification to your company regarding some
changes you will be experiencing with respect to your Full Service Maintenance
Agreement:
=> All future contact renewal notifications will be sent to you 60 days prior
to your contact expiration date.
=> Your Full Service Maintenance Agreement will be automatically renewed
unless you provide written cancellation notification within the 60 day
period prior to your contract expiration date. The Xerox contact name and
telephone number will be provided with the renewal notification that you
receive.
=> The Terms and Conditions for all ColorgrafX service contracts will be
subject to the standard Xerox Terms and Conditions which are attached for
your review. These Terms and Conditions are exactly the same as associated
with other Xerox equipment you may possess.
Please ensure that this information is passed along to the appropriate
individuals within your company. Xerox ColorgrafX values your business; and we
thank you for your patience during this migration period.
If you have questions about your service contract or your billing method, please
call the Xerox Customer Care Line at 1-800-822-2502 (Monday to Friday, 7 a.m.
till 6 p.m. ET). Please have your serial number available when you place your
call.
Sincerely,
/s/ Kathy Rock
Kathy Rock
Service Contract Administration
Enclosure
<PAGE>
REFERRAL TERMS: The following terms apply to all sale and maintenance
transactions:
1. PRODUCTS. "Products" refers to all equipment ("Equipment"), as well as
software, and supplies ordered under this Agreement. You represent that the
Products will not be used primarily for personal, household or family purposes.
2. PAYMENT. Payment is due when you receive our invoice. All applicable taxes
shall be added to your payment amount (unless you provide proof of your
tax-exempt status) including, but not limited to, sales and use, rental, excise,
gross receipts and occupational or privilege taxes.
3. BASIC SERVICES. Xerox will provide the following Basic Services under an
express warranty or maintenance agreement:
A. REPAIRS AND PARTS. Xerox will make adjustments and repairs necessary to
keep Equipment in good working order. Parts required for repair may be
new, reprocessed, or recovered. All replaced parts/materials will become
Xerox' property at its option.
B. HOURS AND EXCLUSIONS. Unless otherwise stated, Basic Services will be
provided during Xerox' standard working hours (excluding Xerox-recognized
holidays) in areas within the United States, its territories, and
possessions open for repair service for the Equipment at issue. Basic
Services shall cover repairs and adjustments required as a result of
normal wear and tear or defects in materials or workmanship (and shall
specifically exclude repairs or adjustments Xerox determines to relate to
or be affected by the use of non-Xerox alterations, relocation, service,
supplies, or consumables).
C. INSTALLATION SITE AND METER READINGS. The equipment installation site must
conform to Xerox' published requirements. If applicable, you must provide
meter readings in a manner prescribed by Xerox. If you fail to provide
timely readings, Xerox may estimate them and bill you accordingly.
D. OPTIONS AND ACCESSORIES. If you operate options or accessories (including
network servers required for Equipment functionality) in association with
the Equipment, you agree to contract with Xerox for equivalent,
coterminous service on them (if available).
E. REMEDY. If Xerox is unable to maintain the Equipment as described above,
Xerox will, as your exclusive remedy, replace the Equipment with an
identical product or, at Xerox' option, another product of equal or
greater capabilities. This replacement product shall be subject to these
same terms and conditions.
F. CARTRIDGE PRODUCTS. If Xerox is providing Basic Services for a cartridge
product (and unless you have entered into a Standard Maintenance Agreement
as described below), you agree to use only unmodified cartridges purchased
directly from Xerox or its authorized resellers in the United States.
G. OPERATOR MAINTENANCE PROCEDURES FOR DOCUCOLOR 70 & MICR EQUIPMENT. If
Xerox is providing Basic Services for your DocuColor 70 or MICR Equipment,
you agree to perform all operator maintenance procedures set forth in the
DocuColor 70 Printer Operator Guide or MICR Customer Maintenance Guide
(including the purchase of all referenced parts, tools, and supplies) and,
for MICR equipment, to provide Xerox' service personnel with the use of
(1) a Xerox-approved Magnetic Signal Level Tester and (2) a Position and
Dimension Gauge.
H. PC/WORKSTATION REQUIREMENTS. In order to receive Basic Services and/or
Software Support for equipment requiring connection to a PC or
workstation, you must utilize a PC or workstation that either (1) has been
provided by Xerox or (2) meets Xerox' published specifications.
4. INTELLECTUAL PROPERTY INDEMNITY. Xerox will defend and indemnify you if any
Product infringes someone else's U.S. intellectual property rights provided you
promptly notify Xerox of the alleged infringement and permit Xerox to direct the
defense. Xerox is not responsible for any non-Xerox litigation expenses or
settlements unless it preapproves them in writing. To avoid infringement, Xerox
may modify or substitute an equivalent Product, refund the price paid for the
Product (less the reasonable rental value for the period it was available to
you), or obtain any necessary licenses. Xerox is not liable for any
infringement-related liabilities outside the scope of this paragraph including
but not limited to infringement based upon a Product being modified to your
specifications or being used or sold with products not provided by Xerox.
5. LIMITATION OF LIABILITY AND ASSIGNMENT. Neither party shall be liable to the
other for any direct damages in excess of one million dollars nor for any
special, indirect, incidental, consequential or punitive damages arising out of
or relating to this Agreement, whether the claim alleges tortious conduct
(including negligence) or any other legal theory. In addition, XEROX DISCLAIMS
THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. You may not assign any
rights or obligations under this Agreement without Xerox' prior written consent.
6. ENTIRE AGREEMENT, GOVERNING LAW, AND ENFORCEMENT. This Agreement constitutes
the entire agreement as to its subject matter, supersedes all prior and
contemporaneous oral and written agreements, and shall be construed under the
laws of New York State (without regard to conflict-of-law principles). All
changes to this Agreement must be made in a writing signed by both parties;
accordingly, any terms on your ordering documents shall be of no force or
effect. In any action to enforce this Agreement, the parties agree to waive
their right to a jury trial and to pay the prevailing party's costs and
expenses, including reasonable attorneys' fees.
7. ASSIGNMENT BY XEROX. In the event Xerox assigns any of its obligations under
this Agreement, it shall remain primarily responsible for their performance; any
claim or defense you have relating to these obligations must be asserted only
against Xerox and not its assignee.
SALE TERMS: The following additional terms apply only to sale transactions:
8. TITLE, RISK, AND RELOCATION. For Equipment purchased outright, title will
pass to you upon payment in full and risk of loss will pass to you upon
installation (except for products designated as Customer Installable for which
risk of loss will pass upon shipment from a Xerox-owned facility). For Equipment
purchased on an installment basis, title and risk of loss will pass to you upon
installation (except for products designated as Customer Installable for which
title and risk of loss will pass upon shipment from a Xerox-owned facility).
Until you have paid for the Equipment in full, all Equipment relocations must be
arranged (or approved in advance) by Xerox.
9. WARRANTY. My warranty to which you are entitled shall commence upon
installation (except for products designated as Customer Installable for which
the warranty will commence upon shipment from a Xerox-owned facility). Warranty
coverage for your cartridge products is conditioned upon your using only
unmodified cartridges purchased directly from Xerox or its authorized resellers
in the United States.
10. CARTRIDGES. In order to enhance equipment reliability, Xerox has designed
the cartridge used in some equipment models to cease functioning alter a
predetermined number of impressions (for further details, please see the
packaging with which your cartridges are delivered). In addition, certain
cartridges are sold as Environmental Partnership cartridges; you agree these
cartridges shall remain Xerox property and that you will return them to Xerox
for remanufacturing once you have run them to their cease-function point.
11. EQUIPMENT STATUS. Unless you are acquiring Previously Installed Equipment,
Equipment will be either (a) "Newly Manufactured," which has been factory
produced and contains new, reprocessed, and/or recovered parts; (b)
"Remanufactured," which has been factory produced following disassembly to a
Xerox predetermined standard and contains new, reprocessed, and/or recovered
parts; or (c) "Factory Produced New Model," which is a model no more than 3
years did that has been factory produced and newly serialized with additional
features and/or functions following disassembly to a Xerox predetermined
standard and contains new, reprocessed, and/or recovered parts.
12. DELIVERY AND REMOVAL CHARGES. Xerox will be responsible for all standard
costs associated with on-site delivery or removal (while you will be responsible
for any non-typical delivery or removal expenses).
13. CREDIT HISTORY. As part of this transaction, Xerox may investigate your
credit history. Unless you have already paid in full, and even if Products have
been delivered, Xerox may, within 60 days following its acceptance of this
Agreement, revoke the Agreement if your credit approval is denied.
14. PREPAYMENT AND BREACH OF INSTALLMENT SALES. You may prepay your remaining
principal balance on Equipment purchased on an installment basis at any time,
thereby eliminating your obligation to pay future finance charges. If you breach
this Agreement with regard to such Equipment, Xerox may, in addition to any of
its other remedies, require immediate payment of the entire unpaid principal
balance.
15. INSURANCE AND SECURITY INTEREST ON INSTALLMENT-PURCHASED EQUIPMENT. You
agree to maintain fire, theft and extended coverage insurance on Equipment
purchased on an installment basis (which shall name Xerox as an additional
insured). Until you make your final installment payment for this Equipment,
Xerox shall have a purchase money security interest in it. You hereby authorize
Xerox or its agents to execute on your behalf all documents necessary to perfect
this interest.
MAINTENANCE TERMS: The following additional terms apply only to maintenance
transactions:
16. PRICING CHANGES FOR MULTI-YEAR AGREEMENTS. Xerox may annually adjust the
Monthly Base and Print Charges established under your multi-year maintenance
agreement, each such increase not to exceed 10%. (For
<PAGE>
[ILLEGIBLE] local government customers, this adjustment shall take place at the
commencement of each of your annual contract cycles.)
[ILLEGIBLE] COMMENCEMENT, EXPIRATION, AND BREACH. Maintenance agreements will
commence at the end of any warranty period and expire on the last day of the
12th, 24th, 36th, 48th or 60th full calendar month thereafter, as applicable. If
you breach this maintenance agreement, Xerox may, in addition to its other
remedies, require immediate payment of all amounts then due and reasonable
liquidated damages to be calculated as either the remaining Minimum Monthly
Maintenance Payments in the Agreement's then-current term or 6 such payments for
one-year agreements (and 12 such payments for multi-year agreements), whichever
is less. The Minimum Monthly Maintenance Payment shall consist of (1) any
Monthly Base Charge and (2) any Monthly Minimum Number of Prints multiplied by
the applicable Meter 1 Print Charge(s).
18. RENEWAL. Each maintenance agreement will be renewed automatically for
successive terms of the same number of months as the initial term unless a
written notice of cancellation is received from you (or provided to you by
Xerox) prior to expiration of the then-current term. Pricing for this renewal
term shall be at Xerox' then-current published pricing.
19. BILLING. Minimum Monthly Maintenance Payments are billed in advance, with
additional Print Charges billed in arrears. For full-color equipment, color
prints are counted on Meter 1.
SOFTWARE TERMS: The following additional terms apply only to transactions
covering Application Software and/or Xerox-brand Printing System, DocuTech,
Color, High-Volume and Digital Copier-Duplicator, or Document Centre Products:
20. SOFTWARE LICENSE. The following terms apply to copyrighted software and the
accompanying documentation, including but not limited to operating system
software, provided with or within the Equipment ("Base Software") as well as
software specifically set out as "Application Software" on the face of this
Agreement. This license does not apply to any Diagnostic Software nor to any
software and accompanying documentation made subject to a separate license
agreement.
A. Xerox grants you a non-exclusive, non-transferable license to use the Base
Software only on or with the Equipment with which (or within which) it was
delivered and to make one back-up copy. For Application Software, Xerox
grants you a non-exclusive, non-transferable license to use this software
on any single unit of equipment you desire along with the right to make
one back-up copy for as long as you are current in the payment of any
indicated software license fees (including the Annual Renewal Fees, if
any). You have no other rights to the Base or Application Software and, in
particular, may not (1) distribute, modify, create derivatives of,
decompile, or reverse engineer the Base or Application Software, or (2)
allow others to engage in same. Title to the Base and Application
Software, any back-up copy of it, and all copyrights and other
intellectual property rights in it, shall at all times reside solely with
Xerox and/or its licensors.
B. Xerox may terminate your license for any Base Software (1) immediately if
you no longer use or possess the Equipment or are a lessor of the
Equipment and your first lessee no longer uses or possesses it or (2) upon
the date of termination of any agreement under which you have rented or
leased the Equipment.
C. If you transfer possession of the Equipment, Xerox will offer the
transferee a license to use the Base Software on or with it, subject to
Xerox' then-applicable terms and license fees, if any, and provided the
transfer is not in violation of Xerox' rights.
D. Xerox warrants that the Base and Application Software will perform in
material conformity with its published specifications for a 90-day period
from the date it is delivered or, for software installed by Xerox, the
date of software installation. Neither Xerox nor its licensors warrant
that the Base or Application Software will be free from errors or that its
operation will be uninterrupted.
21. SOFTWARE SUPPORT. During the period that Xerox provides Basic Services for
the Equipment, Xerox will also provide software support for the Base Software
under the following terms. For Application Software, Xerox will provide this
same level of support provided you are current in the payment of all initial
License and Annual Renewal Fees (or, for programs not requiring Annual Renewal
Fees, the payment of the Initial License Fee and the annual "Support Only"
Fees):
A Xerox will assure that Base and Application Software performs in material
conformity with its published specifications and will maintain a toll-free
hotline during standard business hours for responding to questions
regarding Base and Application Software.
B. Xerox may make available new releases of the Base or Application Software
that exclusively incorporates coding error fixes ("Maintenance Releases").
Maintenance Releases are provided at no charge and must be implemented
within six (6) months after being made available to you. Each new
Maintenance Release accepted by you shall be considered Base or
Application Software governed by the Software License terms.
C. Xerox will use reasonable efforts, either directly and/or with its
vendors, to resolve coding errors or provide workarounds or patches,
provided you report problems in the manner specified by Xerox.
D. Xerox shall not be obligated to remedy coding errors if you have made
modifications to the Base or Application Software.
E. Xerox may annually adjust the Annual Renewal and Support-Only Fees, each
such increase not to exceed 10%. (For state and local-government
customers, this adjustment shall take place at the commencement of each of
your annual contract cycles.)
22. DIAGNOSTIC SOFTWARE. Software used to maintain the Equipment and/or diagnose
its failures or substandard performance (collectively "Diagnostic Software") is
embedded in, resides on, or may be loaded onto the Equipment. The Diagnostic
Software and method of entry or access to it constitute valuable trade secrets
of Xerox. Title to the Diagnostic Software shall at all times remain solely with
Xerox and/or Xerox' licensors. You agree that (1) your acquisition of the
Equipment does not grant you a license or right to use the Diagnostic Software
in any manner and (2) that unless separately licensed by Xerox to do so, you
will not use, reproduce, distribute, or disclose the Diagnostic Software for any
purpose (or allow third parties to do so). You agree at all times (including
subsequent to the expiration of this Agreement) to allow Xerox to access,
monitor, and otherwise take steps to prevent unauthorized use or reproduction of
the Diagnostic Software.
GOVERNMENTAL TERMS: The following additional terms apply only to state and local
government customers:
23. GOVERNMENT CUSTOMER TERMS
A. FUNDING. You state that it is your intent to make all payments required
under this Agreement. In the event that (1) through no action initiated by
you your legislative body does not appropriate funds for the continuation
of this Agreement for any fiscal year after the first fiscal year and has
no funds to do so from other sources and (2) you have made a reasonable
but unsuccessful effort to find a viable assignee within your general
organization who can continue this Agreement, this Agreement may be
terminated. To effect this termination, you shall, 30 days prior to the
beginning of the fiscal year for which your legislative body does not
appropriate funds, send Xerox written notice stating that your legislative
body failed to appropriate funds and that you have made the required
effort to find an assignee. Your notice must be accompanied by payment of
all sums then owed Xerox under this Agreement and must certify that the
canceled Equipment is not being replaced by equipment performing similar
functions during the ensuing fiscal year. In addition, you agree at your
expense to return the Equipment in good condition to a location designated
by Xerox and that, when returned, the Equipment will be free of all liens
and encumbrances. You will then be released from your obligations to make
any further payments to Xerox (with Xerox retaining all sums paid to
date).
B. TAX TREATMENT. This Agreement has been accepted on the basis of Xerox
claiming any interest paid by you as exempt from federal income tax under
Section 103(c) of the Internal Revenue Code of 1986. Should Xerox lose the
benefit of this exemption as a result of your failure to comply with or be
covered by Section 103(c) or its regulations, then, subject to the
availability of funds and upon demand by Xerox, you shall pay Xerox an
amount equal to its loss in this regard.
C. ASSIGNMENT. Notwithstanding any provisions in this Agreement to the
contrary, Xerox may not sell, assign or transfer this Agreement, and any
attempted sale, assignment or transfer shall be void and without effect.
D. PAYMENT AND BILLING. Your payment is due within 30 days of our invoice
date. All maintenance charges under this Agreement will be billed in
arrears.
ADDITIONAL TERMS: The following additional terms apply only to the extent that
you have agreed to one or more of the options described below:
24. PREPAID INVOICE. If this option has been selected, you will not be required
to pay your Monthly Installment Sale Payment during the initial number of months
indicated.
25. SUPPLIES INCLUDED IN BASE/PRINT CHARGES. If this option has been selected,
Xerox will provide you with Black Toner, Black Developer, Copy Cartridges, and
Fuser ("Consumable Supplies") throughout the term of your Maintenance Agreement.
For full-color Equipment, Consumable Supplies shall also include Color Toner and
Developer. You agree that the Consumable
<PAGE>
[ILLEGIBLE] are Xerox property until used by you, that you will use them only
with [ILLEGIBLE] equipment, that you will return all cartridges to Xerox for
remanufacturing [ILLEGIBLE] they have been run to their cease-function point,
and that you will return any unused Consumable Supplies to Xerox at the end of
this Maintenance Agreement. Should your use of Consumable Supplies exceed the
typical use pattern (as determined by Xerox) for these items by more than 10%,
you agree that Xerox shall have the right to charge you for any such excess
usage.
26. REPLACEMENT/MODIFICATION OF PRIOR XEROX AGREEMENT. If this option has been
selected, this Agreement will replace or modify a prior agreement between you
and Xerox covering the specified equipment. If it is a replacement agreement,
the prior agreement shall be null and void. If it is a modification, the prior
agreement shall remain in effect except that any new terms presented in this
modification agreement (e.g., price, duration, configuration) shall take
precedence over the prior terms for the balance of the Agreement. If this
agreement provides an addition or upgrade to the specified equipment, all
included parts and assemblies shall included within any maintenance agreement
covering the specified equipment. All parts or assemblies removed as part of an
upgrade shall become the property of Xerox.
27. XEROX AS FINANCIAL INTERMEDIARY. If this option has been selected, you are
purchasing on an installment basis specifically identified products that were
selected by you and that are not sold by Xerox in the normal course of its
business (i.e., goods for which Xerox is acting as a Financial Intermediary).
With regard to these products, you agree that Xerox is selling them to you "As
Is" and without warranty or liability (either direct or indirect) of any kind.
As such, and with regard to these products, YOU HEREBY WAIVE THE IMPLIED
WARRANTY OF MERCHANTABILITY. Xerox assigns to you, to the extent assignable, any
warranty rights it has to these products (which rights shall revert to Xerox if
you breach this agreement). You agree (a) that these products are not covered by
Xerox' obligation to provide Basic Services; (b) to maintain a service agreement
for these products with a service provider acceptable to Xerox throughout this
Agreement's term; (c) to pay all personal property taxes related to these
products; and (d) to assign to Xerox any rights you have to these products until
title shall pass from Xerox to you (which, subject to any software licenses
surrounding the acquisition of these products, shall occur when you obtain title
to all Xerox Equipment covered by this Agreement).
28. FINANCED SOFTWARE TOTAL. If this option has been selected, the initial
license fees for any Application Software set forth in this Agreement shall be
included in the amount financed on an installment basis and be paid for through
your Monthly Installment Sale Payments. If you breach this software license or
any of your obligations regarding the Equipment, the full amount of the initial
license fees shall be immediately due and payable.
29. FINANCED SUPPLIES TOTAL. If this option has been selected, the cost of any
supplies you have purchased under this Agreement shall be included in the amount
financed on an installment basis and shall be paid for through your Monthly
Installment Sale Payments. If you breach any of your obligations regarding the
Equipment, the full amount of the supply costs shall become immediately due and
payable.
30. REFINANCE OF PRIOR AGREEMENT. If this option has been selected, the balance
of your prior agreement with Xerox or a third-party (as identified in the
Installment Sales Information section of this Agreement) shall be included in
the amount financed on an installment basis and shall be paid for through your
Monthly Installment Sale Payments. If your prior agreement is with a
third-party, you hereby acknowledge that you have the right to terminate the
agreement and agree to provide a statement from the third-party identifying the
equipment at issue and the amount to be paid off (as well as a statement from
you identifying the payee and mailing address for your payoff check). If your
prior agreement was with Xerox, the use of this refinance option shall render
your prior agreement null and void. If you breach this Agreement, the full
amount of your prior agreement balance shall be immediately due and payable.
31. ADJUSTMENT PERIOD. If this option has been selected, the amount you pay
Xerox to maintain the Equipment will be adjusted in accordance with the
information contained in the Adjustment Period portion of this Agreement; as a
result, your initial monthly maintenance payments shall be different from those
payable during the balance of this Agreement.
32. K-16 BILLING SUSPENSION. If this option has been selected, your Minimum
Monthly Maintenance Payment and Print Charges will be suspended each year during
the months indicated. During these months, you agree (a) not to use the
Equipment; (b) that Xerox shall not be responsible for maintaining it; and (c)
that if you request Xerox to provide maintenance service during this period you
will be responsible for paying any suspended monthly bills.
33. TRADE-IN EQUIPMENT. If this option has been selected, you are providing
equipment to Xerox as part of this Agreement ("Trade-In Equipment") and the
following shall apply:
A. TITLE TRANSFER. You warrant that you have the right to transfer title to
the Trade-In Equipment and that it has been installed and performing its
intended function for the previous year at the address where the
replacement equipment is to be installed. Title and risk of loss to the
Trade-In Equipment shall pass to Xerox when Xerox removes it from your
premises.
B. CONDITION. You warrant that the Trade-In Equipment is in good working
order, has not been modified from its original configuration (other than
by Xerox), and has a UL label attached. You agree to maintain the Trade-In
Equipment at its present site and in substantially its present condition
until removed by Xerox.
C. ACCRUED CHARGES. You agree to pay all accrued charges for the Trade-In
Equipment up to and including payment of the Final Principal Payment
Number and to pay all maintenance, administrative, supply, and finance
charges for this equipment through the date title passes to Xerox.
34. RUN LENGTH PLAN. If this option has been selected, the first ten prints of
each original (per run) are recorded and billed on both meters with all
subsequent prints recorded and billed on Meter 1 only. (Note that if a 5090
covered by this plan has its document handler left open, all affected copies
will be recorded and billed on both meters.)
35. FIXED PRICE PLAN. If this option has been selected, Xerox will forego its
right to increase the amount you pay Xerox to maintain the Equipment throughout
the initial term of this Agreement.
36. PER-FOOT PRICING. If this option has been selected, all Print Charges will
be billed on a per-foot basis, with each linear foot equal to one print.
37. ANNUAL CHARGE PLAN. If this option has been selected, the Base Charge for
your maintenance plan will be billed annually in advance.
38. EXTENDED SERVICE HOURS. If this option has been selected, Xerox will provide
Basic Services during the hours indicated, with the first number establishing
the number of eight-hour shifts covered and the second establishing the days of
the week (e.g., 2 x 6 would provide service from 8:00 AM. to 11:59 P.M., Monday
through Saturday). The cost of this enhanced service coverage will be billed
separately and, as such, is not included in your Minimum Monthly Maintenance
Payment or Print Charges.
39. COMPETITIVE REPLACEMENT PROGRAM. If this option has been selected, Xerox
will provide you with the discount indicated in exchange for your agreement to
return a unit of non-Xerox equipment you are currently leasing (the "Competitive
Equipment") to its Lessor. In doing so, you acknowledge that the Equipment you
are acquiring under this Agreement is replacing the Competitive Equipment and
that your agreement with its Lessor allows you to return the Competitive
Equipment at this time.
40. STANDARD MAINTENANCE AGREEMENT. If this option has been selected, Xerox will
provide Basic Services for the Equipment subject to your payment of the
indicated annual charge (which in all cases is nonrefundable) along with a
standardized per-call charge established by Xerox (which is subject to
adjustment by Xerox at its discretion).
41. ATTACHED ADDENDA. If this option has been selected, you acknowledge that one
or more specified addenda (as indicated) have been provided to you. These
addenda, which provide additional terms relevant to the transactions covered
hereunder, are hereby fully integrated into this Agreement.
42. NEGOTIATED CONTRACT. If this option has been selected, this Agreement is
subject to the terms contained in the identified Negotiated Contract. If the
terms contained in this Agreement conflict with those contained in the
Negotiated Contract, the terms of the Negotiated Contract shall prevail.
<PAGE>
[LOGO]
XEROX
COLORGRAFX
SYSTEMS
FAX FORM
TO/NAME: Don McNamee FAX#: 615-742-3868
COMPANY: Display Arts LOCATION: Nashville
================================================================================
FROM: KATHY ROCK DEPT: CUSTOMER ADMIN.
FAX#: (408) 229-3606 PHONE: 800-247-4412 x3147
(408) 229-3697 Intelnet: 8*935-
DATE: March 25, 1998
SUBJECT: Service Contract Proposal
================================================================================
PAGE: 1 OF 3 (including this sheet)
Hi Don:
Please sign the attached proposal and re-fax it to me at 408-229-3606. If you
have any questions, give me a call.
Thanks
Kathy
P.O. Box 210061 o 5853 Rue Ferrari o San Jose, California o 95151-0061
o (408) 225-2800 o (408) 229-3697 Fax
<PAGE>
Kathy Rock 408-229-3606
XEROX COLORGRAFX SYSTEMS, INC. PROPOSAL AND AGREEMENT FOR
5853 Rue Ferrari HARDWARE MAINTENANCE
P.O. Box 210061
San Jose, CA 95151-0061
800-247-4412
-------------
QUOTE NO.
- --------------------------------------------------------------------------------
OFFICE NO OFFICE LOCATION ZONE CONTRACT CONTRACT NO.
429041 Nashville 1 |_| NEW XXX RENEWAL
- --------------------------------------------------------------------------------
LAST YEARS P.O. - For Reference Only BILLING PERIOD
XX MONTHLY |_| QUARTERLY |_| ANNUAL
- --------------------------------------------------------------------------------
BILL TO CUSTOMER NO. SITE LOCATION CUSTOMER NO.
135067 135067
Display Arts Inc. Display Arts Inc.
1425 Elm Hill Pike 1425 Elm Hill Pike
Nashville, TN 37210 Nashville, TN 37210
- --------------------------------------------------------------------------------
BUYER/TELEPHONE NO. END USER/TELEPHONE NO.
Don McNamee 615-742-1425
- --------------------------------------------------------------------------------
ITEM DESCRIPTION MODEL SERIAL UNIT PRICE* EXTENDED PRICE
- --------------------------------------------------------------------------------
1 PTR, 300 dpi, 54" 8954-3T C0R001813 1,180.00 14,160.00
PRICING FIRM FOR 30 DAYS
ALL ACCESSORIES ARE INCLUDED IN FLAT RATE
PRICING.
Annual contracts receive a 5% discount.
To place a Service Call, please call 1-800-247-4412.
PREINSPECTION MAY BE REQUIRED.
- --------------------------------------------------------------------------------
TAX EXEMPT STATUS *Unit price based on TOTAL
(Attach Exemption billing period as (Excluding Taxes) 1,180.00 14,160.00
Certificate) noted above. ---------------------------------------
|_| YES |_| NO EFFECTIVE DATES 02-13-98 02-12-99
- ----------------- ---------------------------------------
Offer and Acceptance - This Proposal and Agreement is subject to Terms and
Conditions on the reverse side.
- --------------------------------------------------------------------------------
AGREED TO P.O. NO. ACCEPTED BY:
648 XEROX COLORGRAFX SYSTEMS, INC.
- ------------------------------------
NAME (Print or Typed)
Donovan McNamee SR
- --------------------------------------------------------------------------------
SIGNATURE DATE BY DATE
/s/ Donovan McNamee 3/25/98 KATHY ROCK 3/25/98
- --------------------------------------------------------------------------------
TITLE TITLE
CEO CONTRACT COORDINATOR
- --------------------------------------------------------------------------------
<PAGE>
HARDWARE MAINTENANCE
Terms and Conditions
1. Service Calls
The service prices shown on the face hereof are based upon service during the
normal work day, 8:00 am. to 5:00 p.m., excluding weekends and holidays.
2. Response Time on Service Calls
The normal response time on service calls is within eight (8) business hours,
excluding weekends and holidays.
3. Equipment Covered
Only Xerox ColorgrafX hereafter referred to as XCS and its equipment not older
than five (5) years from the date of manufacture, and which is located within
the forty-eight (48) contiguous states and Alaska, is eligible for coverage. At
XCS's sole option, equipment over five (5) years from the date of manufacture
may be service by XCS on a best effort time and material basis, and at then
current standard service rates. Equipment which has been modified without XCS's
prior written approval is not eligible for maintenance service hereunder. Only
units whose installed options are covered separately hereunder are eligible for
coverage. This Agreement is subject to re-negotiation in the event the Equipment
is moved from the site designated hereunder.
4. Pre-Inspection
A pre-inspection of any equipment previously delivered is required for equipment
to be covered under this Agreement, unless such coverage is an uninterrupted
continuation of either a warranty period or a previous contract. Charges
incurred for this pre-inspection, including actions required to bring the
equipment within original operating specificaitons, will be invoiced by XCS to
customer at XCS's then current standard service rates.
5. Responsibility of Customer
Customer shall provide, free of charge, the equipment to be serviced, required
system time with ready access, adequate working space and power outlets for use
by maintenance personnel, and the provisioning and disposal of supplies used for
maintenance purposes.
6. Service
The maintenance services provided hereunder are as follows:
a. Remedial maintenance, as required.
b. Preventive maintenance necessary to maintain the equipment within original
operating specifications.
c. Repair parts, on an exchange basis, as well as labor and travel charges.
d. Replacement parts used during maintenance may be Newly Manufactured or
Remanufactured. Newly Manufactured parts are newly assembled parts which
may contain used components which have been reprocessed to assure machine
compliance with product performance and reliability specifications.
Remanufactured parts are parts which have been disassembled to a
predetermined standard established by XCS with defective components being
replaced by new, reprocessed or used components. Before being inspected
and tested to newly manufactured machine test standards, the parts will be
cleaned and refinished and all retrofits deemed by XCS as field mandatory
will be installed.
7. Exclusions
In addition to the service exclusions set forth in Sections 3 and 8, no
maintenance services will be provided with respect to any equipment malfunctions
or problems caused by or relating to any of the following:
a. Equipment not covered under this Agreement, whether manufactured by XCS or
any other person.
b. Customer software, XCS supplies software modified by Customer.
c. Abnormal operating conditions, misuse, operator error, customer's failure
to perform (routine) operator maintenance as described in applicable
"Operator Manual," or problems from any cause due to use of the equipment
outside the operating specifications therefore.
d. Network cables and components thereof, when installed or altered by
Customer or its vendor.
e. Change of computer hardware or operating system.
8. Supplies
The selection and proper use of equipment supplies, including media, toner and
inks is the customer's responsibility. XCS reserves the right to exclude from
this Agreement any repairs for damage to XCS equipment primarily caused by the
use of non-XCS supplies. XCS will on request, repair such damage on a best
effort time and material basis, and at then current standard service rates.
Xerox support policies may not apply.*
9. Terms of Agreement
The initial terms of this agreement is for a period of one year, and is
renewable for additional terms of one year at then current rates unless
terminated by either party through written notice at least sixty (60) days prior
to the expiration. For shorter term contracts the following premiums apply at
month end:
TERM PREMIUM
1-3 mos. Prorated rate plus 50%
4-6 mos. Prorated rate plus 30%
7-9 mos. Prorated rate plus 10%
10-11 mos. Prorated rate
10. Termination
Either party may terminate this Agreement upon written notice of termination to
the other in the event of a material breach to this Agreement or the Agreement
whereby Customer purchased the covered Equipment and such breach remains uncured
for ten (10) days following written notice of breach.
11. Payment
The service prices will be invoiced pursuant to the billing period identified on
the face hereof. Payment terms are net thirty (30) days.
12. Taxes
All service prices and other charges assessed hereunder are exclusive of any
state or local sales, use or any other excise tax. These taxes will be added to
the invoice as applicable.
13. DISCLAIMER OF IMPLIED WARRANTIES AND LIMITATION OF LIABILITY
XCS DISCLAIMS THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
FOLLOWING THE EXPIRATION OF ANY EXPRESS WARRANTY PERTAINING TO EQUIPMENT. XCS
DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY.
14. LIMITATION / DISCLAIMER OF LIABILITY
EXCEPT FOR DAMAGES CAUSED BY XCS'S WILLFUL MISCONDUCT, RECKLESSNESS, OR GROSS
NEGLIGENCE, THE PARTIES AGREE THAT TO THE EXTENT PERMITTED BY APPLICABLE LAW,
XCS LIMITS OR DISCLAIMS LIABILITY RELATED TO THE MANUFACTURE, DELIVERY, OR USE
OF THE EQUIPMENT, THE SOFTWARE AND/OR SUPPLIES USED IN CONNECTION WITH THE
EQUIPMENT, OR THE PROVISION OF SERVICES FOR THE EQUIPMENT, AS FOLLOWS:
A. FOR DIRECT DAMAGES, XCS'S LIABILITY IS LIMITED TO THE GREATER OF THE
AMOUNTS PAID BY THE CUSTOMER OF 10% OF THE AMOUNT REQUIRE TO BE PAID BY
CUSTOMER FOR THE EQUIPMENT, SOFTWARE, SUPPLIES OR SERVICES GIVING RISE TO,
OR WHICH ARE THE SUBJECT OF THE CLAIM WHETHER SUCH CLAIM ALLEGES BREACH OF
CONTRACT, TORTIOUS CONDUCT INCLUDING BUT NOT LIMITED TO NEGLIGENCE OR ANY
OTHER THEORY;
B. XCS DISCLAIMS LIABILITY FOR INDIRECT INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF USE, REVENUE OR PROFIT)
WHETHER SUCH CLAIM ALLEGES BREACH OF CONTRACT, TORTIOUS CONDUCT INCLUDING
BUT NOT LIMITED TO NEGLIGENCE, OR ANY OTHER THEORY.
15. Amendments
This agreement may be amended only by an instrument in writing executed by duly
authorized representatives of both parties.
16. Governing Law
This Agreement shall be governed and construed in all respects in accordance
with the laws of the State of California.
17. Entire Agreement
This Agreement constitutes the entire agreement for maintenance service between
Customer and XCS. The terms and conditions shall prevail notwithstanding any
variance with the terms and conditions of any order submitted by Customer.
* For units using dye sublimation or equivalent supplies a specially trained
authorized service engineer must perform all maintenance. Normal response
times may not always be achieved.
<PAGE>
EXHIBIT 23.1
[Daszkal Bolton Manela Devlin & Co. Letterhead]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in Registration Statement on Form SB-2 of our
reports Dated for the following companies as follows:
<TABLE>
<CAPTION>
COMPANY YEAR ENDED DATE OF REPORT
- ------- ---------- --------------
<S> <C> <C>
Colorsmart.com, Inc. November 30, 1998 May 21, 1999
Advertising That Works, Inc. December 31, 1999 April 16, 1999
Magnum Digital Services December 31, 1998 April 2, 1999
Display Arts, Inc. December 31, 1998 May 26, 1999
</TABLE>
/s/ Daszkal Bolton Manela Devlin & Co.
--------------------------------------
Boca Raton, Florida
December 2, 1999
<PAGE>
EXHIBIT 23.2
LEE R. WATSON
CERTIFIED PUBLIC ACCOUNTANT
3822 WHITLAND AVENUE
NASHVILLE, TENNESSEE 37205
615-383-2650
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use in this Registration Statement on Form SB-2 of my
report dated February 6, 1998, relating to the financial statements of
Colorsmart.com, Inc. for the year ended November 30, 1997 which is part of
this Registration Statement.
/s/ Lee R. Watson
-------------------
Nashville, Tennessee
December 3, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> NOV-30-1998 NOV-30-1997
<PERIOD-START> DEC-01-1998 FEB-07-1997
<PERIOD-END> NOV-30-1998 NOV-30-1997
<CASH> 408 33,529
<SECURITIES> 0 0
<RECEIVABLES> 10,910 0
<ALLOWANCES> 0 0
<INVENTORY> 15,500 7,765
<CURRENT-ASSETS> 26,818 41,294
<PP&E> 268,729 193,735
<DEPRECIATION> 55,367 0
<TOTAL-ASSETS> 299,422 235,279
<CURRENT-LIABILITIES> 113,100 77,664
<BONDS> 0 0
0 0
0 0
<COMMON> 3,329 2,492
<OTHER-SE> 531,952 228,165
<TOTAL-LIABILITY-AND-EQUITY> 299,422 235,279
<SALES> 127,191 513
<TOTAL-REVENUES> 127,191 513
<CGS> 63,886 0
<TOTAL-COSTS> 370,304 87,157
<OTHER-EXPENSES> 920 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,060 0
<INCOME-PRETAX> (307,919) (86,644)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (307,919) (86,644)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (307,919) (86,644)
<EPS-BASIC> (.10) (.04)
<EPS-DILUTED> (.10) (.04)
</TABLE>
